tag:theconversation.com,2011:/uk/topics/andrew-forrest-508/articlesAndrew Forrest – The Conversation2023-02-24T01:23:27Ztag:theconversation.com,2011:article/2003542023-02-24T01:23:27Z2023-02-24T01:23:27ZBillionaire stoush over alleged media bias highlights the need for greater media diversity<p>The <a href="https://www.abc.net.au/news/2023-02-17/twiggy-forrest-kerry-stokes-michelle-rowland-spat-media/101990722">recent stoush</a> between mining magnate Andrew “Twiggy” Forrest and media mogul Kerry Stokes is just the latest flashing neon sign above the parlous state of media diversity in Australia. </p>
<p>Laws protecting media diversity in Australia have been gradually dismantled in recent decades. Because of this, their objective of preventing a select few media owners or voices from having too much influence over public opinion and the political agenda has been placed at risk.</p>
<p>But traditional approaches to protecting media diversity may be less effective as the role of online news – now curated for us using algorithms – becomes ever more prominent in our news diets. This could require a new approach. </p>
<h2>Misuse of media power?</h2>
<p>Stokes’ Seven West Media owns the West Australian Newspaper, the only major daily paper in Perth. Stokes also has a controlling interest in the mining equipment company WesTrac, which supplies Caterpillar mining machinery. </p>
<p>Forrest’s Fortescue Metals previously had a supply arrangement with WesTrac. But he then placed on order to purchase 120 emission-free, hauling trucks from the German Liebherr company, putting him in direct competition with WesTrac. </p>
<p>Forrest claims this move was met with “<a href="https://www.afr.com/companies/mining/forrest-stokes-in-battle-of-billionaires-over-media-coverage-20230215-p5cknp">biased, inflammatory and inaccurate</a>” coverage about his company in Seven West Media.</p>
<p>In a complaint to Communications Minister Michelle Rowland, Mark Hutchinson, the chief executive of Fortescue Future Industries, <a href="https://www.abc.net.au/news/2023-02-17/twiggy-forrest-kerry-stokes-michelle-rowland-spat-media/101990722?utm_medium=social&utm_content=sf264324662&utm_campaign=abc_news&utm_source=m.facebook.com&sf264324662=1&fbclid=IwAR0ykr77aP7SV6ewUk31BQiDupuYRZTMXMpV-hbcnf7bFhFLbbPdTf5JErA">described</a> what he calls “the misuse of the West Australian newspaper to pursue commercial interests”. He added, according to the ABC: </p>
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<p>The West’s coverage has gone far beyond fair scrutiny and is clearly driven by fossil fuel interests with the aim of damaging Fortescue’s green energy mission.</p>
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<h2>‘System not fit-for-purpose’</h2>
<p>Hutchinson says the issues points to a wider problem: the lack of media diversity in Perth, which has only one major daily newspaper for a city of two million. </p>
<p>That Seven West Media is one of only three major commercial corporations owning the bulk of Australian media – alongside <a href="https://www.smh.com.au/national/australia-needs-more-media-diversity-and-there-are-ways-to-achieve-it-20210413-p57iso.html">News Corp and Nine Entertainment</a> – is a sad indictment of the state of our media ownership laws.</p>
<p>With such a highly concentrated media ownership, the partisanship of big news brands has become the norm. The Senate inquiry into media diversity has investigated a litany of problems associated with this, deeming Australian media regulation a “<a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Environment_and_Communications/Mediadiversity/Report">system not fit-for-purpose</a>”. </p>
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<p>For example, Australia’s relationship with China, its largest trading partner, is typically cast in hyperbolic “war drums” language by the Murdoch media. And during the pandemic, News Corp’s online tabloids were especially keen to link COVID with China. China scholar David Brophy documented in his book, <a href="https://www.blackincbooks.com.au/books/china-panic">China Panic</a>, how Sky News seized on a “dodgy-dossier” linking COVID to a laboratory in the city of Wuhan. </p>
<p>More recently, News Corp is at it again, this time airing an <a href="https://www.youtube.com/watch?v=UUD-sCvtDE0&t=9s">hour-long special</a> advocating for a doubling of Australia’s military spending so the country can be protected against the imminent and “inevitable” Chinese invasion. </p>
<p>In its <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Environment_and_Communications/Mediadiversity/Report/section?id=committees%2Freportsen%2F024602%2F78577">final report</a>, the media diversity inquiry commented,</p>
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<p>It is noteworthy that the overwhelming majority of the evidence to this inquiry relates to one dominant media organisation, News Corp. </p>
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Read more:
<a href="https://theconversation.com/news-corps-job-cuts-cast-a-shadow-over-the-future-of-its-newspapers-199762">News Corp's job cuts cast a shadow over the future of its newspapers</a>
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<h2>How Europe is leading the way</h2>
<p>To counter unaccountable media power and a lack of transparency in media ownership, the European Commission has recently proposed a new regulatory framework: the <a href="https://digital-strategy.ec.europa.eu/en/library/european-media-freedom-act-proposal-regulation-and-recommendation">European Media Freedom Act (EMFA)</a>. </p>
<p>Introducing the new framework, EU commissioner Thierry Breton <a href="https://ec.europa.eu/commission/presscorner/detail/en/ip_22_5504">said it contains</a></p>
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<p>[…]common safeguards at EU level to guarantee a plurality of voices and that our media are able to operate without any interference, be it private or public. </p>
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<p>He said a new European watchdog would be set up to ensure transparency in media ownership. Another key feature will require EU member states to test the impact of media market concentrations on media pluralism and editorial independence. </p>
<p>At a <a href="https://multimedia.europarl.europa.eu/en/webstreaming/cult-committee-meeting_20230206-1500-COMMITTEE-CULT">recent EU parliament hearing</a>, a media freedom expert, Elda Brogi, explained how the new measures benefit the public as well as regulators: </p>
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<p>[…] it helps media users to understand how ownership may influence the [news] content.</p>
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<h2>A better method for measuring media diversity</h2>
<p>The Australian government and its principal media regulator, the Australian Communications and Media Authority (ACMA), have recently released a <a href="https://www.acma.gov.au/consultations/2023-01/new-framework-measuring-media-diversity-australia?utm_medium=email&utm_campaign=ACMA%2520seeks%2520feedback%2520on%2520news%2520measurement%2520tool&utm_content=ACMA%2520seeks%2520feedback%2520on%2520news%2520measurement%2520tool+CID_042b83509756ee8b7018e52ad73be76b&utm_source=SendEmailCampaigns&utm_term=consultation%2520paper">discussion paper</a> seeking comment on developing a sophisticated new way to monitor media diversity in Australia.</p>
<p>This is the second phase of a process begun in 2020. The goal is to assess how Australians actually consume online news, including personalised news delivered to them through social media, search engines and news aggregators. </p>
<p>The current media diversity rules are based on an assessment of the ownership and control of traditional media outlets. However, as ACMA says, this misses the volume of news being published and consumed online. This omission is “notable”, the agency says, given 81% of Australians access news content online. </p>
<p>This news measurement model will be able to track the level of connection of stories (news connected to localities), the extent of originality (unique news stories), and the level of civic journalism (news of public significance). </p>
<p>This kind of internationally informed and evidenced-based approach is urgently needed to truly gauge the level of media concentration in Australia and determine its impact on public interest journalism and the news people read. Only then can we put in place new regulations that will have a real impact. </p>
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Read more:
<a href="https://theconversation.com/forget-calls-for-a-royal-commission-into-australias-big-media-players-this-is-the-inquiry-we-really-need-171842">Forget calls for a royal commission into Australia's big media players – this is the inquiry we really need</a>
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<p class="fine-print"><em><span>Tim Dwyer receives funding from the Australian Research Council. </span></em></p>In such a highly concentrated media market as Australia, the partisanship of big news brands has become the norm.Tim Dwyer, Associate Professor, Discipline of Media and Communications, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1976882023-01-13T03:22:53Z2023-01-13T03:22:53ZThe A$30 billion Sun Cable crash is a setback but doesn’t spell the end of Australia’s renewable energy export dreams<p>Sun Cable – considered to be the world’s biggest renewable energy export project – <a href="https://suncable.energy/sun-cable-enters-voluntary-administration-strong-development-progress-and-portfolio-provides-opportunity-for-refreshed-alignment-between-company-and-investor-objectives/">announced</a> this week it had entered voluntary administration <a href="https://www.afr.com/chanticleer/duelling-billionaires-burn-sun-cable-20230111-p5cbw2#:%7E:text=Sun%20Cable%20said%20the%20appointment,be%20achieved%2C%E2%80%9D%20it%20said">following</a> “the absence of alignment” with shareholders. </p>
<p>Sun Cable is expected to cost <a href="https://www.infrastructureaustralia.gov.au/map/australia-asia-powerlink">over A$30 billion</a>. It <a href="https://suncable.energy/">proposes to</a> build an enormous, 12,000 hectare solar farm in the Northern Territory, add an enormous (40 gigawatt hour) battery for electricity storage, then connect Australia to Singapore via Darwin through an undersea cable over 4,000 kilometres long. This would be by far the world’s longest electricity cable if it existed today.</p>
<p>It would see Darwin access 800 megawatts of additional electricity and Sun Cable could supply “up to” 15% of Singapore’s electricity by 2030. To put this into context, Singapore’s annual electricity consumption <a href="https://www.ema.gov.sg/singapore-energy-statistics/Ch03/index3#:%7E:text=Electricity%20Consumption&text=The%20Industrial%2Drelated%20sector%20remained,%25%20or%208.3%20TWh">is about</a> one quarter of Australia’s.</p>
<p>While this prominent and well funded project has gone into voluntary administration, those enthused about rapid decarbonisation and Australia’s renewable energy export potential need not despair. These events are part of the usual discovery processes. </p>
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Read more:
<a href="https://theconversation.com/it-might-sound-batshit-insane-but-australia-could-soon-export-sunshine-to-asia-via-a-3-800km-cable-127612">It might sound 'batshit insane' but Australia could soon export sunshine to Asia via a 3,800km cable</a>
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<h2>What Sun Cable promises</h2>
<p>Sun Cable offers an enticing possibility of putting Australia’s land, and the rays of sunshine that fall on it, to use in <a href="https://www.eia.gov/international/analysis/country/SGP">displacing gas</a> for electricity production in a distant land. Singapore is keen to procure renewable electricity, and has limited ability to produce that electricity itself. </p>
<p>The project has attracted the enthusiastic support of Australia’s two richest men: Mike Cannon-Brookes and Andrew Forrest. Each has already <a href="https://www.smh.com.au/business/companies/cannon-brookes-takes-swipe-at-forrest-commits-to-rebuilding-sun-cable-20230112-p5cc0e.html">committed</a> about $50 million to the project and both are experienced investors in renewable electricity in Australia.</p>
<p>When Cannon-Brookes first invested in the project he <a href="https://www.afr.com/policy/energy-and-climate/cannon-brookes-plan-to-export-aussie-solar-power-to-singapore-20190924-p52u9o">described</a> it as “batshit insane” but also that the “engineering all checks out”. </p>
<p>Sun Cable is also supported by Australia’s governments. The NT government passed <a href="https://ntrebound.nt.gov.au/news/2022/propelling-the-sun-cable-project-forward-with-new-legislation#:%7E:text=The%20Territory%20Government%20has%20passed,construction%2C%20and%20350%20during%20operations">laws</a> last year to facilitate its development. The federal government <a href="https://territorygas.nt.gov.au/projects/sun-cables-australia-singapore-power-link">gave it</a> “major project” status. And Infrastructure Australia <a href="https://www.infrastructureaustralia.gov.au/sites/default/files/2022-06/Evaluation%20Summary%20-%20Australia-Asia%20PowerLink.pdf">called</a> the project “investment ready” and placed it on its National Infrastructure Priority List. </p>
<p><a href="https://www.afr.com/companies/energy/sun-cable-running-joke-or-visionary-decarbonisation-project-20230112-p5cc5f">Media commentary</a> since Sun Cable’s announcement has drawn attention to the differences of view of its two most prominent <a href="https://www.afr.com/companies/energy/sun-cable-collapses-despite-backing-from-forrest-cannon-brookes-20230111-p5cbu">shareholders</a>, particularly about their differing level of support for Sun Cable’s management. </p>
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Read more:
<a href="https://theconversation.com/cannon-brookes-shakes-up-agl-what-now-for-australias-biggest-carbon-emitter-194625">Cannon-Brookes shakes up AGL: what now for Australia's biggest carbon emitter</a>
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<p>But the exact nature of their disagreement is unclear, and both men <a href="https://www.afr.com/policy/energy-and-climate/double-bay-jesus-versus-god-20230111-p5cbwt">have said</a> <a href="https://www.smh.com.au/business/companies/cannon-brookes-takes-swipe-at-forrest-commits-to-rebuilding-sun-cable-20230112-p5cc0e.html">they remain</a> interested in the project.</p>
<p>Commentators have suggested the apparent disagreement is a reflection on the commercial and technical viability of the project itself. Matthew Warren, former chief executive of the Australian Energy Council, went so far as <a href="https://www.afr.com/companies/energy/sun-cable-was-a-colossus-that-collapsed-under-its-own-weight-20230112-p5cc1b">to describe</a> Sun Cable as “a quiet running joke inside the electricity industry” and that it:</p>
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<p>reflected the ignorance, egos and quest for notoriety of its proponents rather than the needs of its prospective customers.</p>
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<p>But Federal Energy and Climate Minister Chris Bowen, commenting on conversations with Sun Cable’s management, <a href="https://www.afr.com/companies/energy/accusations-fly-in-billionaire-battle-for-sun-cable-20230112-p5cc0l">said</a> he was assured the project would proceed. He said the latest developments reflected only a change in corporate structure and approach.</p>
<h2>Comparable projects overseas</h2>
<p>Sun Cable is obviously a very ambitious project. Yet much too little information is publicly available to pronounce, with any certainty, on its commercial and technical viability. </p>
<p>While the project will certainly break new ground, it is not totally in its own league. The similar <a href="https://xlinks.co/renewable-energy-project-announcement">Xlinks project</a> was proposed overseas in 2021 and is now advancing quickly. This project would connect Morocco and England with similar capacity renewable generation and storage, and has a comparably long cable to Sun Cable’s. </p>
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Read more:
<a href="https://theconversation.com/australia-needs-much-more-solar-and-wind-power-but-where-are-the-best-sites-we-mapped-them-all-196033">Australia needs much more solar and wind power, but where are the best sites? We mapped them all</a>
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<p>And at the end of last year, the European Commission <a href="https://www.euractiv.com/section/politics/news/eu-commission-approves-first-energy-corridor-between-italy-africa/">committed funding to</a> a high-voltage direct current link between Tunisia in North Africa and Sicily, Italy. It would export 600 megawatts of (mainly) solar electricity produced in Tunisia. </p>
<p>Although a much less ambitious project than either Xlinks or Sun Cable, it is founded on the same vision of long distance inter-continental transmission of renewable electricity. And it is almost certain to proceed.</p>
<p>Just like fossil fuel resources, the world’s renewable resources are unevenly distributed. There are powerful incentives now, on economic and sustainability grounds, to find ways to reliably and cost effectively move renewable electricity from where those resources are abundant to where they are scarce. </p>
<h2>No need for hand wringing</h2>
<p>Inevitably, the latest Sun Cable developments draw attention to the questions of how best to exploit Australia’s endowment of land, sun and wind and how to capitalise on our track record as a reliable supplier with credible government and trusted courts. </p>
<p>For example, instead of trying to export electricity, should we focus on exporting renewably produced <a href="https://theconversation.com/for-australia-to-lead-the-way-on-green-hydrogen-first-we-must-find-enough-water-196144">hydrogen</a> or ammonia for fuel and fertilisers? Or, should we focus on using renewables to process and refine mineral resources before shipping higher-valued products (such as steel, alumina, aluminium and silicone metal) to distant shores? </p>
<p>These questions have attracted considerable interest from policy makers, investors and researchers – in particular, in books from economist Ross Garnaut (<a href="https://www.google.com.au/books/edition/Superpower/KPiPDwAAQBAJ?hl=en&gbpv=1&printsec=frontcover">Superpower</a> and <a href="https://www.google.com.au/books/edition/The_Superpower_Transformation/JRZmEAAAQBAJ?hl=en&gbpv=1&printsec=frontcover">The Superpower Transformation</a>) and in former Australian chief scientist Alan Finkel’s forthcoming book <a href="https://www.blackincbooks.com.au/books/powering">Powering Up</a>. </p>
<p>Both authors canvass many possibilities and neither categorically rule out direct renewable electricity export. They also suggest ore processing using renewable electricity is likely to offer great immediate value. </p>
<p>As best I can see, the latest Sun Cable developments provide no new publicly available information to confidently provide new insights into these issues.</p>
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Read more:
<a href="https://theconversation.com/red-dirt-yellow-sun-green-steel-how-australia-could-benefit-from-a-global-shift-to-emissions-free-steel-179286">Red dirt, yellow sun, green steel: how Australia could benefit from a global shift to emissions-free steel</a>
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<p>The outpouring of “I-told-you-so” commentary following Sun Cable’s voluntary administration is to be expected. But perhaps the main import of Sun Cable’s developments is to draw attention to Australia’s good fortune in attracting ambitious and enterprising developers, supported by rich Australians who have been successful swimming against the tide. </p>
<p>Rather than dipping their hands into the public’s pocket to fund the discovery of the best way to exploit Australia’s renewable resources, these enterprising people are risking their own money and reputations in a discovery process likely to benefit us all. </p>
<p>There is no need for a crisis of confidence or a bout of hand wringing about the viability of Australia’s renewable energy export prospects. </p>
<p>Disagreements arise between investors all the time. Administrative and legal processes should provide ways for these to be resolved quickly and amicably, as we should expect here. Viva the discovery process.</p><img src="https://counter.theconversation.com/content/197688/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Mountain does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While this prominent and well funded project has gone into voluntary administration, those enthused about rapid decarbonisation and Australia’s renewable energy export potential need not despair.Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1913332022-10-09T23:48:17Z2022-10-09T23:48:17ZWhat will power the future: Elon Musk’s battery packs or Twiggy Forrest’s green hydrogen? Truth is, we’ll need both<figure><img src="https://images.theconversation.com/files/487708/original/file-20221003-17-hlp9.jpg?ixlib=rb-1.1.0&rect=140%2C50%2C4109%2C2771&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">NASA/Unsplash</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>The battle of the billionaires has become the stuff of headlines. The world’s <a href="https://www.forbes.com/real-time-billionaires/#59d606763d78">richest man</a>, Elon Musk, has <a href="https://www.smh.com.au/business/companies/musk-vs-forrest-the-clash-of-eco-titans-and-their-enormous-egos-20220920-p5bjjj.html">gone head-to-head</a> with Australia’s richest man, billionaire Andrew “Twiggy” Forrest.</p>
<p>Musk, founding investor in battery-powered car giant Tesla, has famously mocked hydrogen fuel-cell vehicles as “mind-bogglingly stupid”. Forrest has just placed a very large bet on green hydrogen through his Fortescue Future Industries company. It’s no surprise Forrest has hit back, calling Musk “just a businessman” rather than a “real climate avenger”.</p>
<p>The stoush might sound tabloid. But at its heart is serious debate about the world’s industrial future. Battery-electric cars have already proven their worth, whereas hydrogen fuel-cell cars are still emerging. But green hydrogen isn’t a one-trick pony – it can replace fossil fuels in many high-emissions industrial processes, such as making steel or cement. </p>
<p>As we accelerate towards a green future, will batteries or fuel cells power the world? The short answer is, we’ll need both.</p>
<h2>The battle for the future?</h2>
<p>Musk and his company Tesla are backing batteries and battery-powered electric vehicles. And Musk is doing this at colossal scale, with his large-scale gigafactories churning out millions of lithium-ion battery packs to power battery-electric vehicles. Other corporations such as LG and Samsung are following suit, rolling out their own gigafactories. </p>
<p>By contrast, Forrest is heavily backing green hydrogen. To make it a reality, he envisages vast solar arrays across Australia’s sun-drenched north and west to power the electrolysis process which splits water into its components, hydrogen and oxygen. In a fuel cell car, green hydrogen once again combines with oxygen and produces electricity. </p>
<p>While Teslas and many other battery-electric cars are now seen on roads around the world, fuel cell cars have had limited appeal to date. While Japan’s Toyota and South Korea’s Hyundai have backed them, they’re a rarity in other nations. This, Forrest believes, can change as green hydrogen arrives in large volumes and costs fall. </p>
<p>Musk does have a point. What, he asks, is the point of producing clean energy to produce hydrogen to produce electricity to propel a car? Why not just store the green electricity in a battery and use it directly? </p>
<p>While this truth might limit the uptake of fuel-cell vehicles in the medium term, Forrest sees green hydrogen as a miracle commodity and a long-term prospect. <a href="https://www.abc.net.au/radionational/programs/boyerlectures/oil-vs-water-confessions-of-a-carbon-emitter-v1/13072410">Speaking</a> last year, Forrest said green hydrogen could become the biggest industry in the world, boasting revenues of AU$18.5 trillion by 2050. </p>
<p>How? Green hydrogen is versatile. Unlike batteries, green hydrogen can replace oil, coal and gas in virtually all their uses – including as fuel in fuel cell electric vehicles. Green hydrogen can produce <a href="https://www.thyssenkrupp.com/en/newsroom/press-releases/pressdetailpage/thyssenkrupp-is-accelerating-the-green-transformation--decision-taken-on-the-construction-of-germanys-largest-direct-reduction-plant-for-low-co2-steel-146809">green steel</a>, green cement, green glass, green plastics and even green fertiliser (through green ammonia).</p>
<p>This is the real reason green hydrogen matters. It makes total fossil fuel substitution possible, as I argue in my <a href="https://anthempress.com/a-green-industrial-revolution-pb">forthcoming book</a>. </p>
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Read more:
<a href="https://theconversation.com/australia-plans-to-be-a-big-green-hydrogen-exporter-to-asian-markets-but-they-dont-need-it-179381">Australia plans to be a big green hydrogen exporter to Asian markets – but they don’t need it</a>
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<h2>How far off is total substitution?</h2>
<p>Forrest and his green hydrogen company are focused on green hydrogen as a universal substitute, rather than just fuel for vehicles. </p>
<p>This changes how we should view the hydrogen-battery debate. While battery-electric technology has taken a commanding lead in consumer cars, batteries are much less effective in powering heavy transport such as trucks. That’s because you would need immensely heavy batteries to get enough range and power. By contrast, the ability to store large volumes of hydrogen means fuel cells may well be needed to power trucks, trains, boats and ships. </p>
<p>Giant industrial economies to Australia’s north like such as South Korea, Japan and China are increasingly seeing green hydrogen as a way to decarbonise. The technique should also produce major water savings, given the water used in electrolysis is a <a href="https://pubs.acs.org/doi/10.1021/acsenergylett.1c01375">fraction of that</a> needed to make fossil fuel use viable through mining, cooling power stations and fracking for gas or oil. </p>
<p>While these nations will be able to produce some of their own green hydrogen using water, solar and wind, they are also likely to look for overseas suppliers such as Australia, given our vast solar and wind resources.</p>
<p>But there are cost and scale challenges to overcome, notably the cost of electrolysers. <a href="https://www.nature.com/articles/s41560-022-01097-4">Recent research</a> suggests this bottleneck is significant, but could be overcome with government and industry backing. </p>
<p>Costs should drop rapidly in the next few years. By the end of this year, the world will have its first gigawatt of electrolysis capacity. By 2030, according to a new <a href="https://www.iea.org/reports/electrolysers">International Energy Agency report</a>, it could be between 134 and 200 gigawatts of capacity if all planned projects proceed. As of 2021, 38 gigawatts of capacity <a href="https://reneweconomy.com.au/australia-has-38gw-of-green-hydrogen-in-pipeline-but-major-cost-falls-needed/">were planned</a> in Australia. Some of these won’t proceed, of course. But many will. </p>
<p>Green hydrogen is not a direct competitor with light battery-electric cars. It’s complementary – and it will open up many new urgently needed pathways to net zero in hard-to-decarbonise sectors. So Musk is wrong about hydrogen. But he’s right about batteries – we’ll need them too. </p>
<p>For our part, Australia has everything to gain from accelerating the green hydrogen industrial future. It’s entirely feasible we could have a vast export industry to take up the slack as coal, oil and gas decline. And we’ll benefit from our rich deposits of minerals needed in batteries, too. </p>
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Read more:
<a href="https://theconversation.com/breakthrough-in-gas-separation-and-storage-could-fast-track-shift-to-green-hydrogen-and-significantly-cut-global-energy-use-186644">Breakthrough in gas separation and storage could fast-track shift to green hydrogen and significantly cut global energy use</a>
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<img src="https://counter.theconversation.com/content/191333/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Mathews receives funding from ARC for the joint research project "Green energy transition in East Asia"</span></em></p>Australia’s richest man recently took on the world’s richest man over the shape of our green future. But it’s not either batteries or green hydrogen – we need both.John Mathews, Professor Emeritus, Macquarie Business School, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1698322021-10-26T19:16:19Z2021-10-26T19:16:19ZAustralia’s clean hydrogen revolution is a path to prosperity – but it must be powered by renewable energy<p>Days out from the United Nations climate summit in Glasgow, the Morrison government on Tuesday <a href="https://theconversation.com/morrisons-climate-plan-has-35-2030-emissions-reduction-projection-but-modelling-underpinning-2050-target-yet-to-be-released-170635">announced</a> a “practically achievable” path to reaching its new target of net-zero emissions by 2050.</p>
<p>As expected, the government will pursue a “technology not taxes” approach – eschewing policies such as a carbon price in favour of technological solutions to reduce emissions. Developing Australia’s fledgling hydrogen industry is a central plank in the plan.</p>
<p>This technological shift should not be seen as a cost burden for Australia. Yes, major transformation in industry is needed as it moves away from conventional fossil-fuelled processes. But this green industrial revolution is a potential source of great profit and prosperity – a fact Australia’s business sector has already recognised. </p>
<p>Acting quickly, and powering the shift with renewable energy, means Australia can be a world leader in green hydrogen technology and exports, <a href="https://theconversation.com/south-koreas-green-new-deal-shows-the-world-what-a-smart-economic-recovery-looks-like-145032">particular to Asia</a>.</p>
<figure class="align-center ">
<img alt="hand holds blue booklet" src="https://images.theconversation.com/files/428452/original/file-20211026-17-iv6jas.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/428452/original/file-20211026-17-iv6jas.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/428452/original/file-20211026-17-iv6jas.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/428452/original/file-20211026-17-iv6jas.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/428452/original/file-20211026-17-iv6jas.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/428452/original/file-20211026-17-iv6jas.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/428452/original/file-20211026-17-iv6jas.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Hydrogen is at the centre of the Morrison government’s plan to reach net-zero emissions by 2050.</span>
<span class="attribution"><span class="source">Mick Tsikas/AAP</span></span>
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</figure>
<h2>A ‘priority technology’</h2>
<p>Hydrogen can be produced in several ways. So-called “green” hydrogen is produced using electrolysers, powered by renewable energy, splitting water into hydrogen and oxygen. </p>
<p>“Blue” hydrogen is produced from coal or gas, with some carbon emissions trapped and stored underground. </p>
<p>A report released earlier this month found Australia could <a href="https://www.abc.net.au/radionational/programs/breakfast/green-exports-could-create-thousands-of-jobs/13585262">create 395,000</a> new jobs and generate A$89 billion in new trade by 2040 by investing in clean energy exports. Some of the biggest opportunities were in green hydrogen produced using renewable energy.</p>
<p>The National Hydrogen Strategy, published in late 2019 and spearheaded by then-Chief Scientist Alan Finkel, aims to make Australia a world leader in hydrogen. Under the most optimistic scenario, it predicts Australia’s hydrogen industry could be worth A$26 billion to the economy in 2050. </p>
<p>Energy Minster Angus Taylor on Tuesday said clean hydrogen was a “priority technology” in the government’s roadmap to reaching net-zero emissions this century, adding:</p>
<blockquote>
<p>“We’ve set a goal of under $2 per kilogram and as we get to that cost-competitiveness we know we’ll see explosive growth in the deployment of clean hydrogen.”</p>
</blockquote>
<p>Somewhat problematically, the Morrison government considers blue hydrogen a “clean” technology, and an important part of Australia’s energy transition.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/super-charged-how-australias-biggest-renewables-project-will-change-the-energy-game-148348">Super-charged: how Australia's biggest renewables project will change the energy game</a>
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<img alt="two men talking" src="https://images.theconversation.com/files/428451/original/file-20211026-25-j6jds6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/428451/original/file-20211026-25-j6jds6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/428451/original/file-20211026-25-j6jds6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/428451/original/file-20211026-25-j6jds6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/428451/original/file-20211026-25-j6jds6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/428451/original/file-20211026-25-j6jds6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/428451/original/file-20211026-25-j6jds6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Australia’s former chief scientist Alan Finkel, pictured with Energy Minister Angus Taylor, spearheaded the National Hydrogen Strategy.</span>
<span class="attribution"><span class="source">Richard Wainwright/AAP</span></span>
</figcaption>
</figure>
<h2>The revolution is possible</h2>
<p>To bring down the cost of green hydrogen, it must be manufactured at scale. This is consistent with a vision of a global green shift in which clean forms of energy and production become so competitive they displace incumbent fossil fuel industries.</p>
<p>That is certainly the way Australian businessman Andrew “Twiggy” Forrest sees it. This month he announced his company, Fortescue Future Industries, will build a green energy manufacturing centre in central Queensland. The first step in the <a href="https://www.abc.net.au/news/2021-10-11/qld-hydrogen-capacity-explainer-hydrogen-green-twiggy/100528046">$1 billion-plus</a> investment will involve hydrogen electrolysers, before the project expands to other green industry products such as cabling and wind turbines.</p>
<p>Forrest also <a href="https://www.afr.com/policy/energy-and-climate/forrest-willing-to-fund-1b-green-power-station-in-nsw-20210315-p57axg">intends</a> to build a $1.3 billion gas- and hydrogen-fuelled <a href="https://reneweconomy.com.au/nsw-fast-tracks-andrew-forrest-backed-gas-hydrogen-port-kembla-power-station/">power plant</a> at Port Kembla in New South Wales and a plant in Brisbane, producing <a href="https://www.abc.net.au/news/2021-10-11/queensland-hydrogen-twiggy-forrest-ammonia-feasiblity/100528732">green ammonia</a> for use in fertilisers.</p>
<p>Forrest <a href="https://www.smh.com.au/business/the-economy/it-will-dwarf-coal-nsw-plan-seen-as-a-leap-forward-for-hydrogen-20211013-p58zpd.html">claims</a> there will be “no bigger industry” in future than green hydrogen and ammonia, saying it would dwarf the scale of iron ore and coal. The claims may sound outlandish, but history suggests they’re possible. </p>
<p>The oil industry, and its offshoots in cars and petrochemicals, grew to its mammoth size in the 20th century precisely because of industrialists such as <a href="https://www.britannica.com/biography/John-D-Rockefeller">John D. Rockefeller</a> and <a href="https://www.britannica.com/biography/Henry-Ford">Henry Ford</a>. They understood that large investments at huge scale would trigger huge cost reductions as the market for goods produced by fossil fuels expanded.</p>
<p>Similarly today, huge investments in cost reduction and market expansion, if continued, could well see the green hydrogen industry <a href="https://irena.org/-/media/Files/IRENA/Agency/Publication/2020/Dec/IRENA_Green_hydrogen_cost_2020.pdf">displace</a> fossil fuels.</p>
<p>Economics will drive the transition. The costs of green hydrogen will likely outmatch the costs of oil and gas, and so become the inputs of choice in making <a href="https://newsroom.unsw.edu.au/news/science-tech/new-eco-friendly-way-make-ammonia-could-be-boon-agriculture-hydrogen-economy">green fertilisers</a>, <a href="https://theconversation.com/green-steel-is-hailed-as-the-next-big-thing-in-australian-industry-heres-what-the-hype-is-all-about-160282">green steel</a>, <a href="https://theconversation.com/green-cement-a-step-closer-to-being-a-game-changer-for-construction-emissions-126033">green cement</a> and fuel for <a href="https://theconversation.com/green-cement-a-step-closer-to-being-a-game-changer-for-construction-emissions-126033">heavy vehicles</a> such as trucks and ships. </p>
<p>The business sector is not the only one blazing a trail. Several Australian states, including <a href="https://www.abc.net.au/news/2021-10-13/andrew-forrest-backs-nsw-green-hydrogen-plan/100534458">New South Wales</a>, <a href="https://www.epw.qld.gov.au/about/initiatives/hydrogen/taskforce">Queensland</a> and <a href="https://www.wa.gov.au/government/publications/western-australian-renewable-hydrogen-strategy-and-roadmap">Western Australia</a>, are also seizing green hydrogen opportunities.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-morrison-government-is-set-to-finally-announce-a-2050-net-zero-commitment-heres-a-to-do-list-for-each-sector-170099">The Morrison government is set to finally announce a 2050 net-zero commitment. Here's a 'to do' list for each sector</a>
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<img alt="white tank with H2 Hydrogen in blue writing" src="https://images.theconversation.com/files/428447/original/file-20211026-17-1mqpom4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/428447/original/file-20211026-17-1mqpom4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/428447/original/file-20211026-17-1mqpom4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/428447/original/file-20211026-17-1mqpom4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/428447/original/file-20211026-17-1mqpom4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/428447/original/file-20211026-17-1mqpom4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/428447/original/file-20211026-17-1mqpom4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The Morrison government wants hydrogen produced at under $2 a kilogram.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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</figure>
<h2>The future must be green</h2>
<p>Much resistance to clean energy in Australia has focused on the costs of the transition. But in fact, it can be a path to prosperity.</p>
<p>There’s one important caveat, however. Minister Taylor said on Tuesday that his technology roadmap included hydrogen produced from coal and gas, saying “Australia has an opportunity to be a world leader in the adoption of blue and green hydrogen”.</p>
<p>But as <a href="https://theconversation.com/australia-is-at-a-crossroads-in-the-global-hydrogen-race-and-one-path-looks-risky-157864">others have noted</a>, producing hydrogen from fossil fuels is a risky strategy. It can emit substantial amounts of greenhouse gases, and capturing these emissions at a high rate may drive up the cost of the technology. </p>
<p>This would make it far more expensive than green hydrogen produced from renewable energy, disrupting the cycle of cost-reduction and market expansion. </p>
<p>Taylor is right in saying Australia could be a global leader in hydrogen production and exports. But only hydrogen produced using renewable energy will bring about a true green industrial revolution.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/australia-is-at-a-crossroads-in-the-global-hydrogen-race-and-one-path-looks-risky-157864">Australia is at a crossroads in the global hydrogen race – and one path looks risky</a>
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<img src="https://counter.theconversation.com/content/169832/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Mathews receives funding from the Australia Research Council (ARC) Discovery Project 2019-202.</span></em></p>Australia’s business sector has recognised the profits to be made in the hydrogen transition. Acting quickly, and powering the shift with renewable energy, is key.John Mathews, Professor Emeritus, Macquarie Business School, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/887702017-12-12T00:05:05Z2017-12-12T00:05:05ZAs costs mount, the government should abandon the Cashless Debit Card<figure><img src="https://images.theconversation.com/files/198441/original/file-20171210-27677-12248fl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Cashless Debit Card trial disproportionately targets Indigenous people, despite what the government says.</span> <span class="attribution"><span class="source">AAP/Richard Milnes</span></span></figcaption></figure><p>A Senate inquiry <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/CashlessDebitCard/Report">has recommended</a> that trials of the Cashless Debit Card be continued and expanded to new sites in other states next year. This is despite <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/CashlessDebitCard/Report/d01">Labor</a> and <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/CashlessDebitCard/Report/d02">Greens</a> senators providing separate dissenting reports that rejected the recommendation that legislation for the bill should pass.</p>
<p>The majority report’s proposal dramatically contrasts with most of the <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/CashlessDebitCard/Submissions">submissions accepted</a> by the inquiry raising significant concerns and arguing against the trials. These submissions outline a variety of serious issues that have been largely overlooked.</p>
<h2>What is the card?</h2>
<p>The trials for the Cashless Debit Card began in early 2016 in Ceduna, South Australia, and the East Kimberley in Western Australia. </p>
<p>The card quarantines 80% of social security payments received by all working-age people (between the ages of 15 and 64) in the trial sites. It attempts to restrict cash and purchases of alcohol, illegal drugs and gambling products. </p>
<p>The card compulsorily includes people receiving disability, parenting, carers, unemployed and youth allowance payments. People on the aged pension, on a veteran’s payment or earning a wage are not compulsorily included in the trial, but can volunteer to take part.</p>
<h2>The issues left unanswered</h2>
<p>The trial disproportionately targets Indigenous people, despite the government claiming the card is for both <a href="https://www.aph.gov.au/DocumentStore.ashx?id=1fcbc7ab-effb-4092-bb42-9c743dadf7a5&subId=560832">Indigenous and non-Indigenous</a> welfare recipients. This is disingenuous, given the card was first proposed as a key recommendation in mining magnate Andrew Forrest’s <a href="https://www.pmc.gov.au/resource-centre/indigenous-affairs/forrest-review">Review of Indigenous Training and Employment</a>. </p>
<p>This recommendation followed various other forms of income management, including a program that was part of the <a href="http://caepr.cass.anu.edu.au/highlights/evaluating-new-income-management-northern-territory-final-evaluation-report-and-summary">Northern Territory Intervention</a> in 2007.</p>
<p>The Intervention required the suspension of the Racial Discrimination Act to explicitly target all Indigenous people on welfare. <a href="https://www.aph.gov.au/DocumentStore.ashx?id=5b3af532-0d22-44e2-9967-7731d0074a6f&subId=561285">Concerns</a> about <a href="https://www.aph.gov.au/DocumentStore.ashx?id=1fcbc7ab-effb-4092-bb42-9c743dadf7a5&subId=560832">human rights</a> breaches continue, and most were overlooked by the <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/CashlessDebitCard/Report">Human Rights Joint Committee’s commentary</a> on the Cashless Debit Card bill.</p>
<p>The trial of the card has increased hardship in people’s lives. This is not only because of the experiment’s disorganised and ill-conceived implementation, but also due to the trial’s design. </p>
<p>People are being compulsory included because there is an assumption that they engage in problematic behaviours, such as the over-consumption of alcohol, gambling, or the use of illegal drugs. But this is not the reality <a href="http://caepr.cass.anu.edu.au/research/publications/cashless-debit-card-trial-east-kimberley">for most people</a>.</p>
<p>Being put on the card has made people’s lives harder because limiting cash restricts people’s ability to undertake day-to-day activities to help their family’s wellbeing. This includes getting second-hand goods, paying for transport, and buying gifts. </p>
<p>This hardship is reflected in the <a href="https://www.dss.gov.au/about-the-department/feature/cashless-debit-card-trial-evaluation-final-evaluation-report">final evaluation of the trial</a>, in which 32% said their lives were worse since being on the card (only 23% said their lives were better). </p>
<p>Further, <a href="https://www.dss.gov.au/about-the-department/feature/cashless-debit-card-trial-evaluation-final-evaluation-report">48% of participants</a> reported that the card does not help them look after their children better. This is concerning, as recently completed research into income management programs indicates a correlation with <a href="https://www.menzies.edu.au/icms_docs/279201_Children_negatively_impacted_by_early_intervention_restrictions.pdf">negative impacts</a> on children – including a reduction in birth weight and school attendance.</p>
<p>Getting the assumptions wrong has pushed already vulnerable people into even more vulnerable situations. Medical specialists <a href="https://www.aph.gov.au/DocumentStore.ashx?id=6d4e5cc9-7d8b-4567-bf87-9d10068d25ea&subId=561286">have raised</a> concerns with the card being used to treat addiction.</p>
<p>Both crime and domestic assaults increased under the card in the East Kimberley. Superintendent Adams of the Kimberley Police District told the Senate inquiry that in the 12 months to June 30, 2016, there were 319 domestic assaults in Kununurra, but in the 12 months to June 30, 2017 (and the time of the trial), this figure had <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/CashlessDebitCard/Report/d01">increased to 508</a>.</p>
<h2>Flawed evidence</h2>
<p>The government used both the interim and final evaluations as key evidence to justify extending the trials. </p>
<p>Both evaluations have been severely criticised as being <a href="http://caepr.cass.anu.edu.au/research/publications/cashless-debit-card-evaluation-does-it-really-prove-success">methodologically and analytically flawed</a>: from the way <a href="https://www.theguardian.com/commentisfree/2017/sep/07/much-of-the-data-used-to-justify-the-welfare-card-is-flawed">interviews were conducted</a>, to having no baseline to test government claims of success, through to an over-emphasis on anecdotal improvements and discarding important issues such as the increase in crime and domestic violence.</p>
<p>The decision to implement the card was not a community decision that represents the regions’ diverse interests or population. And some have had more say than others. </p>
<p>For example, the Miriuwung Gajerrong Corporation <a href="https://www.aph.gov.au/DocumentStore.ashx?id=9e59ccc9-b9e6-4fad-9fb6-2a992d84fd44&subId=516467">noted</a> that, although the:</p>
<blockquote>
<p>… Department of Social Services states that the Cashless Debit Card program was co-designed with local leaders in Kununurra … in reality, only four local leaders were consulted in relation to the introduction of the [card] in Kununurra. </p>
</blockquote>
<p>Consultations themselves have not been about co-design, but have been tokenistic to <a href="http://caepr.cass.anu.edu.au/research/publications/cashless-debit-card-trial-east-kimberley">convince people to support the card</a>.</p>
<p>In a perverse twist, the only way people can get themselves off the trial is to get a job. Yet in both Ceduna and the East Kimberley, the biggest cause of unemployment is the lack of formal, dignified and secure jobs. Linking to unemployment, some people included in the trial are also subjected to the punitive <a href="http://regnet.anu.edu.au/research/publications/6984/modern-slavery-remote-australia">Community Development Program</a>. This compounds poverty, as the program’s nature induces high breaching rates.</p>
<p>Even if a few support the card, many more have suffered material and emotional hardship. The community has been fractured through <a href="https://www.aph.gov.au/DocumentStore.ashx?id=98f47f0e-ff14-4156-ba37-5f25e05b43d9&subId=561082">such heavy-handed intervention</a>. And the A$25 million spent on it has demonstrated no credible evidence of sufficient benefit to justify an ongoing rollout. </p>
<p>That the card continues to be pursued by government exposes its dogged obsession with implementing neocolonial and punitive policy for some imagined political gain at the expense of vulnerable people.</p>
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<p><em>The author would like to thank professor Jon Altman and Sarouche Razi for comments on earlier drafts.</em></p><img src="https://counter.theconversation.com/content/88770/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Elise Klein receives funding from the British Academy. She gave evidence in the Senate's inquiry into the Cashless Debit Card. She is a member of the Australian Greens. </span></em></p>That the Cashless Debit Card continues to be pursued exposes a dogged obsession with implementing punitive policy at the expense of vulnerable people.Elise Klein, Lecturer in Development Studies, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/825852017-08-23T19:30:29Z2017-08-23T19:30:29ZExpansion of cashless welfare card shows shock tactics speak louder than evidence<figure><img src="https://images.theconversation.com/files/182717/original/file-20170821-17116-1j4rnqe.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Minderoo Foundation's video was a heavy-handed illustration of problems in some WA communities.</span> <span class="attribution"><a class="source" href="https://vimeo.com/228824624/8ba17856b5">Screenshot/Minderoo Foundation</a></span></figcaption></figure><p>The federal government last week <a href="http://www.abc.net.au/news/2017-08-18/cashless-card-advocate-defends-scheme-in-court-wa/8821252">passed legislation</a> to expand the trial of the <a href="https://www.dss.gov.au/families-and-children/programmes-services/welfare-conditionality/cashless-debit-card-overview">cashless welfare card</a> to other areas of Australia. The <a href="https://www.facebook.com/groups/1486363324991953/">controversial</a> policy quarantines 80% of welfare payments to Indigenous Australians living in the Ceduna and East Kimberley regions of Western Australia and cannot be used on gambling, alcohol or to withdraw cash.</p>
<p>The passing of the legislation comes as an inquest into 13 Aboriginal youth suicides in the Kimberley region is <a href="http://www.abc.net.au/news/2017-08-14/suicide-inquest-hears-concern-over-cashless-welfare-cards/8805774">hearing about the welfare card’s</a> impact. It’s also a few weeks after mining billionaire Andrew Forrest’s philanthropic organisation, the <a href="https://www.minderoo.com.au/philanthropy/">Minderoo Foundation</a>, together with regional councils and outgoing WA Police Commissioner, Karl O'Callaghan, were conveyed to Canberra to advocate for the card’s expansion. </p>
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<p>The lobbying <a href="https://vimeo.com/228824624/8ba17856b5">came in a video</a> designed to shock with emotive descriptions of child abuse and footage of children lifted by their hair and stomped on. It implied a strong link between violence against children and income management. Forrest and his supporters were strategic in <a href="http://www.abc.net.au/news/2017-04-22/andrew-twiggy-forrest-pushes-for-expansion-of-centrelink-cdc/8463006">promoting</a> income management and showing <a href="http://www.abc.net.au/news/2017-08-09/andrew-forrest-uses-violent-video-to-push-cashless-welfare-card/8789616">their video</a> before appealing their case to the Prime Minister.</p>
<p>While we can’t necessarily attribute the trial’s expansion to the success of the campaign, it shows evidence-based approaches, which speak against continuing the policy, have been ignored. This is another case that adds to <a href="http://blogs.lse.ac.uk/lsereviewofbooks/2014/02/07/book-review-beyond-evidence-based-policy-in-public-health-the-interplay-of-ideas-by-katherine-smith/">growing concern</a> among researchers that evidence-based policy formulation is being <a href="https://theconversation.com/who-are-you-calling-anti-science-how-science-serves-social-and-political-agendas-74755">threatened</a> by easily-digestible, emotive campaigns.</p>
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<strong>
Read more:
<a href="https://theconversation.com/the-cashless-debit-card-causes-social-and-economic-harm-so-why-trial-it-again-74985">The Cashless Debit Card causes social and economic harm – so why trial it again?</a>
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<h2>Does income management work?</h2>
<p>The Minderoo Foundation and some community members promote the <a href="https://www.dss.gov.au/families-and-children/programmes-services/welfare-conditionality/cashless-debit-card-overview">cashless debit card</a> as it cannot be used to buy alcohol, gambling products or to withdraw cash. While not a panacea, they believe it will be a <a href="http://www.skynews.com.au/news/national/wa/2017/08/09/leaders-plead-for-welfare-card-rollout.html">potential circuit breaker</a> as it “… gives community services a chance, that gives health workers a chance, that gives the police a chance”. </p>
<p>The government has long been using income management as a <a href="https://www.dss.gov.au/our-responsibilities/families-and-children/publications-articles/income-management-fact-sheets/child-protection-measure-of-income-management">child protection tool</a>. Yet there is little evidence to suggest income management policies improve children’s well-being. </p>
<p>An <a href="https://aifs.gov.au/publications/family-matters/issue-97/welfare-conditionality-child-protection-tool">evaluation of income management</a> in the NT in 2014 found people subjected to child protection income management made up a small proportion (0.5%) of the overall income management population. So evaluating whether the policies worked was difficult. Instead researchers relied on interviews with child protection staff which were varied. </p>
<p>Meanwhile, the <a href="https://childdetentionnt.royalcommission.gov.au/Search/Results.aspx?k=silburn">Royal Commission</a> into the Protection and Detention of Children in the NT has heard that child protection notifications, substantiations of these, as well as out-of-home placements had all more than doubled since 2007.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/more-income-management-trials-will-prove-futile-it-doesnt-work-46334">More income management trials will prove futile – it doesn't work</a>
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<p>If the card’s aim is to reduce alcohol-fuelled violence in general, the evidence is again unconvincing. The NT evaluation above revealed no statistically
significant changes in the level of reported problems for either those on compulsory or voluntary income management. But it did show the direction of change was towards a relative worsening of problems due to drinking.</p>
<h2>Social determinants</h2>
<p>Dr <a href="http://www.smh.com.au/wa-news/oppressive-scheme-wa-youth-suicide-inquest-slams-cashless-welfare-card-20170814-gxw7f9.html">Elise Klein,</a> who is researching the cashless welfare card, told the inquest into the suicide of Indigenous youths it is an “oppressive scheme” representing neocolonialism and government overreach. </p>
<p>Indeed, the government has a long history of restricting an individual’s choices supposedly in their best interest. One example is the <a href="https://www.legislation.nsw.gov.au/acts/1902-47.pdf">Aborigines Act 1902</a>, which resulted in a Chief Protector who was “the legal guardian of every aboriginal and half-caste child to the age of 16 years”.</p>
<p>Colonisation’s <a href="https://link.springer.com/article/10.1007/s40653-016-0117-9">damaging effects</a> across generations is an issue shared globally by most Indigenous people. The suggested reparation work is the first step in tackling the social determinants of health which are many including education, employment and income, with education being <a href="https://www.mja.com.au/journal/2017/207/1/improving-indigenous-health-through-education">the most potent</a>. </p>
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<em>
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Read more:
<a href="https://theconversation.com/social-determinants-how-class-and-wealth-affect-our-health-64442">Social determinants – how class and wealth affect our health</a>
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<p>The next step is to tackle the <a href="https://www.mja.com.au/system/files/issues/194_10_160511/mar10460_fm.pdf">causes of the causes</a>, which will <a href="https://health-policy-systems.biomedcentral.com/articles/10.1186/s12961-016-0085-4">only occur</a> if there is support from the highest political levels. In the absence of this, <a href="https://croakey.org/whose-problem-is-it-anyway-transforming-the-public-health-narrative-to-stem-the-tide-of-lifestyle-drift/">lifestyle drift</a> <a href="http://www.tandfonline.com/doi/abs/10.1080/09581596.2010.520692">thrives</a> whereby policy initiatives to tackle inequalities in health that begin with a broad social determinants approach drift down in favour of blaming individuals for becoming sick as a result of their poor <a href="https://theconversation.com/dont-be-surprised-by-abbotts-comments-about-lifestyle-choices-38711">lifestyle choices</a>. </p>
<p>It is easier for governments to support <a href="http://www.tandfonline.com/doi/abs/10.1080/09581596.2010.520692">healthy lifestyle</a> promotion programs despite the risk that sometimes these approaches are <a href="https://www.ncbi.nlm.nih.gov/pubmed/12380855">ineffective and even counterproductive</a>. In addition they can <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4423493/">increase inequality</a>. </p>
<h2>A spray-on solution</h2>
<p>With the <a href="http://www.nusap.net/spe/mackenbach_strategy%20failure_ssm%202010.pdf">perception</a> that truly addressing the <a href="http://www.who.int/social_determinants/resources/csdh_media/baum_iuhpe_07.pdf">social determinants of health</a> is too hard, it is understandable why the cashless welfare card is attractive. It is easier to <a href="https://academic.oup.com/cdj/article-abstract/doi/10.1093/cdj/bsx008/3572908/Community-as-a-spray-on-solution-a-case-study-of?redirectedFrom=fulltext">spray-on</a> a solution rather taking responsibility for tackling underlying <a href="https://bmcpublichealth.biomedcentral.com/articles/10.1186/1471-2458-14-1087">public health and social policy issues</a>. However, taking the easier option is a <a href="http://www.tandfonline.com/doi/full/10.1080/09581596.2016.1184229?src=recsys">health risk</a>. </p>
<p>The principle of “<a href="http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(05)63069-3/fulltext">let the data do the talking</a>” to influence government polices is failing. Data can be hard to access requiring <a href="https://www.crikey.com.au/2017/08/14/rundle-forrest-forces-the-issue-on-cashless-welfare-card/">subscriptions</a> or <a href="http://www.tandfonline.com/doi/full/10.1080/0312407X.2012.708763?scroll=top&needAccess=true">payment</a>, whereas news of the Forrest campaign was readily accessible. The message was also straightforward, while researchers don’t have a well resourced foundation to assist with conveying complex concepts. </p>
<p>Researchers are rarely as <a href="https://www.forbes.com/profile/andrew-forrest/">high profile</a> with <a href="http://www.abc.net.au/news/2017-05-22/andrew-twiggy-forrests-history-of-grand-goals-and-grand-gestures/8548134">political influence</a> and are <a href="https://theconversation.com/government-buries-its-own-research-and-thats-bad-for-democracy-60488">vulnerable</a> to having their research buried. This experience reveals the need for <a href="https://theconversation.com/academics-cant-change-the-world-when-theyre-distrusted-and-discredited-77420">academics and scientists</a> to <a href="https://www.ncbi.nlm.nih.gov/pubmed/25616195">better understand the policy process</a>, to step up and be more <a href="http://www.bmj.com/content/350/bmj.h81">political</a> and <a href="https://global.oup.com/academic/product/health-inequalities-9780198703358?cc=us&lang=en&">actively involved in advocacy</a>. Forrest et al have provided a lesson on how to do it.</p>
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<p><strong><em>Read more: <a href="https://theconversation.com/why-politicians-think-they-know-better-than-scientists-and-why-thats-so-dangerous-72548">Why politicians think they know better than scientists – and why that’s so dangerous</a></em></strong></p><img src="https://counter.theconversation.com/content/82585/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Bret Hart is affiliated with the Social Determinants of Health Alliance as chair and is an Independent Board Director of Puntukurnu Aboriginal Medical Service and deputy chair of the Board of Wellbeing in Schools Australia.</span></em></p>The trial of the cashless welfare card, to control unhealthy spending in Indigenous communities, is being expanded partly due to emotive well-funded campaigns. Meanwhile, evidence is being ignored.Michael Bret Hart, Adjunct Clinical Associate Professor Curtin Medical School Public Health Physician, Curtin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/793352017-06-13T04:24:54Z2017-06-13T04:24:54ZShould Australia have a Modern Slavery Act?<figure><img src="https://images.theconversation.com/files/173510/original/file-20170613-10220-17wat11.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Businessman Andrew Forrest and his wife Nicola are strong advocates of anti-slavery measures.</span> <span class="attribution"><span class="source">AAP/Alan Porritt</span></span></figcaption></figure><p>There has been a flurry of activity recently in relation to establishing a Modern Slavery Act in Australia. This has included a <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Foreign_Affairs_Defence_and_Trade/ModernSlavery">parliamentary inquiry</a> and Labor’s <a href="https://d3n8a8pro7vhmx.cloudfront.net/australianlaborparty/pages/7652/attachments/original/1496620518/170605_LABOR_TO_FIGHT_MODERN_SLAVERY.pdf?1496620518">recent policy release</a> on the topic. </p>
<h2>Is slavery a problem in Australia?</h2>
<p>First, there is no doubt that activities associated with modern slavery, such as human trafficking, servitude and forced labour, are grave human rights issues, requiring a dedicated and co-ordinated response. </p>
<p>Governments cannot solve the problem on their own. It is a particular issue in countries like India, but also occurs in Australia.</p>
<p>Between 2004 and 2016, the Australian Federal Police received <a href="https://www.ag.gov.au/CrimeAndCorruption/HumanTrafficking/Documents/Report-of-the-interdepartmental-committee-on-human-trafficking-and-slavery-july-2015-to-June-2016.pdf">almost 700 referrals</a> relating to suspected human trafficking and slavery-related crimes, though only 17 people <a href="https://www.ag.gov.au/CrimeAndCorruption/HumanTrafficking/Documents/Report-of-the-interdepartmental-committee-on-human-trafficking-and-slavery-july-2015-to-June-2016.pdf">have so far been convicted</a> of these offences. </p>
<p>Most recently, in February 2017, two men pleaded guilty to charges of <a href="http://www.brisbanetimes.com.au/queensland/slave-house-pair-to-be-deported-to-taiwan-20170208-gu88bj.html">servitude</a> relating to their treatment of Taiwanese workers in Brisbane.</p>
<p>Recent media reports of exploitation of migrant workers in Western Australian <a href="https://thewest.com.au/news/wa/rude-awakening-for-sleepy-workers-ng-b88399983z">farms</a> and <a href="http://www.abc.net.au/news/rural/2014-05-05/wa-vegetable-industry-rocked-by-criminal-activity/5431426">market gardens</a>, Victorian <a href="http://www.theage.com.au/victoria/chinese-fruit-pickers-underpaid-10000-in-northern-victoria-20150525-gh8tev.html">farms</a>, and in <a href="http://www.smh.com.au/business/workplace-relations/7eleven-investigation-exposes-shocking-exploitation-of-convenience-store-workers-20150828-gja276.html">7-Eleven retail stores nationwide</a>, suggests this is a real – but often hidden – issue in Australia.</p>
<h2>What developments are underway for a Modern Slavery Act in Australia?</h2>
<p>Moves are underway in Australia to introduce new laws to tackle slavery that will operate outside the existing criminal law framework. </p>
<p>On February 15, a parliamentary inquiry into <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Foreign_Affairs_Defence_and_Trade/ModernSlavery">establishing a Modern Slavery Act in Australia</a> was launched. The terms of reference for the inquiry specifically refer to the UK’s <a href="http://www.legislation.gov.uk/ukpga/2015/30/contents/enacted">Modern Slavery Act</a> and to relevant findings from the Joint Standing Committee on Foreign Affairs, Defence and Trade’s 2013 report <a href="http://www.aph.gov.au/parliamentary_business/committees/house_of_representatives_committees?url=jfadt/slavery_people_trafficking/report.htm">Trading Lives: Modern Day Human Trafficking</a>.</p>
<p>Although the UK’s Modern Slavery Act has seven parts, including protection for victims, civil and criminal provisions, new maritime enforcement mechanisms, and the establishment of an anti-slavery commissioner, the focus has overwhelmingly been on its impact on businesses.</p>
<p>The act and associated regulations require businesses with a turnover of £36 million or more to disclose what they are doing to eliminate slavery and trafficking from their supply chains and their own businesses. It appears <a href="http://www.abc.net.au/news/2016-12-02/ending-modern-slavery-in-australia/8085922">there is support</a> from people in the business community, and faith-based and other non-governmental organisations, for a similar business reporting initiative in Australia.</p>
<p>A key promoter of the introduction of a Modern Slavery Act here is businessman and philanthropist Andrew Forrest. He and his wife Nicola established <a href="https://www.walkfreefoundation.org/about/">Walk Free</a>, a Perth-based international non-governmental organisation with a mission to “end modern slavery in our generation”.<br>
Walk Free was one of the 173 organisations and individuals to make a submission to the parliamentary inquiry. </p>
<p>Although submissions varied in terms of how modern slavery and trafficking might best be tackled, there was broad, in-principle support for the introduction of an act. This includes submissions by businesses such as Qantas and Wesfarmers, both of which already report on their anti-slavery efforts under the UK legislation.</p>
<p>There is apparent bipartisan support for the initiative. The Coalition government has been <a href="http://www.minister.border.gov.au/peterdutton/2016/Pages/target-human-trafficking-and-slavery.aspx">exploring options</a> for business reporting over the last several years through the Supply Chains Working Group set up as part of the National Roundtable on Human Trafficking and Slavery.</p>
<p>Labor has expressed strong support for the introduction of new business reporting obligations, proposing to go further than the UK by imposing <a href="http://www.abc.net.au/news/2017-06-05/shorten-calls-for-crackdown-on-businesses-using-slavery/8590360">penalties on businesses</a> in Australia that fail to report on their anti-slavery efforts. </p>
<p>In the UK, as well as at an international level, compliance with such reporting obligations is primarily driven by considerations of public opinion.</p>
<h2>What international obligations exist?</h2>
<p>Several voluntary international obligations relevant to modern slavery exist. Globally, more than 9,400 organisations from over 160 countries have committed as participants to the United Nations Global Compact (<a href="https://www.unglobalcompact.org/">UNGC</a>). This is the world’s largest corporate sustainability initiative, actively engaging in responsible human rights and labour practices.</p>
<p>The Global Compact Network Australia (<a href="http://www.unglobalcompact.org.au/about/gcna/">GCNA</a>) brings together UNGC participants, other leading companies, non-profit organisations and universities – including <a href="http://www.news.uwa.edu.au/201608238961/august-2016/uwa-joins-un-global-compact">the University of Western Australia</a> – to advance these same goals in Australia.</p>
<p>Furthermore, the UN has <a href="http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf">guiding principles on business and human rights</a>. Foreign Minister Julie Bishop has recently established an <a href="http://foreignminister.gov.au/releases/Pages/2017/jb_mr_170602b.aspx">advisory group</a> on the implementation of these principles.</p>
<p>OECD guidelines for multinational enterprises also apply to Australian businesses. For example, the associated dispute resolution mechanism has been used to bring a <a href="http://static1.squarespace.com/static/580025f66b8f5b2dabbe4291/58169937bb7f1e05acdfbeea/58169a12bb7f1e05acdfd043/1477876242459/HRLC_RAID_Complaints_OECD_Guidelines_specific_instance_G4S_Sep2014.pdf?format=original">complaint</a> against security firm GS4 Australia for conditions and alleged abuse of detainees on Manus Island.</p>
<h2>Will an Australian Modern Slavery Act prove effective?</h2>
<p><a href="https://www.walkfreefoundation.org/news/uk-independent-modern-slavery-commissioner-set-visit-australia/">Last week’s visit</a> to Australia by Kevin Hyland, the UK anti-slavery commissioner, was timely. </p>
<p>Although the UK legislation has received a cautious welcome so far, it is too early to judge whether it will have any meaningful impact on reducing worker exploitation.</p>
<p>In Australia, longstanding criminal laws against trafficking and slavery have not prevented their occurrence and, for the most part, have not been relied on by authorities to prosecute exploitation. The effectiveness of pursuing employers for the exploitation of migrant workers via the Fair Work Ombudsman <a href="https://theconversation.com/why-were-making-no-progress-tackling-the-exploitation-of-migrant-workers-62961">is also limited</a>.</p>
<p>By extending the responsibility to tackle exploitation to include business and not just government, it is hoped that the introduction of an Australian Modern Slavery Act will help tackle worker exploitation. However, there remains a risk that this initiative will continue the trend of side-stepping the root causes of worker exploitation in this country.</p>
<p>Vulnerability to workplace exploitation is closely <a href="http://www.smh.com.au/business/workplace-relations/border-obsession-opens-door-to-workplace-slavery-20151130-glc5le.html">connected</a> to the regulation of migration and labour. </p>
<p>Therefore, as well as receiving the support of Australia’s business community, any proposed solution to this problem must engage with government policies and practices affecting migration and migrant labour to reduce worker vulnerability.</p><img src="https://counter.theconversation.com/content/79335/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Fiona McGaughey has previously received a bursary from Graduate Women (WA).</span></em></p><p class="fine-print"><em><span>Dave Webb coordinates UWA's commitment to the UNGC and the GCNA.</span></em></p><p class="fine-print"><em><span>Peta-Jane Hogg receives funding from a University Postgraduate Award. </span></em></p>Any proposed solution to the problem of modern slavery must engage with the business community and government policies on migration and migrant labour.Fiona McGaughey, Lecturer, Faculty of Law, The University of Western AustraliaDave Webb, Associate Professor of Marketing and Business Ethics, The University of Western AustraliaPeta-Jane Hogg, PhD Candidate in Law, The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/780982017-05-23T01:15:10Z2017-05-23T01:15:10ZTwiggy Forrest donation: more philanthropy means more risk-taking – and that’s good<figure><img src="https://images.theconversation.com/files/170262/original/file-20170522-4467-1u8fk3q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Forrests have bold ambitions for their philanthropy – perhaps inviting some cynics to be dismissive of their aims.</span> <span class="attribution"><span class="source">AAP/Mick Tsikas</span></span></figcaption></figure><p>Monday’s <a href="https://www.minderoo.com.au/news/2017/05/22/400m-donation-make-difference-australia-globally/">announcement</a> by mining magnate Andrew Forrest and his wife, Nicola, that they will commit A$400 million toward a range of causes was an important day for Australian philanthropy.</p>
<p>The size of the philanthropic commitment – Australia’s largest ever by living donors – certainly drew attention, as did the direction of the funds toward ambitious initiatives. There’s $75 million for a global drive to <a href="https://www.minderoo.com.au/news/2017/05/22/ending-modern-slavery-at-the-forefront-of-new-philanthropic-donation/">end modern slavery</a>. Another $75 million will be directed to develop a new blueprint for <a href="https://www.minderoo.com.au/news/2017/05/22/75m-donation-ensure-every-child-australia-chance-thrive/">child development</a> in Australia and beyond.</p>
<p>The announcement again highlighted that philanthropy in Australia really is coming of age.</p>
<h2>A shift toward ‘strategic’ philanthropy</h2>
<p>Australia is seeing <a href="https://theconversation.com/infographic-a-snapshot-of-charities-and-giving-in-australia-66672">more, and larger, donations</a>. But there’s also now a focus on more strategic philanthropy, which tries to tackle the root causes of complex problems through collaboration, research and advocacy. The Forrests’ efforts to end slavery and improve child development clearly fit into that category.</p>
<p>Philanthropy in Australia is still relatively small – especially when you compare it to the size of government and the economy.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/170359/original/file-20170522-25053-1av20xz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/170359/original/file-20170522-25053-1av20xz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=606&fit=crop&dpr=1 600w, https://images.theconversation.com/files/170359/original/file-20170522-25053-1av20xz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=606&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/170359/original/file-20170522-25053-1av20xz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=606&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/170359/original/file-20170522-25053-1av20xz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=761&fit=crop&dpr=1 754w, https://images.theconversation.com/files/170359/original/file-20170522-25053-1av20xz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=761&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/170359/original/file-20170522-25053-1av20xz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=761&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The size of Australian philanthropy in perspective.</span>
<span class="attribution"><span class="source">Compiled using Australian government data</span></span>
</figcaption>
</figure>
<p>But, as the philanthropic sector gets bigger, more people will start to question its influence and power. There was certainly an element of this in some of the social media and talkback radio comments responding to the Forrests’ announcement.</p>
<p>Paraphrasing some of the comments, some are uncomfortable with philanthropists using their money to influence social change. They ask why they should call the shots – unlike elected governments, philanthropists are not democratically accountable. </p>
<p>This is a <a href="https://www.nytimes.com/2017/04/14/your-money/wealth-matters-philanthropy-david-callahan.html?_r=0">more common concern in the US</a>, given the growing number of “mega” philanthropists there. This criticism overlooks the fact that philanthropic dollars can be used in a very different way to government dollars, precisely because they are not subject to the same sort of accountability.</p>
<p>Governments are often criticised as being slow, unresponsive, risk-averse, and unable to innovate. This is not an entirely fair criticism, because governments can and do take risks and innovate. However, there is also some truth to the claim. Governments can’t take the same risks as philanthropists – and that’s one reason why philanthropy is so important.</p>
<p>Some refer to philanthropy as <a href="https://www.rockefellerfoundation.org/blog/philanthropy-go-partner-risk/">risk capital</a> for social change. This means philanthropy can be more nimble and responsive, and it can push boundaries and support innovation in areas which governments may be reluctant to tread. </p>
<p>While most would probably expect governments to try to innovate, few would necessarily expect or want them to push boundaries. But sometimes that’s exactly what you need, and what you can do when you’re not constrained by electoral cycles or the scrutiny of your political opponents.</p>
<p>Perhaps the best modern example of this is the role played by philanthropy to pave the way for the <a href="https://www.state.gov/e/eb/tfs/spi/iran/jcpoa/">Iran nuclear deal</a> struck in 2015. Since 2002, the US-based <a href="http://www.rbf.org/">Rockefeller Brothers Fund</a> provided US$4.3 million in funding to support the so-called “Track II” diplomacy with Iran.</p>
<p>This initiative brought together senior former government officials from both countries to engage in the kind of talks that could not happen through official diplomatic channels. Secret meetings, co-convened and chaired by the Rockefeller Brothers Fund, were held in locations in Europe with the aim of building an understanding of the respective positions of the US and Iranian governments.</p>
<p>The participants routinely briefed officials back home regarding the discussions, helping grow each nation’s understanding of the other’s position.</p>
<p>Over time, many barriers were broken down. Eventually one of the key participants was made foreign minister in 2013 by the newly elected Iranian president, Hassan Rouhani. This helped jump-start the formal negotiations that led to the deal.</p>
<h2>It’s not just about the money</h2>
<p>The Forrests have bold ambitions for their philanthropy, perhaps inviting some cynics to be dismissive of their aims. Ending modern slavery is no easy task. But the Rockefeller Brothers Fund was also ambitious when it came to Iran, and the risk it took paid off.</p>
<p>Philanthropy doesn’t only bring money to the table. Philanthropists can also use their voices to advocate for change – something Prime Minister Malcolm Turnbull praised the Forrests for <a href="http://www.pm.gov.au/media/2017-05-22/remarks-andrew-and-nicola-forrest-400-million-philanthropic-donation-announcement">in his remarks</a> on Monday. Philanthropists can use their convening power to bring together communities, civil society organisations, experts, governments and others around issues.</p>
<p>While philanthropic bodies are not democratically accountable like governments are, that certainly does not mean they are not accountable at all. Australian philanthropy is <a href="https://theconversation.com/australian-charities-are-well-regulated-but-changes-are-needed-to-cut-red-tape-72877">very well regulated</a> – and the activities of all foundations, including the Forrests’ Minderoo Foundation, are overseen by the <a href="http://www.acnc.gov.au/">Australian Charities and Not-for-profits Commmission</a>.</p>
<p>To be effective, philanthropy relies on networks of stakeholders with whom it works - civil society organisations, subject matter experts, governments, and members of the community. These networks are also a source of accountability for philanthropy, and it must cultivate them in order to ensure it is regarded as legitimate.</p>
<p>Transparency is also a source of accountability. <a href="http://www.communitybusinesspartnership.gov.au/wp-content/uploads/2017/04/giving_australia_2016_philanthropy_and_philanthropists_report.pdf">Recent research</a> shows there is growing awareness among philanthropists about the importance of being open and transparent about what they do.</p>
<p>Ultimately, more philanthropy means more risk-taking to find new ways to tackle the challenges confronting Australia and the world. It’s important that the value of this risk-taking is recognised, and that we welcome philanthropists like the Forrests being bold with what they do, and open about how and why they’re doing it.</p><img src="https://counter.theconversation.com/content/78098/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Krystian Seibert works as the Advocacy & Insight Manager for Philanthropy Australia, the peak body for philanthropy in Australia.</span></em></p>The record donation by Twiggy Forrest highlights the rise of more strategic philanthropy, which tries to tackle the root causes of complex problems through collaboration, research and advocacy.Krystian Seibert, Adjunct Industry Fellow, Centre for Social Impact, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/749852017-03-30T00:18:07Z2017-03-30T00:18:07ZThe Cashless Debit Card causes social and economic harm – so why trial it again?<figure><img src="https://images.theconversation.com/files/161967/original/image-20170322-31203-uf3fhi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Almost half of the participants in the Cashless Welfare Card trial said it had made their lives worse.</span> <span class="attribution"><span class="source">AAP/Richard Milnes</span></span></figcaption></figure><p>The federal government’s <a href="https://www.dss.gov.au/families-and-children/programmes-services/welfare-conditionality/cashless-debit-card-trial-overview">Cashless Debit Card trials</a> in the East Kimberley and Ceduna were recently extended.</p>
<p>In the space of a day, the government not only released the limited <a href="https://www.dss.gov.au/families-and-children/programs-services/welfare-conditionality/cashless-debit-card-trial-wave-1-evaluation-report">evaluation of the trial</a>, but used this to justify its extension. The extension is puzzling given that the trial has led to further economic and social harm among people compulsorily included.</p>
<h2>Background to the card</h2>
<p>The card compulsorily quarantines 80% of a person’s welfare benefits. It restricts purchases, with the aim of promoting <a href="http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5520">“socially responsible behaviour”</a>. Its trial was legislated with bipartisan support in 2015. This followed mining magnate Andrew Forrest’s recommendations for the <a href="https://www.dpmc.gov.au/resource-centre/indigenous-affairs/forrest-review">expansion of income management</a>.</p>
<p>But in 2014, a government-commissioned <a href="http://caepr.anu.edu.au/sites/default/files/cck_misc_documents/2014/12/Evaluation%20of%20New%20Income%20Management%20in%20the%20Northern%20Territory_full%20report.pdf">evaluation of income management</a> in the Northern Territory provided conclusive evidence that the compulsory income management regime did not make a significant difference. It fell well short of meeting the trial’s objectives – despite the <a href="http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BN/2011-2012/IncomeManagementOverview#_Toc328056521">A$410.5 million spent</a>.</p>
<p>The government quickly put rhetorical distance between the renamed Cashless Debit Card and the failed <a href="http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BN/2011-2012/IncomeManagementOverview">compulsory income management</a>. It simply claimed that the card was not income management. </p>
<p>While now some non-Indigenous people are on the Cashless Debit Card, the reality is that both trial sites have a high proportion of Indigenous people. Thus, it is invariably racially targeted.</p>
<h2>The evaluation</h2>
<p>The Cashless Debit Card evaluation claims the trial has led to changes in the community. But its methodology is questionable, and the authors are unable to separate their findings from other programs operating in the trial sites, such as the <a href="http://www.swek.wa.gov.au/Profiles/swek/Assets/ClientData/Document-Centre/2016_Final_Report_TAMS_Review.pdf">Takeaway Alcohol Management System</a> in the East Kimberley.</p>
<p>Nonetheless, government ministers Alan Tudge and Christian Porter <a href="http://www.alantudge.com.au/Media/Articles/tabid/89/articleType/ArticleView/articleId/947/language/en-US/Cashless-Debit-Card-extended-following-positive-independent-evaluation.aspx">have run with</a> the evaluation’s dubious conclusion that it found “proof of concept” – that is, evidence the card works. This is despite their own evaluation finding that 49% of participants said it had made their lives worse and, on average, one in five participants reported that their children were worse off. </p>
<p>It is astonishing that the government is proceeding with another trial given these findings. Successive governments have been eager to use concern for children in particular as a pretext for <a href="https://www.creativespirits.info/aboriginalculture/politics/northern-territory-emergency-response-intervention#axzz4cCRB8tIP">heavy-handed intervention in Indigenous communities</a>.</p>
<p>The evaluation of the card in the East Kimberley also shows limited understanding of its negative economic and social impacts on vulnerable populations.</p>
<h2>The card’s economic effects</h2>
<p>The card’s logic is based on a distorted perception that alcohol, drug use and gambling are the primary causes of poverty.</p>
<p>Interestingly, the evaluation shows that most people on the card – and their families – did not gamble and did not report consuming illegal drugs or alcohol in excess. </p>
<p>Despite demeaning rhetoric in <a href="http://www.dpmc.gov.au/sites/default/files/publications/Forrest-Review.pdf">reports to government</a> suggesting that welfare poverty is a choice not to seek employment, the <a href="https://kdc.wa.gov.au/wp-content/uploads/2016/08/3-Aboriginal-Wellbeing-A-Census-Analysis.pdf">Kimberley Development Commission</a> has shown the key cause of unemployment in the East Kimberley is the absence of formal jobs. This situation has deteriorated since the government abolished the <a href="http://www.abc.net.au/news/2007-07-26/scrapping-cdep-is-just-plain-dumb/2513782?pfmredir=sm">Community Development Employment Program</a>. </p>
<p>The government’s response was to launch a <a href="http://caepr.anu.edu.au/sites/default/files/Publications/WP/16-081-WP-WORKDOLE+D(22Jun16).pdf">remote work-for-the-dole scheme</a>, the Community Development Program. It claims to prepare people for work that is simply not there. </p>
<p>So, not only are people in the East Kimberley subjected to quarantining of their welfare payments, they must also endure work for the dole with extreme punitive measures. This has led to breaches at a level 33 times higher than for the non-remote and mainly non-Indigenous <a href="https://www.employment.gov.au/jobactive">jobactive</a> program. Breaching has led to welfare payments being withheld from already struggling families.</p>
<p>The link between the card and the scheme is not examined in the evaluation. However, it warrants investigation.</p>
<p>Despite having to contend with material poverty, the trial has exacerbated economic insecurity for poor families. It limits the cash they have to pay for informal renting arrangements, second-hand goods, cash purchases of locally grown produce, and pocket money for children. </p>
<p>And when the card was introduced, many struggled to use it. The user manual was filled with technical jargon, and the mobile app was inappropriate. This is shown by the high rate of transaction errors recorded by Indue, the company contracted to roll out the card.</p>
<h2>Social effects</h2>
<p>The evaluation is silent on how socially disempowering the trial has been for many. </p>
<p>The government failed to consult, let alone obtain <a href="http://www.un.org/esa/socdev/unpfii/documents/DRIPS_en.pdf">freely given, prior and informed consent</a> from the broad community. Instead, it engaged only a select group of like-minded individuals and their organisations to roll out the card to their communities. </p>
<p>Despite this, many of those who agreed to host the trial in the East Kimberley did so for the $1.5 million sweetener for badly needed services. </p>
<p>The clear opposition to the card expressed at public meetings, strikes and petitions has been dismissed and ignored. People on the card are subjected to a <a href="https://www.dss.gov.au/families-and-children/programs-services/welfare-conditionality/kununurra-region-community-panel">community panel</a> – the amount quarantined can be reduced only after being scrutinised by fellow community members.</p>
<p>Some argued that the card would be important to curb gender-based violence. However, there are reports that domestic violence has actually increased since the card was introduced. <a href="https://www.police.wa.gov.au/Crime/Crime-Statistics-Portal/Statistics">Crime</a> has also increased, yet the government and its evaluation have overlooked such inconvenience in claiming “proof of concept”.</p>
<p>Politicians and officials have deployed the card to tackle the supposed bad behaviour of vulnerable populations. Yet a deeper review of it suggests it is the government and its poorly conceived, ideologically driven policy that needs scrutinising. Perhaps the <a href="http://rachel-siewert.greensmps.org.au/articles/greens-and-labor-secure-support-senate-inquiry-broken-community-development-program">forthcoming Senate inquiry</a> into the Community Development Program will be a good place to start.</p>
<hr>
<p><em>The author would like to thank Professor Jon Altman and Sarouche Razi for comments on earlier drafts.</em></p><img src="https://counter.theconversation.com/content/74985/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Elise Klein is a member of the Australian Greens. She receives funding from British Council. </span></em></p>It’s a mystery why another trial of the Cashless Debit Card is necessary – particularly given how it has led to further economic and social harm among its participants.Elise Klein, Lecturer in Development Studies, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/507562015-11-19T02:57:39Z2015-11-19T02:57:39ZHealthy Welfare Card begins here … where next?<figure><img src="https://images.theconversation.com/files/101983/original/image-20151116-26090-1ugsn6s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">What do Ceduna and the other trial sites for the Healthy Welfare Card have in common? All are country towns with a mix of Indigenous and non-Indigenous residents.</span> <span class="attribution"><a class="source" href="https://upload.wikimedia.org/wikipedia/commons/f/fe/Ceduna%2C_South_Australia.jpg">Wikimedia Commons/Nachoman-au</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Given the high profile of Indigenous disadvantage, is it a coincidence that certain welfare reforms first appear in Indigenous communities before being mainstreamed?</p>
<p>Under income management, a portion of a welfare payment is restricted in how it can be spent rather than being paid directly in cash. The Commonwealth <a href="http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BN/2011-2012/IncomeManagementOverview">first introduced compulsory income management</a> to 73 remote Indigenous communities under the Northern Territory Intervention in 2007.</p>
<p>In 2010, income management was extended to non-Indigenous welfare recipients in the territory. <a href="http://caepr.anu.edu.au/others/Report-1418859519.php">More than 90%</a> of recipients, however, were still Indigenous. </p>
<p>In 2012, the government began rolling out trials to <a href="http://www.humanservices.gov.au/customer/enablers/centrelink/income-management/about-income-management#a4">depressed regional centres</a> across Australia, including Bankstown, Shepparton, Logan, Playford and Rockhampton. The difference was that income management was now subject to referrals, instead of compulsory. Indigenous recipients were now in the minority – <a href="https://data.gov.au/dataset/3b1f1fb7-adb5-48ea-8305-9205df0a298c/resource/bceeda43-d289-4cf4-86ec-b82e50361dc0/download/incomemanagementsummary2january2015.pdf">more than 80%</a> were non-Indigenous.</p>
<h2>Universal policy was Forrest Review goal</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/102000/original/image-20151116-4970-zdsl02.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/102000/original/image-20151116-4970-zdsl02.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/102000/original/image-20151116-4970-zdsl02.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=851&fit=crop&dpr=1 600w, https://images.theconversation.com/files/102000/original/image-20151116-4970-zdsl02.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=851&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/102000/original/image-20151116-4970-zdsl02.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=851&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/102000/original/image-20151116-4970-zdsl02.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1069&fit=crop&dpr=1 754w, https://images.theconversation.com/files/102000/original/image-20151116-4970-zdsl02.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1069&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/102000/original/image-20151116-4970-zdsl02.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1069&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Creating Parity review recommended that income management smartcards be applied to most welfare recipients.</span>
<span class="attribution"><a class="source" href="https://indigenousjobsandtrainingreview.dpmc.gov.au/sites/default/files/files/3838%20Forrest%20Review%20Update%20-%20Full%20Report%20-%20Complete%20PDF%20PRO1.pdf">Commonwealth</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>If the Coalition government implements the recommendations of its <a href="https://indigenousjobsandtrainingreview.dpmc.gov.au/forrest-review">Forrest Review</a>, aimed at “creating parity” between Indigenous and non-Indigenous Australians, the same trajectory may be proposed for the <a href="https://theconversation.com/why-the-cashless-welfare-card-trial-will-leave-us-none-the-wiser-49360">cashless smartcard</a> called the <a href="http://www.theaustralian.com.au/national-affairs/indigenous/cashless-welfare-card-tackles-family-violence/story-fn9hm1pm-1227610073388?sv=97512b273a22b6d248b29dfa9a896dc2">Healthy Welfare Card</a>. </p>
<p>Although the review explicitly focused on Indigenous disadvantage, Andrew Forrest was uninhibited in making his recommendations <a href="https://indigenousjobsandtrainingreview.dpmc.gov.au/how-healthy-welfare-card-would-work">apply to all</a> “vulnerable” Australians.</p>
<p>As with the <a href="http://www.humanservices.gov.au/customer/enablers/centrelink/income-management/basicscard">BasicsCard</a> used for compulsory income management in NT Aboriginal communities from 2008, Forrest recommended that Healthy Welfare Cards be mandatory for all unemployed persons, carers, single parents and people with disabilities. </p>
<p>Essentially, that would be everyone except veterans and aged pensioners. Alert to the implications for the rest of Australia, the Australian Council of Social Service immediately <a href="http://www.acoss.org.au/media_release/groups_call_for_rejection_of_forrest_review_healthy_welfare_card/">opposed the move</a>.</p>
<p>The parliamentary secretary responsible for implementing the policy, Alan Tudge, <a href="http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Ffd2f3451-f05d-425a-9815-471294607839%2F0009%22">has said</a> that trial sites were:</p>
<blockquote>
<p>… selected on the basis of high levels of welfare dependence, where gambling, alcohol and illegal drug abuse are causing unacceptable levels of harm and there is an openness to participate from within the community.</p>
</blockquote>
<p>It went unsaid that this involved sites with high numbers of Indigenous people, along with sufficient leadership and public support to back the trials.</p>
<h2>Trials involve a certain kind of town</h2>
<p>The locations first <a href="http://www.theaustralian.com.au/national-affairs/indigenous/trial-communities-back-no-grog-cashless-welfare-cards/story-fn9hm1pm-1227395552860?sv=44ea10098c0cbf2cb26e8422791a9a1c">mooted for the card rollout</a> – Kununurra, Moree and Ceduna – are country towns with freehold title, with Indigenous populations roughly one-quarter to one-third of the total. These towns face serious social problems, in addition to those related to welfare reform, which demand a coordinated government response.</p>
<p>After community objections emerged, Moree <a href="http://www.abc.net.au/am/content/2015/s4279891.htm">was dropped</a>. It was replaced with Halls Creek, also a rural town, but with a population that is about 75% Indigenous. After <a href="http://www.theaustralian.com.au/opinion/indigenous-communities-against-trials-of-cashless-welfare-card/story-e6frg6zo-1227565185570">divisions</a> emerged it too was dropped. </p>
<p>Interestingly, the government appears to be choosing trial sites from the small pool of towns (roughly 50 in number) with a mixed Indigenous and non-Indigenous population (25-75% Indigenous). The vast majority of towns in Australia are either overwhelmingly Indigenous (more than 75%) or overwhelmingly non-Indigenous (less than 25% Indigenous).</p>
<p>This week the government announced that the third trial site would be <a href="http://www.theaustralian.com.au/national-affairs/indigenous/hope-for-kids-in-the-welfare-cards-say-indigenous-elders/story-fn9hm1pm-1227611508691?sv=dd6c583595cc88764875c9025de23240">Wyndham</a>. Again, it’s a rural town where the Indigenous population is just over 50%.</p>
<p>If the Healthy Welfare Card is an Indigenous reform, why target these mixed country towns instead of Indigenous communities? We can think of two explanations.</p>
<p>First, the government must apply the reform equally to non-Indigenous welfare recipients to avoid accusations of targeting Indigenous people and facing charges of racial discrimination. Even in Ceduna, where only 25% of the population is Indigenous, Indigenous people still constitute <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/Debit_Card_Trial/Report">an estimated 72%</a> of welfare recipients. In <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/Debit_Card_Trial/Submissions">his submission</a> to a Senate inquiry into the trial, Aboriginal and Torres Strait Islander Social Justice Commissioner Mick Gooda warned:</p>
<blockquote>
<p>In view of these percentages, the trial may have a disproportionate impact upon Aboriginal and Torres Strait Islander people in these locations.</p>
</blockquote>
<p>The second explanation is that the Healthy Welfare Card is not an Indigenous reform at all, but intended for all Australians. On this view, the government is using the tragic circumstances of Indigenous disadvantage to legitimise a universal reform not otherwise palatable to the public. </p>
<p>Would the same public approval exist for trials in a non-Indigenous “population of high levels of welfare dependence” with “gambling, alcohol and illegal drug abuse” problems? Are the only people who fit this profile Indigenous? </p>
<p>Why not apply the trials as an extension to income management trials (Bankstown, Shepparton, Logan, Playford or Rockhampton), which already include a large number of non-Indigenous welfare recipients?</p>
<h2>So where is this policy headed?</h2>
<p>In understanding the battlefield of Indigenous affairs, it always helps to look backwards. When the Howard government launched the NT Intervention in mid-2007, it <a href="https://www.humanrights.gov.au/sites/default/files/content/racial_discrimination/publications/rda-nter/NTERandRDAPublication12%20December2011.pdf">suspended the Racial Discrimination Act</a>. That removed the possibility of a legal rights challenge.</p>
<p>Only after income management was applied equally to all unemployed citizens in the territory did the Rudd-Gillard government reinstate the act in 2010. This then allowed the <a href="http://parlinfo.aph.gov.au/parlInfo/download/library/prspub/1511200/upload_binary/1511200.pdf;fileType=application/pdf">spread of “race-neutral” income management</a> to other parts of Australia.</p>
<p>Suspending the act required a huge political alignment. This was largely legitimated by the crisis of child abuse in the Northern Territory, including claims of <a href="http://www.smh.com.au/national/pedophile-ring-claims-unfounded-20090704-d8h9.html">paedophile rings</a>, which were later discredited. It would be very difficult for any government to achieve such moralistic bipartisan support again.</p>
<p>So does the government need a work-around by seeking out trial sites that are mixed rural towns with significant Indigenous populations? </p>
<p>The government is walking a fine line here. It must not be seen to single out Indigenous people, but, at the same time, it invokes the crisis of Indigenous disadvantage to legitimate the reform. </p>
<p>Is the Healthy Welfare Card an Indigenous reform or a universal reform in disguise? Let’s call it what it is.</p><img src="https://counter.theconversation.com/content/50756/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Moran receives funding from an Australian Research Council Indigenous Discovery grant.</span></em></p><p class="fine-print"><em><span>Carroll Go-Sam receives funding from Australian Research Council Discovery Indigenous Grant. </span></em></p>Income management was first applied to Indigenous communities before being implemented more widely. The Healthy Welfare Card policy appears to be on this same path.Mark Moran, Chair of Development Effectiveness, The University of QueenslandCarroll Go-Sam, ARC Discovery Indigenous Award Researcher, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/452432015-08-10T20:13:57Z2015-08-10T20:13:57ZThey’re rich, unelected and shaping public policy<p>In the United States, businessman-turned-presidential-hopeful Donald Trump has been <a href="http://www.monmouth.edu/assets/0/32212254770/32212254991/32212254992/32212254994/32212254995/30064771087/67f674c8-fd4a-4a93-afbc-8b246a83da56.pdf">leading the pack</a> for Republican pre-selection. In Australia, we have seen billionaire miner Andrew Forrest take the front seat in policy development when the prime minister, Tony Abbott, asked him to <a href="https://indigenousjobsandtrainingreview.dpmc.gov.au/">lead a review</a> of Indigenous training and employment programs.</p>
<p>Thirty-five years of widening income disparities have produced a sizeable number of “high wealth individuals” - the Australian Taxation Office’s term for <a href="https://www.ato.gov.au/general/building-confidence/privately-owned-and-wealthy-groups/about-privately-owned-and-wealthy-groups/privately-owned-and-wealthy-groups-demographics/">4600 Australians</a> (or 0.04% of taxpayers) with personal assets of $30 million or more. Among them are 49 on the <a href="http://www.brw.com.au/lists/rich-200/2015/;jsessionid=8EA821D28C2B21618A9B2518966FD18C">BRW Rich List</a> with assets of $1 billion or more (topped by Gina Rinehart with $14 billion).</p>
<p>On the surface, it could be said that billionaire Clive Palmer is the most obvious example of Australia’s super-rich wielding influence. But the equally important point to make is that as leader of one of the handful of independent senators denying the Coalition a Senate majority, Palmer is unusual in being both elected and bound by the transparency of the parliamentary system. </p>
<p>It’s the question of whether the unelected super-rich are exercising a strong influence on public policy and, if so, whether such influence thwarts the interests of ordinary Australians and undermines our democracy.</p>
<p>There is no simple answer to this question because there is no clearly identifiable commonality to their means of influence or to their interests. But when they do have a strong voice there are risks which policymakers should be aware of. </p>
<h2>It is not a new phenomenon</h2>
<p>Even when Australia was far more egalitarian there were politically influential tycoons. Reg Ansett used his political influence to shape aviation policy (the “two-airline policy”) in the postwar years. Bob Hawke was well known for his friendships with those at the top end of town, most notably Alan Bond, but it will never be known how much and in what direction they influenced his policy thinking. Dick Smith (57 on the BRW Rich List) has been a consistent public voice on the technicalities of aviation policy.</p>
<p>Also there have been the media families – Fairfax, Packer and Murdoch – all influential in their own ways. <a href="https://theconversation.com/murdoch-and-his-influence-on-australian-political-life-16752">A point of contention</a> has been whether they pursue personal political ideologies or commercial interests that lead them to favour political parties. But personal ideology seems to be the most compelling explanation for Murdoch papers’ uncritical support of Coalition governments in recent years, at least in the face of The Australian’s continuing unprofitability.</p>
<p>Both <a href="http://www.miningaustralia.com.au/news/gina-rinehart-urges-australians-to-fight-against-c">Gina Rinehart</a> and Andrew Forrest fronted up publicly against the mining tax, with Forrest in particular pumping public sentiment against it <a href="http://www.smh.com.au/business/axe-the-tax--mining-magnates-see-red-20100609-xvqj.html">by characterising the tax </a> as a threat to the jobs of average Australians. </p>
<p>But the main political influence came from the mining lobby groups - and the very large and influential corporate groups that fund them. It was later disclosed that the mining industry (including the Minerals Council of Australia and major miners BHP and Rio) had spent a total of $22 million on a marketing campaign that killed off the tax and was cited as a factor in the ousting of Kevin Rudd as prime minister.</p>
<p>One of the clearest examples of Forrest’s influence on public policy has been the introduction of a trial of the cashless welfare card, an idea he originally championed to combat Aboriginal disadvantage and welfare dependency.</p>
<p>Yet his <a href="http://www.afr.com/business/mining/iron-ore/andrew-forrests-iron-ore-campaign-against-bhp-billiton-and-rio-tinto-goes-grassroots-20150517-gh3qzv">PR campaign</a> to bring about a public inquiry into the iron ore production strategies of his larger competitors, BHP and Rio Tinto, was less successful. Tony Abbott had initially appeared to countenance the idea of an inquiry into Forrest’s claim that the two big miners were artificially inflating production in order to drive the price down and force out smaller players - such as himself.</p>
<p>But then Treasurer Joe Hockey knocked back the idea, following on from rare public statements by <a href="http://www.afr.com/business/mining/iron-ore/bhp-ceo-andrew-mackenzie-calls-iron-ore-inquiry-a-waste-of-taxpayers-money-20150518-gh4mwv">BHP’s Andrew Mackenzie</a> and <a href="http://www.theaustralian.com.au/business/mining-energy/rio-tinto-denies-flooding-iron-ore-market-as-inquiry-looms/story-e6frg9df-1227358205246">Rio’s Andrew Harding</a>.</p>
<p>In this instance at least it seems corporate power has prevailed over individual power.</p>
<p>There is no discernible pattern in the ways the rich influence, or attempt to influence, public policy, and that should be hardly surprising. By and large they’re individualists, not given to collective action. And it is often very difficult to gauge particular agendas that may be pursued through covert channels of influence (such as Rinehart’s <a href="http://www.theguardian.com/world/2012/feb/01/fairfax-media-takeover-australia-rinehart">past stake in Fairfax Media</a> and current 10% holding in Network Ten, both of which have been interpreted as a desire for influence over media policy.)</p>
<p>In studying the political desires of very wealthy Americans, <a href="http://www.russellsage.org/sites/all/files/u4/Page%20%26%20Hennessy,%20What%20Affluent%20Americans%20Want%20from%20Politics.pdf">Benjamin Page and Cari Lynn</a> of Northwestern University found that they had a disproportionate influence on public policy. Yet it was difficult to find any common pattern, apart from general evidence that they were less supportive of welfare spending and of spending on health and environment programs, more oriented to market liberalisation, and more liberal on social issues than most Americans.</p>
<p>But while the very rich held these views, they closely aligned with the views of better-off Americans generally. That is, the study found no pattern of beliefs unique to the very wealthy.</p>
<h2>But there are risks</h2>
<p>A recent <a href="http://www.economist.com/news/united-states/21660180-what-good-more-unequal-america-might-look-living-inequality"><em>Economist</em> Lex column</a> speculates on an America that has come to accept ever-widening wealth disparities by turning to a far greater role for philanthropy in funding public goods such as medical research, infrastructure and higher education.</p>
<p>It’s a provocative scenario, and it carries two problems. One is that philanthropists may over-estimate their own contribution, believing that philanthropy can displace major public programs, and will use their influence to curtail public spending. But any replacement of public revenue would require a massive increase in philanthropy: even in the US, where philanthropy is strong, it still accounts for only <a href="http://www.nptrust.org/philanthropic-resources/charitable-giving-statistics/">2% of GDP</a>.</p>
<p>The other risk is that private giving is likely to be pro-cyclical, drying up when it is most needed, while conventional public spending is counter-cyclical.</p>
<p>A more general issue is that the very rich tend to live in a world apart from the rest of the population. Anyone who has travelled recently will have noticed that some airlines have scrapped first class – those who once rode first class now have their own private airplanes. No more do they have to share with lesser mortals the congested trip to the airport or the inevitable flight delays. They are less reliant on public services – public transport, public schools, public hospitals – than most Australians, and generally have less opportunity for social mixing.</p>
<p>It’s hard to imagine that those living in such isolation could understand the needs of the other 99.96% of Australians.</p><img src="https://counter.theconversation.com/content/45243/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ian McAuley receives funding from Copyright Agency and Melbourne University Press.</span></em></p>Do the unelected super-rich exercise an over-weening influence on public policy. The answer is yes, and no.Ian McAuley, Lecturer, Public Sector Finance , University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/420662015-05-19T12:01:52Z2015-05-19T12:01:52ZWar between miners catches government in the crossfire<figure><img src="https://images.theconversation.com/files/82221/original/image-20150519-30501-1l2yqim.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Prime Minister Tony Abbott is in a nasty squeeze, with Andrew Forrest, founder of Fortescue Metals Group, and some of the other smaller miners on one side, and the big producers, BHP Billiton and Rio Tinto, on the other.</span> <span class="attribution"><span class="source">AAP/Dan Himbrechts</span></span></figcaption></figure><p>Tony Abbott has got into a terrible tangle over whether there should be an inquiry into iron ore prices.</p>
<p>After encouraging the idea on Friday and Monday, the Prime Minister on Tuesday appeared to be stepping back from it.</p>
<p>One day he saw an inquiry as potentially “a very good way” to get at the facts and sort out the “claims and counter claims”, the next he was saying “there has never been any proposal from this government for an inquiry. The proposal has always been from Nick Xenophon”.</p>
<p>As he might himself put it, there’s been a touch of the Abbott weathervane in evidence.</p>
<p>The Prime Minister is in a nasty squeeze between Andrew Forrest, founder of Fortescue Metals Group, and some of the other smaller miners on the one hand, and the big producers, BHP Billiton and Rio Tinto, on the other. He’s also being very publicly stared down by a couple of his cabinet ministers. It’s awkward.</p>
<p>Forrest, a man who’s had influence with both sides of politics, is campaigning for an inquiry, saying that the big miners’ repeatedly-stated plans for expanding supply have pushed down the iron ore price. The public has a right to transparency, he told the ABC on Tuesday night, claiming also this would “correct” the big miners’ behaviour.</p>
<p>It should be noted that Forrest, with a higher cost enterprise than the big companies, has a lot of commercial skin in this game.</p>
<p>In response, BHP Billiton and Rio Tinto point out that if they stand still they give a competitive advantage to overseas competitors, especially the Brazilian multinational Vale, to grab more market share.</p>
<p>Independent senator Xenophon took up the Forrest cause, trying to get support for a Senate inquiry, urging the case to Treasurer Joe Hockey and Abbott.</p>
<p>But the grillings that a Senate committee under Labor’s Sam Dastyari gave executives from Apple, Google, Microsoft, News Corp and BHP Billiton over tax minimisation and representatives of the big banks over the scandals in financial advice were fresh in the government’s mind.</p>
<p>Abbott and Hockey believed the best course would be for a joint parliamentary inquiry under a reliable Liberal. The obvious MP was Angus Taylor, who has an impeccable business background, including in consulting to the mining industry, and incidentally also has a Master of Philosophy in economics from Oxford, where his thesis was about competition policy.</p>
<p>A neat plan, it seemed. Something for Forrest. Something for Xenophon, who has some influence with other crossbenchers - important when you have budget measures to get through. It would also be a good gig for Taylor, seen as one of the high flyers of the future.</p>
<p>And the mining executives would be protected from a “show trial” run by the very effective Dastyari.</p>
<p>But then the strategy spectacularly unravelled, before the proposal even got to the full cabinet.</p>
<p>Trade Minister Andrew Robb (the guy in charge of promoting free trade) and Industry Minister Ian Macfarlane (whose portfolio covers resources) publicly made clear their opposition, while avoiding being explicit.</p>
<p>The major miners were appalled. BHP Billiton’s chief executive Andrew Mackenzie declared an inquiry would be “a ridiculous waste of taxpayers’ money”.</p>
<p>Don Argus, former chairman of BHP Billiton, told The Australian that if the government intervened in the market Australia would be an international “laughing stock”.</p>
<p>“In a market economy, prices will determine what is produced,” he said, adding it was beyond his comprehension how anyone would think about having an inquiry. “If you don’t understand something, sit down with the miners and talk to them.”</p>
<p>Abbott has insisted the government is committed to the market and dismissed any notion of regulation. The government does not want a witch hunt or demonising, he says.</p>
<p>As things stand, it is unclear whether the inquiry idea is alive or dead. What is clear is that the government has got a pasting and for little purpose.</p>
<p>If (as it is) the Australian Competition and Consumer Commission is satisfied with the behaviour of the major mining companies, which are still selling the iron ore at a profit, and the government says it doesn’t want to regulate, a quick cost-benefit analysis suggests more cost than benefit in an inquiry officially sponsored by the government.</p>
<p><strong><a href="http://michellegrattan.podbean.com/e/nick-xenophon-1432035989/?token=ec56ffede52774bbd49f7530c79fb413">Listen to the latest Politics with Michelle Grattan podcast, with guest, Nick Xenophon, here or on iTunes.</a></strong></p>
<iframe id="audio_iframe" src="https://www.podbean.com/media/player/ba3sp-561dab" width="100%" height="100" frameborder="0" scrolling="no"></iframe><img src="https://counter.theconversation.com/content/42066/count.gif" alt="The Conversation" width="1" height="1" />
Tony Abbott has got into a terrible tangle over whether there should be an inquiry into iron ore prices.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/418142015-05-18T03:49:44Z2015-05-18T03:49:44ZCompetition the wrong test for iron ore inquiry<p>Fortescue Metals Group Chairman Andrew Forrest has <a href="http://www.afr.com/business/mining/iron-ore/andrew-forrests-iron-ore-campaign-against-bhp-billiton-and-rio-tinto-goes-grassroots-20150517-gh3qzv">stepped up</a> his campaign against competitors Rio and BHP, after gathering the support of independent Senator Nick Xenophon who is pushing for an inquiry into competition in the iron ore sector.</p>
<p>Forrest <a href="http://www.dailytelegraph.com.au/news/opinion/big-miners-bhp-billiton-and-rio-tintos-flood-the-market-tactics-threaten-australias-prosperity/story-fni0cwl5-1227349418669">claims</a> the miners are harming the Australian economy by flooding the market with iron ore, driving lower prices with a <a href="http://www.abc.net.au/news/2015-05-04/andrew-forrest-renews-attack-on-rio-bhp-iron-ore-supply/6444014">“predatory volume strategy”</a>. Australian Competition and Consumer Commission Chairman Rod Sims says it’s hard to make a claim of predatory behaviour given the miners are still making a margin on their product.</p>
<p>Prime Minister Tony Abbott has said an inquiry <a href="http://www.news.com.au/national/breaking-news/decision-on-iron-ore-inquiry-soon-hockey/story-e6frfku9-1227357805095">“could make sense”</a> in order to “get to the bottom on claim and counter-claim about what’s happening inside the iron ore industry at the moment”.</p>
<h2>How we got here</h2>
<p>Most Australians would know by now that the price of iron ore has fallen substantially over the last year. To get a sense of the decline, the benchmark price has fallen by more than 60% from around US$135 per tonne at the beginning of 2014 to below US$50, recovering to above US$60 recently.</p>
<p>This fall has been driven by two main factors. First, iron ore is essentially used for the production of steel. In turn, the demand for steel is typically driven by construction activity. New residential building construction starts in China, the biggest buyer of iron ore, declined by 14.4% in 2014.</p>
<p>Second, there has been an expansion in production by the world’s three largest miners: Rio Tinto, BHP and Brazil’s Vale. Together these three companies represent more than 60% of the international iron ore market. Moreover, all three major mining companies have plans to further increase supply.</p>
<p>Vale, for example, <a href="http://www.vale.com/EN/investors/home-press-releases/Press-Releases/ReleaseDocuments/PREPORT1T15_i.pdf">increased production</a> by nearly 11% or about 12 million tonnes between the first and last quarters of 2014. BHP <a href="http://www.theaustralian.com.au/business/mining-energy/bhp-lifts-wa-iron-ore-forecasts-increases-march-quarter-output/story-e6frg9df-1227314701106">produced 59 million tonnes</a> of iron ore in the first quarter of 2005, representing a 20% increase on quarter 1 2014, and approximately 77% of Vale’s production in the same period. Similarly, Rio Tinto increased iron ore production by 11% in 2014, to a total of over 300 million tonnes.</p>
<p>Collectively, the world’s largest iron ore producers (Vale, Rio Tinto, BHP Billiton, and the smaller Anglo American and FMG), <a href="http://static.ourstatebudget.wa.gov.au/15-16/factsheets/ironore.pdf">increased sales</a> by more than 140 million tonnes, around 10% of the total seaborne market, in 2014.</p>
<h2>The market adjustment</h2>
<p>The demand for iron ore is derived from the demand for steel, which in turn is derived from the demand for construction. This suggests the elasticity of demand ought to be fairly low. <a href="http://econ.duke.edu/uploads/media_items/thesis-zhirui-zhu.original.pdf">One estimate</a> of the world’s elasticity of demand for iron ore suggests that a 1% drop in price leads to an increase in demand of only 0.24%. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/81972/original/image-20150518-25422-gp9sio.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/81972/original/image-20150518-25422-gp9sio.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/81972/original/image-20150518-25422-gp9sio.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=571&fit=crop&dpr=1 600w, https://images.theconversation.com/files/81972/original/image-20150518-25422-gp9sio.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=571&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/81972/original/image-20150518-25422-gp9sio.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=571&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/81972/original/image-20150518-25422-gp9sio.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=717&fit=crop&dpr=1 754w, https://images.theconversation.com/files/81972/original/image-20150518-25422-gp9sio.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=717&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/81972/original/image-20150518-25422-gp9sio.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=717&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Reserve Bank of Australia.</span>
</figcaption>
</figure>
<p>The low elasticity of demand suggests that the market will primarily adjust through changes in supply, with high cost suppliers being displaced by low cost producers and revenue falling. The chart to the right, reproduced from an <a href="http://www.rba.gov.au/publications/smp/boxes/2015/feb/a.pdf">RBA report</a>, is helpful in understanding which miners will be displaced as a result of the drop in prices.</p>
<p>Indeed, this adjustment is already in motion. For example, China now imports more than 80% of the iron ore it needs compared to 70% two years ago. China’s iron-ore output has <a href="http://www.businessspectator.com.au/news/2015/4/30/china/iron-ore-price-war-has-chinas-miners-reeling">decreased by 9%</a> in the first quarter of 2015. The impact is also being felt by smaller miners in Australia and in other parts of the world.</p>
<p>Moreover, the impact on revenue is also as predicted. While Australia’s exports of iron ore to China increased by 18% on a yearly basis, iron ore export earnings <a href="http://www.industry.gov.au/industry/Office-of-the-Chief-Economist/News/media-releases/Pages/Increasing-supply-and-slowing-economic-growth-in-China-contributes-to-weaker-commodity-prices-14-May-2015.aspx">declined by 31%</a> due to the fall in prices. </p>
<p>In a nutshell, while the larger miners are gaining market share, they are doing so at the expense of high cost miners and it is adversely affecting earnings. The diagram above also helps us understand why the ACCC has said that this process of high cost suppliers being replaced by low cost suppliers simply reflects the workings of a competitive market.</p>
<h2>Where will it end?</h2>
<p>The <a href="https://hbr.org/2000/03/how-to-fight-a-price-war">example of the airline industry price wars</a> in the US following the 1992 deregulation is instructive. As a result of the price war, the industry lost all the profits that had been earned in its entire history.</p>
<p>Why would the large miners engage in a price war?</p>
<p>Andrew Forrest’s central idea seems to be that by increasing production, and causing such a large decrease in prices, large, low cost miners would be able to exclude small, high cost miners from the market. Presumably, once these high cost miners exit the market, the large miners would then recoup any profit sacrifices by using their market power to increase prices and profits.</p>
<p>Given large miners are not pricing below production cost, this is not your standard <a href="https://www.accc.gov.au/business/anti-competitive-behaviour/predatory-pricing">predatory pricing</a> - and why the ACCC apparently has no concerns with the conduct. However, it’s not clear that production/extraction costs are the relevant costs for a predatory pricing test. As resources are finite, a tonne of iron ore sold today is one tonne less of iron ore sold tomorrow at likely a higher price. This is the opportunity cost of the resource and it is not clear why this should not be included in a predatory pricing test. These are complex issues that a parliamentary inquiry could independently look at.</p>
<h2>Why it’s a policy issue</h2>
<p>One may be tempted to think that this is essentially a business issue and that, in the absence of any anti-competitive implications, governments should simply stay out of it. This would be a costly public policy mistake as it would ignore the impact the price war has had, and will have if it continues unabated, on the value of the resources for owners.</p>
<p>The key is that because iron ore resources are finite, a lower price today may result in a reduction in their total value over the lifetime of a mine. The only case when this wouldn’t happen is if future demand for iron ore were to fall. This is unlikely as any decline in the demand from China, as it moves to its next stage of development, will be replaced by new demand derived from development efforts in India, Africa and the less developed countries of South East Asia.</p>
<p>In Australia, the Crown owns the resources and their value is captured both through state royalties, which directly benefit Western Australia where the bulk of iron ore resources are, and through corporate tax, which benefits both Western Australia and the country as a whole. The industry also has a significant impact on the broader economy.</p>
<p>The 2015 federal <a href="http://www.budget.gov.au/2015-16/content/overview/html/overview-04.htm">budget papers estimate</a> that, since the last budget, the value of forecast iron ore exports has been downgraded by around A$90 billion. This has contributed to lower nominal GDP and has reduced forecast tax collections by around A$20 billion. This is roughly 57% of the public deficit in 2015-2016.</p>
<p>In Western Australia, the general government revenue estimates to 2017-2018 have been revised down by an unprecedented A$10.2 billion since the 2014-15 budget, driven by sharp declines in iron ore and crude oil prices. The revenue write-down in 2015-16 alone is A$3.9 billion, equivalent to 13% of the state’s total revenue base.</p>
<p>As the elasticity of demand for iron ore is low, this foregone revenue, or a return on ownership of mineral rights, is unlikely to be recovered in the future. It is essentially a transfer from the owners of the resources to buyers.</p>
<h2>Will the price war end by itself?</h2>
<p>Rio Tinto, Fortescue Metals Group, Arrium Limited, Grange Resources, and Vale’s production and exports of iron ore were <a href="http://www.smh.com.au/business/mining/vales-slower-growth-to-trigger-iron-ore-rally-20150430-1mxenu.html">reportedly lower</a> in the March 2015 quarter than the December 2014 quarter. Vale, for example, decreased its output by 10% from the previous quarter and has announced it could temporarily decrease supply by 30 million tonnes. This, alongside an increase in Chinese demand for iron ore (despite a fall in its demand for steel), can possibly explain the recent partial recovery in the price of iron ore.</p>
<p>Given the expansion plans of the three large miners, and demand conditions, it seems the restraint shown by some of the miners in Quarter 1, 2015 may end, resulting in further downward pressure on iron ore prices. The Western Australian government budget papers, for example, assume a $47.5 price per tonne of iron ore for 2015-2016 and an increase in volume of 4.4%, on top of an increase of 13% in 2014-2015.</p>
<p>So what can a government inquiry accomplish? The inquiry is likely to focus on whether the conduct of the large miners is anti-competitive. The arguments I presented above suggest that the issues goes beyond competition law, or at least the ACCC’s interpretation of it, when examining <a href="https://theconversation.com/iron-ore-race-to-the-bottom-not-in-the-interests-of-australians-33685">finite resources owned by the Crown</a>.</p>
<p>A second possible avenue for investigation, which could be pursued by the parliamentary inquiry, involves considering adding a public benefit test to any new production licence approvals or changing <a href="https://theconversation.com/why-twiggy-forrest-should-have-got-behind-a-super-profits-tax-39422">taxation arrangements</a> to reflect the impact of business conduct on the value of the resources. For example, a tiered royalty regime could be set so that rates increase for very high volumes.</p><img src="https://counter.theconversation.com/content/41814/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Flavio Menezes participated in a press interview organised by the Minderoo Group (<a href="http://www.minderoo.com.au/">http://www.minderoo.com.au/</a>) to support the establishment of a parliamentary inquiry into iron ore prices. Flavio Menezes received no financial benefit from participating in the press interview. </span></em></p>While it’s easy for the large miners to argue increased iron ore production is business as usual, the overall cost to the sector warrants a closer inspection.Flavio Menezes, Professor of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/418162015-05-18T02:12:21Z2015-05-18T02:12:21ZA $147m budget saving missed: income management has failed<p>The expensive and extensive government-funded evaluation of income management in the Northern Territory clearly failed to find it worth ongoing funding. Note the following significant findings in the <a href="http://caepr.anu.edu.au/sites/default/files/cck_misc_documents/2014/12/Evaluation%20of%20New%20Income%20Management%20in%20the%20Northern%20Territory_summary%20report.pdf">summary report</a> of <a href="http://caepr.anu.edu.au/others/Report-1418859519.php">the final evaluation report</a> on NT income management programs: </p>
<blockquote>
<p>The evaluation could not find any substantive evidence of the program having significant changes relative to its key policy objectives, including changing people’s behaviours.</p>
<p>More general measures of wellbeing at the community level show no evidence of improvement, including for children.</p>
<p>The evaluation found that, rather than building capacity and independence, for many the program has acted to make people more dependent on welfare.</p>
</blockquote>
<p>Yet the 2015-16 budget has not only included a two-year extension of the services to 25,000 recipients, but <a href="https://www.dss.gov.au/sites/default/files/documents/05_2015/2015_budget_fact_sheet_-_income_management_-_final_0_0.pdf">signals more expansion</a> of the basic concept. This makes no sense as most forms of income management fail to show positive outcomes, despite some individuals, mainly voluntary participants, claiming income management has benefited them.</p>
<p>The included funding is for new technology and commercial involvement in the future program, which suggests the Andrew “Twiggy” Forrest version of a cashless <a href="http://indigenousjobsandtrainingreview.dpmc.gov.au/chapter-2-healthy-welfare-card">welfare card</a> is the next step. Why would the Forrest version offer better outcomes, apart from cutting administration costs by removing Centrelink? </p>
<p>The announcement below fails to acknowledge there are any questions about benefits of the program. The budget statement <a href="https://www.dss.gov.au/sites/default/files/documents/05_2015/2015_budget_fact_sheet_-_income_management_-_final_0_0.pdf">claims</a>:</p>
<blockquote>
<p><strong>Income Management 2015 Budget</strong></p>
<p>Income management is a tool that helps people better budget their welfare payments and ensures they are getting the basic essentials of life such as food, housing, electricity and education.</p>
<p><strong>What was announced in the 2015 budget?</strong></p>
<p>Income management will continue for another two years in all locations where it currently operates, with possible expansion to four new communities. This $144.6 million investment will build on the positive impacts of income management; giving participants more control of their welfare money, improving family stability, reducing stress and financial hardship. It will also give Government time to fully test alternative approaches to welfare payments quarantining.</p>
</blockquote>
<p>Returning to the evaluation report, there are further clear statements, backed by data in the <a href="http://caepr.anu.edu.au/others/Report-1418859519.php">body of the report</a> by the Social Policy Research Centre at UNSW, that do not recommend continuing the program in any of its current forms:</p>
<blockquote>
<p><strong>Summarising the impact</strong></p>
<p>Taking the results as a whole, the conclusion is that there is no evidence of any consistent positive impacts on problematic behaviours related to alcohol, drugs, gambling, and financial harassment, in the extent to which financial hardships and stresses are experienced – for example, running out of food, not being able to pay bills, or on community level outcomes such as children not being looked after properly, school attendance, drinking, and financial harassment. (p.307)</p>
<p>Despite the magnitude of the program the evaluation does not find any consistent evidence of income management having a significant systematic positive impact. (p.317)</p>
<p>Data on spending point to continued major problems of diet and poor levels of fruit and vegetable consumption, in particular for Indigenous people living in remote communities. There is no evidence of income management having resulted in changes in spending or consumption, including on alcohol, tobacco, fresh fruit and vegetables. (p.317)</p>
</blockquote>
<p>Given the report was delivered to the government last September and released publicly in December, it is puzzling that there has been no acknowledgement of the flaws. In late March, the <a href="http://www.smh.com.au/federal-politics/political-news/healthy-welfare-card-trials-to-tackle-violence-and-alcohol-abuse-20150322-1m4uk2.html">government announced</a> that welfare recipients would be given cashless cards to stop them spending money on alcohol and drugs in a bid to combat violence against women and children. Parliamentary Secretary to the Prime Minister Alan Tudge said the government was planning trials of the cards “in a small number” of places, which were yet to be decided, later this year. </p>
<p>And now it is in the budget. This decision clearly ignores the findings of the evaluation report, which seriously undermine any government claims that quarantining incomes is effective in changing behaviour or that its new card will affect spending positively and reduce drinking. The report does not recommend continuing the program in any of its current forms.</p>
<h2>Prejudice makes it easier to ignore evidence</h2>
<p>The question arises: why does this particular policy change receive so little attention or objections? Despite the threat that controlling income may well alter the basis for general income support, the possibilities stay beneath the public debate radar. Few in the welfare sector have raised objections or questions.</p>
<p>One can only assume an element of racial and wider prejudice is operating, as the original and many ongoing recipients have been Indigenous. Income management started as part of the Howard government’s NT Emergency Response to a child sexual abuse report. </p>
<p>Originally, the income management program was targeted at all Commonwealth payment recipients in 72 Indigenous communities, controlling 50% of their spending. It required suspending the Racial Discrimination Act. There was no explanation as to how financial controls would fix child abuse.</p>
<p>When the ALP took office some months later, it expanded the numbers and set up a review. Despite the <a href="http://www.abc.net.au/stateline/nt/content/2006/s2400936.htm">Yu report</a> raising some questions and doubts, the new government extended the scheme to the rest of the NT. It was de-racialised but still covers mostly Indigenous recipients in the NT, with smaller mainly non-Indigenous and Indigenous pilots elsewhere.</p>
<p>Now, eight years on and despite all the evidence to the contrary, the budget papers state clearly:</p>
<blockquote>
<p>The Government is investing $147 million to deliver more streamlined and cost-effective income management. Around 25,000 people will continue to benefit from this programme designed to support vulnerable Australians.</p>
</blockquote>
<p>Why? How about some serious economic rationality, both to save taxpayers’ money and improve social well-being?</p><img src="https://counter.theconversation.com/content/41816/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Eva Cox does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Various studies, culminating in the final evaluation report of income management in the Northern Territory, have found such programs don’t achieve the claimed benefits. Why did the budget extend them?Eva Cox, Professorial Fellow Jumbunna IHL, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/394222015-04-07T01:55:01Z2015-04-07T01:55:01ZWhy Twiggy Forrest should have got behind a super profits tax<p>Coinciding with the government’s tax discussion paper last week was a <a href="http://www.minerals.org.au/file_upload/files/publications/RichardsonC_Mining_tax_ratios_FINAL.pdf">report</a> from the Minerals Council of Australia evaluating the industry’s tax burden (tax paid divided by profits).</p>
<p>The report, written by Deloitte economist Chris Richardson, aimed to dispel the public view that the mining industry does not pay its fair share of tax. </p>
<p>A key point is that while the proportion of mining company profit paid in tax had decreased in 2008/2009 leading up to the debate on the introduction of the Resource Super Profits Tax (RSPT), it is now at or above historical levels. </p>
<p>As pointed out in Richardson’s report, the nature of taxation of mining plays a big part in explaining why the ratio of tax paid to profits has increased amidst a significant drop in the price of minerals such as iron and coal.</p>
<p>In a nutshell, mining companies pay royalties and company tax. Up until recently, mining companies also paid the Minerals Resource Rent Tax (MRRT), which was a compromised rent tax introduced by the Gillard government to circumvent the industry opposition to the RSPT. For a variety of reasons, related mostly to its design, the MRRT did not raise a great deal of revenue and so the focus here is on the other two taxes.</p>
<p>While royalties are typically levied on revenue, company tax is levied on profits. So, faced with a reduction in prices, production becomes less profitable. Firms, however, will still pay 30% of their profits in company tax, so any increase in the ratio of total tax paid to profits has to be explained by royalties. </p>
<p>As Richardson points out, not only has the ratio of royalties to profits increased because profits decreased, some States have also increased the royalty rates. They were likely incentivised by the MRRT design, under which companies received a credit for the royalties they paid on coal and iron ore projects with annual resource profits above A$50 million. For these projects, an increase in the royalty would have no impact on the bottom line.</p>
<p>Here is the rub, as pointed out by the Henry Review, the Minerals Council itself and a <a href="http://www.scribd.com/doc/31959942/Economists-Statement">group of 20 economists</a>; royalties distort production decisions. For example, a company that would exploit a mine for which revenue is just greater than costs in the absence of royalties, would not exploit a mine in the presence of royalties. </p>
<p>While royalties do capture some of the rents – the super profit associated with the exploitation of a finite resource that is owned by Australians – they are inefficient. In contrast, a tax on super profits does not distort production decisions. As long as revenue exceeds costs, the company will exploit the mine. This was the key rationale for the proposal of the RSPT to replace royalties.</p>
<h2>How times have changed</h2>
<p>Fortescue Metal Group’s Andrew “Twiggy” Forrest was one of the most <a href="http://www.smh.com.au/business/axe-the-tax--mining-magnates-see-red-20100609-xvqj.html">vocal opponents</a> of the super profits tax. Fortescue’s financial position is currently under significant pressure due to falling iron ore prices caused by <a href="http://theconversation.com/iron-ore-race-to-the-bottom-not-in-the-interests-of-australians-336850">oversupply</a>, and the slowing Chinese economy. Ironically, it would likely be better off today under a well-designed RSPT than under a royalties regime. </p>
<p>A well-designed RSPT would have impacted Fortescue in two different ways. First, a super profits tax is designed so companies pay more tax when times are good and less tax when times are bad.</p>
<p>Second, an RSPT would also have increased the cost of increasing production for the major iron ore producers. This is because the price at which smaller, higher cost producers would shut down production would have increased, necessitating even larger increases in production for the major producers’ strategy of displacing small producers to pay off. This would depend on how world prices responded to increases in supply by the large companies.</p>
<p>All worth considering in light of Andrew Forrest’s recent <a href="http://www.theaustralian.com.au/business/mining-energy/accc-investigates-andrew-forrest-call-for-cap-on-iron-ore-production/story-e6frg9df-1227277776667">controversial call</a> for a cap on iron ore production.</p>
<p>The RSPT proposed by the Rudd government had some flaws, as discussed in Richardson’s report. But had the industry been successful in engaging with the policy process, securing the replacement of royalties with a super profits tax, it would be in a better position today. </p>
<p>Nevertheless, mining companies have invested a trillion dollars in new mines and infrastructure and the boom and bust nature of the industry is unlikely to change. While profits are lower now, the need for a better taxation system for minerals remains. It is not a good omen for tax reform in this country when the only reference in the recently released tax discussion paper to a mining tax is in the foreword, and it refers to the abolishment of the MRRT.</p>
<hr>
<p><em>Flavio will be on hand for an Author Q&A session between 10:45 and 11:45am AEST on Wednesday April 8. Post your questions about the article in the comments section below.</em></p><img src="https://counter.theconversation.com/content/39422/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Flavio Menezes does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Had the mining industry engaged differently on the proposed mining super profits tax, it would be in a better position today.Flavio Menezes, Professor of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/326112014-10-07T19:07:50Z2014-10-07T19:07:50ZGovernment that ignores evidence sets up welfare policies to fail<p>The mess of federal budget negotiations has taken over the limited space for social policy debates. However, we are due to get final reports on a range of inquiries. These include the <a href="http://www.dss.gov.au/our-responsibilities/review-of-australia-s-welfare-system/a-new-system-for-better-employment-and-social-outcomes-full-version-of-the-interim-report">McClure report</a> on social security, which will take into account Andrew Forrest’s <a href="https://indigenousjobsandtrainingreview.dpmc.gov.au/forrest-review">Creating Parity</a> report on Indigenous welfare and employment. </p>
<p>The report will trigger major changes to income-support programs, so any input from related evaluations may have considerable impact. One of the ideas being touted, <a href="https://theconversation.com/forrest-report-ignores-what-works-and-why-in-indigenous-policy-30080">particularly by Forrest</a>, but also mentioned by Social Security Minister Kevin Andrews, is the extension of some forms of income management.</p>
<p>A range of pilot programs have run in various parts of Australia. However, these and the Northern Territory model show few if any clear benefits, despite extensive evaluations of controls on the spending rights of income recipients. </p>
<h2>Push to extend income controls is on</h2>
<p>The <a href="http://www.abc.net.au/news/2014-10-07/fred-chaney-urges-caution-on-cashless-welfare-card/5794382">debate is on</a>, as indicated by coverage of <a href="http://www.dss.gov.au/our-responsibilities/families-and-children/programs-services/income-management/income-management-evaluations">two new reports</a> just posted on the Department of Social Services website. These are already being <a href="http://kevinandrews.dss.gov.au/media-releases/187">misinterpreted by the minister</a> and <a href="http://www.theaustralian.com.au/national-affairs/indigenous/income-regime-helps-money-management-reduces-substance-abuse/story-fn9hm1pm-1227079564661">misreported</a> as offering encouragement to expand the program:</p>
<blockquote>
<p>Social Services Minister Kevin Andrews welcomed the findings of the reports, which he said proved income management was helping individuals and families to budget better and stabilise their lives. ‘The reports found that the vast majority of people who volunteered for income management were positive about the initiative, reporting lower stress levels and marked improvements in their ability to manage their money,’ Mr Andrews said.</p>
</blockquote>
<p>The Australian article suggests that the reports support the extension of the program, with the minister going on to remind us of the McClure and Forrest contributions to this policy area. However, my more careful reading of both reports finds no clear results that would endorse imposing any form of compulsory income management on income-support categories or place-based eligibility.</p>
<h2>What did the reports find?</h2>
<p><a href="http://www.dss.gov.au/our-responsibilities/families-and-children/programs-services/income-management/evaluation-of-voluntary-income-management-in-the-anangu-pitjantjatjara-yankunytjatjara-apy-lands">One report</a> covers a voluntary version in the APY lands. This program was requested by local Indigenous communities and devised in consultation with them. </p>
<p>The <a href="http://www.dss.gov.au/our-responsibilities/families-and-children/programs-services/income-management/income-management-evaluations#2">other report</a> covers pilot programs in various locations. These involve a wide range of compulsory and voluntary entry and eligibility criteria.</p>
<p>The only really clear finding of both reports was that those who had voluntarily decided to participate had more positive responses to income-management programs. </p>
<p>This included most but not all in the APY scheme who saw it as meeting some local needs. The other evaluation included about half of the interviewed group who were compelled to take part, either as a category or on social worker recommendations. Their responses to income management were often negative compared to the voluntary groups.</p>
<p>To quote from the reports, the <a href="https://www.sprc.unsw.edu.au/">Social Policy Research Centre’s</a> APY findings were:</p>
<blockquote>
<p>The majority of community members and other stakeholders who participated in this study were positive about income management being introduced into the APY Lands. The fact that the communities had requested income management, and had been consulted about its introduction, appears to have had a major influence on the communities’ view of income management.</p>
</blockquote>
<p>Responses are mixed in relation to the impact of income management on the wellbeing of the community as a whole, but overall there is a belief that it has had a positive though limited impact so far.</p>
<p>But income management has not suited everyone. A number of study participants had decided not to try it, or had tried it and decided not to continue.</p>
<p>The second report on Deloitte’s evaluations of place-based income management (PBIM) gives some measurable positive results for voluntary income management (VIM) participants. They were on the program for some time before some compulsory categories were added. The latter group showed far fewer positive responses to being deprived of control over their spending. </p>
<p>The Deloitte report observes:</p>
<blockquote>
<p>The short-term outcomes of PBIM noted in this report include the ability to pay bills and other payments on time and reduced stress or worry. The probability of reporting positive outcomes was increased for VIM customers between the survey point at baseline and the wave one survey. The probability of reporting negative outcomes increased among the surveyed VULN [vulnerable income management] cohort. </p>
<p>The level of tobacco and alcohol consumed by VIM customers decreased significantly over the period between baseline and wave one compared with the change for the comparison group. This suggests a positive impact of PBIM on these behaviours. No such significant impact was observed in the short term for VULN customers, who were less likely to engage with these behaviours at baseline than VIM customers. </p>
</blockquote>
<h2>Consent is the key to benefits</h2>
<p>The above findings are obviously limited. They certainly do not offer clear endorsements of any forms of compulsory income management, only support by those who voluntarily joined it.</p>
<p>Many of these people were reported as already using the Centrepay system for housing etc. The question arises whether this voluntary system should be expanded rather than continuing the income management program, which is linked to compulsion and costly administration.</p>
<p>Even former Liberal Indigenous affairs minister Fred Chaney has <a href="http://www.abc.net.au/news/2014-10-07/fred-chaney-urges-caution-on-cashless-welfare-card/5794382">warned against</a> compulsory income management. There is a signal lack of serious evidence in the many other earlier studies of income management that compulsory controls on benefit spending create general benefits.</p>
<p>Some recipients have indicated they like being managed. Yet seven years of NT official data covering the communities that started the program under the Howard government have produced no independent evidence of improved outcomes.</p>
<p>At this stage of policy changes, we need to note the repeated reports of failed programs that were supposed to assist Indigenous people with “Closing the Gap”. These failures often come from the inclination of ministers and advisers to follow their political beliefs instead of evidence. They fail to make effective use of any professional, rather than political, expert advisers, including impartial <a href="http://www.aihw.gov.au/closingthegap/">advice and evidence</a> from the Australian Institute of Health and Welfare.</p>
<p>It is interesting to note that the original income-management trials were part of the so-called emergency NT Intervention. Although the program was de-racialised under the ALP, its original and still majority application to the NT Indigenous population has resulted in little public scrutiny of the basic assumptions of the right to control welfare support.</p>
<p>The Forrest view of generalising it to all welfare recipients obviously echoes government beliefs that they need paternalistic controls. In times when budget cuts in welfare are touted, it is strange that the <a href="http://www.abc.net.au/news/2013-01-31/welfare-income-management-costs-report/4494054">expense of the administration</a> of social control, estimated at up to $4,000 a year per person, is not a disincentive. </p>
<p>We can only hope the government, which claims to want change, does not continue to fund <a href="https://theconversation.com/creeping-spread-of-income-management-must-be-challenged-24560">expensive but ineffective</a> programs. That will lead to cries that “nothing works” in welfare as well as Indigenous policies.</p><img src="https://counter.theconversation.com/content/32611/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Eva Cox does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The mess of federal budget negotiations has taken over the limited space for social policy debates. However, we are due to get final reports on a range of inquiries. These include the McClure report on…Eva Cox, Professorial Fellow Jumbunna IHL, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/300802014-08-05T01:06:55Z2014-08-05T01:06:55ZForrest report ignores what works and why in Indigenous policy<p>The <a href="https://indigenousjobsandtrainingreview.dpmc.gov.au/sites/default/files/files/The_Forrest_Review.pdf">Creating Parity report</a> on Indigenous employment and welfare, <a href="http://www.theguardian.com/world/2014/aug/01/tony-abbott-doesnt-rule-out-expanding-income-management">released last week</a> by mining magnate Andrew Forrest, is in much the same vein as Tony Shepherd’s recent <a href="https://theconversation.com/commission-of-audit-report-released-experts-respond-26177">Commission of Audit</a>. Forrest and Shepherd are senior business figures with limited policy expertise. They have offered the Abbott government reports that expose their lack of experience in using appropriate evidence bases to shape the recommendations they offer. </p>
<p>When offered a range of responses to their inquiries, they allow their prejudices to override any ideas they didn’t like.</p>
<p>Forrest started with his <a href="https://theconversation.com/philanthropy-in-australia-its-what-you-do-with-it-that-counts-12473">philanthropic</a> plus business models firmly in place. This led him to assume that what worked for him – as a privileged white male – would work for anyone else. Some personal experiences and childhood memories are fed into a set of recommendations. These proclaim the virtues of the current systems of education and attached services, but without really explaining why it hasn’t worked so far for most first people. </p>
<p>The result, as seen in the report, is Forrest’s supposedly unified set of proposals. However, these offer options that could well make things worse. They ignore both Indigenous strengths and what the rest of us have learnt, or need to learn.</p>
<h2>Punitive paternalism has a long history of failure</h2>
<p>Forrest makes the same mistakes that <a href="http://www.crikey.com.au/2007/10/12/the-pm-and-aboriginal-australia-a-timeline/">John Howard</a> followed by <a href="http://www.theaustralian.com.au/national-affairs/indigenous/how-jenny-macklin-took-on-the-left-to-transform-indigenous-policy/story-fn9hm1pm-1226766385171">Jenny Macklin</a> made in Indigenous policy. They also assumed that the problems were endemic to Indigenous communities. More rapid change therefore required a solid assault on the too slow assimilative processes that were needed to ensure parity success in our terms.</p>
<p>This involved stricter control over the “deviant” behaviours that created disadvantage. The non-compliant behaviours that are blamed for continuing disadvantage needed “tough love” responses.</p>
<p>As prime minister Tony Abbott <a href="http://www.theaustralian.com.au/news/latest-news/abbott-challenged-by-forrest-report/story-fn3dxiwe-1227009707084">said</a>, the government needs to discourage non-optimum decision-making by using financial penalties to force good personal health care, ordered and clean daily life and education attendance. This very <a href="https://overland.org.au/2014/05/tony-abbott-and-the-white-mans-burden/">19th century model</a> reflects the colonising model that created many of the current problems, albeit with less overt, more subtle racism.</p>
<p>Punitive policies had a very poor record of success as colonisers sought to enforce their version of civilisation on the colonised. The report’s approach led <a href="http://www.themonthly.com.au/politicoz/august/1406857530/twiggys-two-cents">one commentator to write</a>:</p>
<blockquote>
<p>As it happens, Forrest’s report goes well beyond <a href="https://indigenousjobsandtrainingreview.dpmc.gov.au/terms-of-reference">his brief</a>, and advocates a return to the paternalistic and punitive welfare models of centuries past for not just Indigenous welfare recipients but hundreds of thousands of others. There are echoes of the <a href="http://en.wikipedia.org/wiki/English_Poor_Laws">‘poor laws’</a> of British mercantilism in his proposal to punish parents for their children’s non-attendance at school. His proposal to extend ‘income management’ – that attempt at controlling how welfare recipients spend their money which has <a href="https://theconversation.com/northern-territory-intervention-extended-but-is-it-working-8005">proven so divisive</a> among Aboriginal communities – harks back to the <a href="http://www.austlii.edu.au/au/journals/ILB/2005/12.html">trust accounts</a> of past decades.</p>
</blockquote>
<p>This step backwards fails to accept that recognising and respecting the civilisations and contributions of Indigenous peoples is necessary to unravel the damages of long-term cultural dominance, which strips away communal strengths and well-being. </p>
<p>The United Nations and others have recognised the long-term failures of programs to “civilise” first nations. Yet we have seen returns to paternalism in the <a href="http://www.creativespirits.info/aboriginalculture/politics/northern-territory-emergency-response-intervention">Northern Territory Emergency Response</a> (NTER) – the NT Intervention – and other welfare changes. </p>
<p>The <a href="http://www.dss.gov.au/our-responsibilities/indigenous-australians/programs-services/closing-the-gap-in-the-northern-territory/northern-territory-emergency-response-nter-redesign/about-the-response/legislation">original NTER legislation</a> created many racially targeted programs as “special measures” and suspended the Racial Discrimination Act. Labor’s subsequent de-racialisation of income management has not stopped the program despite <a href="http://www.probonoaustralia.com.au/news/2013/07/income-management-policy-%E2%80%98ineffective%E2%80%99-report#">little or no evidence it works</a>.</p>
<p>Nowhere does the report make any serious acknowledgement of systemic exclusion of both Indigenous knowledge and cultural competencies. It offers no recognition of the value of language diversity and the maintenance of cultural identity.</p>
<p>Missing too from the report are the data that show the failure of many of the proposed programs such as anti-truancy measures. Having children at schools that do not meet their needs does not improve outcomes.</p>
<h2>When all else fails, trying looking at the evidence</h2>
<p>The report shows no signs that the authors are aware of the substantial recent research evidence that finds that flaws in how governments devise and deliver services are responsible for many program failures. They need to look at what works and what does not.</p>
<p>As a long-term policy wonk, with direct experience in ministers’ offices, advocacy groups, NGOs, bureaucracies and academic teaching of the process, I am researching the evidence of what works and often doesn’t work. As professorial fellow in the research unit of <a href="http://www.jumbunna.uts.edu.au/">UTS Jumbunna Indigenous House of Learning</a>, my project involves collating documentation on why so many well-funded policies and programs fail to deliver their apparent good intentions.</p>
<p>Fortunately, the Closing the Gap agreements established a <a href="http://www.aihw.gov.au/closingthegap/">clearinghouse</a> on such data with the highly reputable Australian Institute of Health and Welfare. The AIHW is the government’s own collector of statistics and guardian of high standards. Since 2011, it has offered its meta-analyses of the results in many of the research and evaluation reports lodged by other government authorities like the Australian National Audit Office (ANAO), academic and community institutions.</p>
<p>The AIHW publications sum up results in a <a href="http://www.aihw.gov.au/uploadedFiles/ClosingTheGap/Content/Publications/2013/15161.pdf">series of publications</a> on what works and, importantly, what does not.</p>
<p>Briefly, what works is bottom-up, culturally appropriate programs in partnership with – and not for – local groups for the long term. What doesn’t work is top-down, centrally decided, cookie-cutter models.</p>
<p>On these criteria the Forrest proposals would mostly fail. Despite recognising, in later sections, the importance of local elders in processes, he suggests local engagement but only if the locals adopt the centrally set criteria and delivery models.</p>
<p>Forrest dismisses oral cultures and languages, and all other learning that cannot be applied in job seeking. He ignores the importance of community and focuses on fixing individuals. It is a repeat of the recipes that Lutheran missionaries <a href="http://www.themonthly.com.au/issue/2009/june/1274511700/peter-sutton/here-i-stand">imposed on the young Noel Pearson</a>, with a few updates.</p>
<p>Increasing numbers of research studies show the importance of a <a href="http://www.neweconomics.org/blog/entry/why-the-governments-welfare-reform-cant-work">sense of agency to social well-being</a>. There are no clear results that validate the policies that increase controls over people’s lives, such as Cape York, which has produced <a href="http://www.dss.gov.au/sites/default/files/documents/03_2013/cywr_evaluation_report_v1.2_0.pdf">very limited improvements</a>.</p>
<p>When I raise this lack of evidence, a frequent response is that “nothing works, so we had to do something”. However, the risk is that what is proposed is likely to make the disconnections worse, so these proposals are not an appropriate response. As we do have data on <a href="https://theconversation.com/closing-the-gap-we-know-what-works-so-why-dont-we-do-it-23243">what works and what does not</a>, the Forrest report needs to be totally rewritten to take the AIHW evidence into account.</p><img src="https://counter.theconversation.com/content/30080/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Eva Cox does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Creating Parity report on Indigenous employment and welfare, released last week by mining magnate Andrew Forrest, is in much the same vein as Tony Shepherd’s recent Commission of Audit. Forrest and…Eva Cox, Professorial Fellow Jumbunna IHL, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/245632014-03-25T21:27:13Z2014-03-25T21:27:13ZTaking on modern slavery and the challenge of making it history<p>In the late 18th century, a small band of <a href="http://trilogy.brynmawr.edu/speccoll/quakersandslavery/">British Quakers</a> and other humanitarian-minded folk began to build the case against the slave trade. Britain’s supremacy in maritime power and technology meant that it led the world in the transatlantic trade in African “cargo”, having overtaken Portuguese, Spanish and French competitors.</p>
<p>Gruesome evidence, given by ship captains, sailors and former slave trade surgeons, was <a href="http://abolition.e2bn.org/campaign_16.html">presented to British parliament</a> in the 1780s and circulated widely in the burgeoning print media. The public learnt for the first time the details of their nation’s blood-soaked trade.</p>
<p>Revulsion and guilt were widespread. A <a href="http://abolition.e2bn.org/campaign_17.html">boycott movement</a> got underway, urging people to reject sugar in their coffee and tea. To persist in the consumption of West Indian sugar was (it was argued) tantamount to ingesting the blood, sweat and tears of suffering plantation workers.</p>
<p>Partly as a result of the continued high visibility of slavery’s atrocities, the slave trade was <a href="http://abolition.e2bn.org/slavery_113.html">abolished in Britain</a> in 1807. Particularly affecting, in terms of emotional impact, was the focus on the kidnapping of children and the separation of family members on the auction block. Similar emotional triggers operate today in spurring members of the public into action.</p>
<h2>Forrest takes up an old fight</h2>
<p>The sexual slavery of a deeply traumatised girl from Kathmandu, sent to the Middle East at the age of nine and discarded at 12, <a href="http://www.smh.com.au/national/andrew-forrests-dream-to-stop-all-slavery-20140317-34y2g.html">was the trigger</a> for mining billionaire Andrew Forrest to establish his <a href="http://www.walkfreefoundation.org/">Walk Free Foundation</a> in 2010. </p>
<p>This global activist movement attracted the support of heavy-hitting politicians and philanthropists such as the Clintons, Tony Blair and Bill Gates. Now this foundation has spawned the <a href="http://www.abc.net.au/news/2014-03-18/forrest-launches-organisation-in-bid-to-end-slavery/5327192">Global Freedom Network</a>, an organisation that aims to free the world’s estimated 30 million slaves.</p>
<p>With an eye to high-level visibility and media impact, Forrest has headed up this network with three leaders of world religions: the Pope, the Archbishop of Canterbury and the Grand Imam of al-Azhar in Egypt. This is a remarkable clutch of high-profile collaborators. </p>
<p>Associated with the Global Freedom Network is the <a href="http://www.globalslaveryindex.org/">Global Slavery Index</a>, launched last year. This lists countries where slavery is most prevalent, in ranked order. Improvements in the index for 2014 will be achieved (it is promised) by determining rankings according to a combined measure of “prevalence” and “government response”.</p>
<p>Forrest is adamant that his work against modern-day slavery is not an exercise in “feel-good” philanthropy, which will evaporate as soon as the media turns its attention elsewhere. </p>
<p>Forrest vows to draw upon all the hard-edged business skills that have generated his immense wealth to date. For instance, he has already <a href="http://www.abc.net.au/news/2014-01-23/andrew-forrest-announces-plan-to-free-25m-slaves/5215032">brokered a deal</a> under which Australian technology for coal conversion will be given pro bono to Pakistan in exchange for government-led efforts to eradicate slavery in the Punjab.</p>
<h2>Supply chains make us complicit</h2>
<p>Supply chains will be a particular focus of the Global Freedom Network. Government leaders and corporate CEOs will also be urged to make visible and “slavery-proof” the often unseen links between the source and the finished product sold on the high street.</p>
<p>Last year’s deadly <a href="https://theconversation.com/bangladesh-disaster-shows-why-we-must-urgently-clean-up-global-sweat-shops-13899">garment-factory collapse</a> in Savar, Bangladesh, which killed 1129 workers and injured 2515, triggered widespread discussions about corporate social responsibility across global supply chains. It also brought home the extent to which we consumers in the wealthy West are complicit in modern slavery.</p>
<p>Given the scale of this tragedy, the response from Western businesses has been less than impressive. Of the <a href="http://en.wikipedia.org/wiki/2013_Savar_building_collapse">29 brands identified</a> as having sourced products from the collapsed Savar building, only nine attended meetings held late last year to agree on a minimum wage for garment workers and compensation for the garment trade’s victims.</p>
<p>The definition of modern slavery covers many forms. It includes people trafficking, sexual slavery, child labour, forced marriage, debt bondage, hereditary slavery and a rapidly expanding trade in organs and transnational surrogacy. </p>
<p>Forrest’s ambition is enormous – a dream some might say. Nor is his aspiration new in any way. As we have seen, he takes his inspiration from those first abolitionist movements of the late 18th century.</p>
<p>More recently he has taken his cue from the excellent work of <a href="http://www.kevinbales.net/">Kevin Bales</a> and his “Free the Slaves” movement. Forrest’s Global Slavery Index declares that it is indebted to Bales’ work over the last 15 years. This has resulted in many books, including the powerful Disposable People: New Slavery in the Global Economy (1999), a study of five slave-based businesses.</p>
<p>Depressing as Bales’ case studies might be, he nevertheless conveys an upbeat message. This can be seen in his <a href="http://www.ted.com/talks/kevin_bales_how_to_combat_modern_slavery">TED talk</a> of 2010 where he argues that the percentage of people enslaved today is less than hitherto, as is the wealth generated by slaves globally.</p>
<p>Ironically, the explosion of the world’s population, which means that people are so cheap — much cheaper than in the 18th century – also means that it is now possible for us to buy them out of slavery.</p><img src="https://counter.theconversation.com/content/24563/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Deirdre Coleman receives funding from the Australian Research Council.</span></em></p>In the late 18th century, a small band of British Quakers and other humanitarian-minded folk began to build the case against the slave trade. Britain’s supremacy in maritime power and technology meant…Deirdre Coleman, Robert Wallace Chair of English in the School of Culture and Communication, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/191892013-10-16T00:31:24Z2013-10-16T00:31:24ZOf Forrests and acorns: philanthropic gift may seed other university giving<figure><img src="https://images.theconversation.com/files/33099/original/7tc96jt7-1381880960.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Will philanthropy in Australia change because of the recent donation by Andrew "Twiggy" Forrest to Wes Australian universities.</span> <span class="attribution"><span class="source">Seed image from www.shutterstock.com</span></span></figcaption></figure><p>This week’s <a href="http://www.abc.net.au/news/2013-10-14/forrest-to-make-largest-donation-by-an-australian/5021936">A$65 million pledge</a> by Nicola and Andrew Forrest to all five West Australian universities alters the philanthropy landscape in Australia. The Forrests’ donation comes less than a year after Louise and Graham Tuckwell’s A$50 million donation to Australian National University.</p>
<p>Not long ago, some of the larger philanthropic funding of Australian universities emanated from the US – either through mega-generosity like <a href="http://www.atlanticphilanthropies.org/history-and-founder">businessman Chuck Feeney’s Atlantic Philanthropies</a> or from big stateside foundations.</p>
<p>Nonetheless, the university sector more frequently sees more moderate scale donations, and these are mostly only given after the institution has worked on developing relationships with people who care or might care about higher education. All these gifts are needed and welcomed but both the magnitude and leverage of the Forrest’s pledge merits particular comment.</p>
<p>Like Feeney, the Forrests (the first Australians to join the <a href="http://givingpledge.org/pdf/letters/Forrest_Letter.pdf">Gates’ Giving Pledge</a>) have talked openly about their contribution as a way to model large generosity in a country where giving happens often anonymously and well below need or potential. </p>
<p>In fact in Australia, sometimes it doesn’t happen at all. High net worth giving is <a href="http://eprints.qut.edu.au/40336/">not the norm here</a>. Tax data consistently confirms about <a href="http://eprints.qut.edu.au/61719/">four out of ten affluent Australians</a> give nothing. There’s no doubt that Australia’s culture of moe sustained and talked about large giving could certainly be improved. </p>
<p>The Forrests set out to inspire, and even though theirs is reportedly the largest single gift ever made by an Australian couple, it is more than just the impressive amount that might do that. The choice of scholarships and post-docs as the beneficiaries squarely applies some sound philanthropic strategies: funding good people and matching opportunity with dollars. </p>
<p>It showcases where the smart money thinks others should invest. Not everybody can fund a suite of scholarships but given the <a href="http://theconversation.com/ten-years-on-australians-are-a-picture-of-wealth-15104">increase in wealth over the past decade here</a> many Australians could fund one scholarship in their field of passion.</p>
<p>This pledge is unique in that it funds a state in its bid to be more of a knowledge force and it is a state that has lagged in giving despite <a href="http://www.lotterywest.wa.gov.au/assets/grants/documents/publications/a-rising-tide">its cornucopia of mining wealth</a>. The donation also embraces all WA’s universities rather than just Andrew Forrest’s alma mater, the University of Western Australia (UWA), although A$15 million is apparently earmarked for a world leading residential college there. At UWA, the Forrests’ input is the confidence boost and attention grabber that invigorates a $400 million fundraising program.</p>
<p>But will others follow? As a general rule, giving research across the world and locally confirms the <a href="http://dx.doi.org/10.2139/ssrn.1015507">link between education and giving</a>: those with higher education give more partly due to higher income and partly to higher awareness of need through wide networks. It is likely we will see more university graduates giving back over time, especially as the alumni and development function within Australian universities matures. </p>
<p>Many alumni and development offices here are less than two decades old and in a scenario where lengthy relationships and trust are at the core of giving, the plantations of philanthropy have not been long enough cultivated by much of the higher education sector. </p>
<p>The Forrest gift is the proof that untapped major giving exists in this country and it may spur other university and foundation boards to put in more effort (that is, funding and prioritising) to engage the community’s mind and heart. It also is tangible evidence to governments that philanthropy can be a viable funding partner that strengthens education strategies. Matched giving by government that has triggered strong donations to higher education in some Asian countries, and initiatives like the UK government’s support for fundraising infrastructure in universities, are all worth considering here.</p>
<p>Universities these days reflect a wide range of funding sources, from government to corporations, from individuals to philanthropic foundations and the lines between these sources are sometimes blurred. Corporations that can see a synergy of interest may fund scholarships or chairs in their discipline and individuals may fund where their personal linkages, experiences or beliefs lead them. </p>
<p>The challenge for universities is to locate the synergies and their own pool of “true believers” in education and the array of community benefit that comes from university teaching and research opens many avenues. </p>
<p>The linkages and benefits that the Forrests have identified in their action are a strong object lesson not just for other givers but for universities to ponder. Most academic causes will have their logical link to a giving source. That’s where development comes in. Relationships are key but it takes prioritised time and budget for universities to develop them.</p>
<p>So this pledge directs the focus of government and graduates to universities as a giving destination at a time when giving is settling back into growth post-GFC. </p>
<p>Mostly though, it is a thought starter for other Australian figures of success. Research tells us that people give according to their value (income) but more so according to their values. The Forrest’s pledge says: this is what our work and lives stand for. </p>
<p>The “stop and pause” power of what Nicola and Andrew Forrest have pledged may well cause others to reflect on what their dollars might do and whether the proverbial bigger boat really is a symbol of whom and what they are. To me this is the real Forrest’s acorn that they have planted here.</p><img src="https://counter.theconversation.com/content/19189/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Wendy Scaife does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>This week’s A$65 million pledge by Nicola and Andrew Forrest to all five West Australian universities alters the philanthropy landscape in Australia. The Forrests’ donation comes less than a year after…Wendy Scaife, Senior Research Fellow, QUT Business School, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/124732013-02-27T02:54:12Z2013-02-27T02:54:12ZPhilanthropy in Australia: it’s what you do with it that counts<figure><img src="https://images.theconversation.com/files/20647/original/5p57nzf4-1361856337.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Highly publicised private benefactors are redefining philanthropy in Australia, so now is the time for a discussion on how this wealth can best be harnessed.</span> </figcaption></figure><p>The recent commitment by Fortescue Metals chief Andrew Forrest to contribute half of his private wealth to philanthropic causes, coming on top of investor Graham Tuckwell’s $50 million donation for equity scholarships at the Australian National University, draws attention to the role of private social investment in Australia as never before.</p>
<p>Philanthropy is not new to Australia. We are fairly familiar with the eminent names attached to museums, galleries, think-tanks, schools, university libraries, and art collections in honour of those who built them. Many lesser-known Australians make equally generous contributions. The country’s major banks between them manage several billion dollars in small to medium charitable bequests left by little-known or anonymous donors, many dating from over a century ago.</p>
<p>But just how the donations of generous private benefactors in Australia is used, is worth debating. </p>
<p>The role of philanthropy is gaining prominence as Australia grows richer but arguably less equal, while government funding is cut back. Something, if not someone, has to give.</p>
<p>Some critics <a href="http://www.theage.com.au/opinion/society-and-culture/philanthropy-not-always-selflessness-20130221-2eu4x.html">condemn philanthropy</a> as alien to this country, if not uniquely American, or as fundamentally hypocritical, self-serving, and idiosyncratic. Commentator Satyajit Das has argued it can serve to undermine social policy by reflecting the views of the benefactors rather than reflecting a rigorous analysis of the issues. “Such influence may ultimately be unhealthy in a democracy,” he writes.</p>
<p>But surely the question is not whether philanthropy is a good thing or a bad thing. It can be both. The question at issue is how Australians can work together to ensure that private philanthropy is beneficial and effective for those who need it most, and how private donors can work together on a scale that could really make a difference.</p>
<p>It’s not the business of philanthropy to substitute for markets or to do the government’s job for it – to run health and education systems, to provide basic care for the sick and the elderly, or to engage in poverty reduction on a scale that matters. Non-government organisations which do provide these services in Australia are largely funded by government. Indeed, private wealth contributes a fraction to these services relative to public funding. </p>
<p>But philanthropy and private social investment can help by drawing on two distinctive features of private giving that are often missing in market mechanisms and government operations: innovation and risk taking.</p>
<p>Private philanthropy is better equipped than government agencies or commercial investors to bear risk in support of innovation. When Muhammad Yunus approached the Bank of Bangladesh in the 1970s to expand micro-credit services to the rural poor, through his new Grameen Bank, the Bank of Bangladesh not unreasonably declined his request for core lending. The bank’s board and management considered lending to poor households inconsistent with its duty of care to depositors and shareholders in ensuring the security of their investments. No government agencies or government international aid donors stepped in to the breach either.</p>
<p>So Yunus approached a private philanthropic donor, the Ford Foundation, for an $800,000 loan guarantee as security against commercial micro-credit loans – not as a grant but as a social investment. He offered to pay it back, but only if his plan worked. Ford carried the risk and, as we now know, Muhammad Yunus returned the loan in full once he had demonstrated the commercial viability of his micro-finance model to banks and to the market.</p>
<p>In a case study of the Ford Foundation’s dealings with the Grameen Bank, Harvard University professor Steven Lawry notes that the case suggests most innovative ideas do not come from the donors themselves, nor from their boards, but from among people living and working closest to the problems at hand.</p>
<p>Social justice donors need to keep their ears close to the ground and be sufficiently humble to recognise that they don’t carry solutions to every problem in their briefcases. The best of them bring resources, an open mind, and an appetite for risk. In this case, a private foundation carried the risk of someone else’s social innovation to the point where the innovation could get to market and prove itself – in a style of investment philanthropy that would be considered innovative even today, 40 years on, in some parts of the world.</p>
<p>Taking risk alone is not enough. Once the appetite for risk is whetted then finding the smartest innovations to adopt, figuring out how to test them in the field, working to leverage additional resources from markets and the state, and scaling up a social program to the point where it has systemic impact, all involve challenges of a different order. But done well, a strategic risk investment of under one million dollars can have a beneficial social impact measured in the hundreds of millions or even billions of dollars over time.</p>
<p>Risk-taking is not new to Australian philanthropy either. In 1989, the Myer Foundation and the Commission for the Future created Asialink, a university based-entity promoting Asia literacy in Australian schools from kindergarten through senior high school. </p>
<p>Asialink in turn established the Asia Education Foundation which leveraged millions of dollars from the federal government for state-based Asia literacy programs. Through Asialink, the Myer Foundation invested in a future that was still in the making.</p>
<p>Philanthropy can never make up for lack of sound policy or lack of political will in government, nor compensate for serious market failures. But through its appetite for innovation and risk taking, it can help to expand access to public goods and improve the delivery of government services. </p>
<p>It can also prompt market corrections. Australia needs more, not less, of this kind of risk-taking innovation. We also need more open and inclusive discussion of how philanthropy can make a real difference to our communities, our environment, and our well-being. The question is not whether philanthropy is a good or a bad thing. It’s a question of finding out just how good it really can be.</p><img src="https://counter.theconversation.com/content/12473/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Fitzgerald previously worked for the Ford Foundation in China and served in an honorary capacity on the Victorian Advisory Committee of the Asia Education Foundation in the 1990s. </span></em></p>The recent commitment by Fortescue Metals chief Andrew Forrest to contribute half of his private wealth to philanthropic causes, coming on top of investor Graham Tuckwell’s $50 million donation for equity…John Fitzgerald, Truby and Florence Williams Charitable Trust Chair in Social Investment and Philanthropy, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/99342012-10-02T20:51:47Z2012-10-02T20:51:47ZSharp message to ASIC as Forrest wins High Court appeal<figure><img src="https://images.theconversation.com/files/16081/original/2kg77cqv-1349158279.jpg?ixlib=rb-1.1.0&rect=26%2C38%2C1946%2C1215&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Relieved: Fortescue Metals Chairman Andrew Forrest wins his High Court appeal - but the message to ASIC is the need for greater transparency.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Fortescue Metals Chairman Andrew Forrest can breathe a huge sigh of relief after winning his High Court appeal against a Federal Court finding that might have seen him banned as a company director.</p>
<p>The Australian Securities and Investments Commission (ASIC) suffered loss in more ways than one. Apart from the financial sting, where costs were awarded against ASIC, the regulator also suffered from reputation loss arising from the way in which it ran the case. </p>
<p>The unanimous judgement was highly critical of the manner in which ASIC framed its case and has sent a clear and sharp message to the corporate regulator for the need for greater transparency when formulating claims against defendants.</p>
<p>In 2011, the Full Federal Court overturned the decision of the trial judge and held that (then-CEO) Forrest had breached his duty of care and diligence by allowing Fortescue to make misleading statements that it had entered into “binding contracts” with several Chinese companies for the development of critical mining infrastructure. </p>
<p>When news broke in the media that such agreements struck in the framework agreement were not binding, the Full Federal Court also upheld ASIC’s claim that the company had breached the continuous disclosure laws by failing to disclose this to the market. </p>
<p>However, before the findings of the Full Court were remitted to the trial judge to assess civil penalties for breach of the Corporations Act (which included the prospect of being banned from being a director, as well as financial penalties), Forrest appealed to the High Court. </p>
<p>In rejecting ASIC’s claim that the public statement was misleading, the High Court emphasised the need for ASIC to identify the intended audience and to ask: what would they have understood? </p>
<p>Applying this test, the High Court found that the intended audience of investors and members of the business community would not have understood the agreement to be binding in a legal sense. According to the High Court, “it would be extreme or fanciful” for the target audience to have understood that the contracts were capable of being enforced by an Australian court if the parties later disagreed.</p>
<p>Of all the competing meanings of the phrase “a binding contract”, as used in the context of this case, the High Court took the view that it simply conveyed to the intended audience what the parties to the framework agreement had done and said they had done. </p>
<p>In preferring this narrow meaning, the High Court found that there was no evidence led at trial to show support for a broader meaning, for example, that a court will grant relief should the agreement be breached.</p>
<p>Concerned that the decision might be seen as falling short of protecting the investing public, the High Court was at pains to point out that the result in this type of cases are determined by the particular facts and evidence. </p>
<p>As a result, the High Court cautioned that this case does not establish a broad proposition to the effect that any public statement that Company A has made a contract with Company B necessarily conveys to its audience a message only about what the contractual document contains. The effect of the message conveyed is, ultimately, dependent on a close and careful analysis of the facts.</p>
<p>There are at least two key messages highlighted in today’s judgement. First, the value of this judgement as a precedent for corporate management to navigate its way through the investor protection provisions of the Corporation Act is limited, due to its narrow focus. </p>
<p>Based on the High Court’s finding on the core issue of misleading or deceptive conduct in favour of the defendants, the court did not focus on other significant issues such as the use of the business judgement defence - that the decision was made in good faith and with the best interests of the company - as a defence for breaching directors’ duty of care and diligence. </p>
<p>Nor did the result in this case warrant an examination of the directors’ obligations under the continuous disclosure laws. </p>
<p>It is understandable, but regrettable, that the High Court did not offer guidance on such important issues of major concern to the corporate community.</p>
<p>Second is the clear and sharp message sent to ASIC that its litigation strategy was defective for two main reasons. </p>
<p>One, ASIC failed to clearly specify the basis of the alleged misrepresentation (for example, whether it was fraudulent or negligent), resulting in confusion and potential unfairness to the defendant.</p>
<p>Second, in piling one alternative claim on top of another, ASIC was found to have taken this strategy to litigation to new heights which was condemned. </p>
<p>Such an approach was considered by the High Court to be “planting a forest of forensic contingencies” and unacceptable to achieve a fair trial.</p>
<p>In so doing, the High Court upheld the notion and reminded ASIC that no person ought to be put to loss without having a proper opportunity of meeting the case alleged against them. </p>
<p>Such critical remarks offer comfort to potential defendants facing allegations of breach of law by regulatory agencies.</p><img src="https://counter.theconversation.com/content/9934/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anil Hargovan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Fortescue Metals Chairman Andrew Forrest can breathe a huge sigh of relief after winning his High Court appeal against a Federal Court finding that might have seen him banned as a company director. The…Anil Hargovan, Associate Professor, Australian School of Business, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/95482012-09-13T01:25:46Z2012-09-13T01:25:46ZQueensland coal: an accounting black hole<figure><img src="https://images.theconversation.com/files/15395/original/kxfc83c8-1347447099.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Given its parlous financial state, Queensland is within its rights to increase mining royalties. But why frame it as a surplus profits tax?</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>The Queensland Government has decided to raise coal mining royalties. Seems reasonable, doesn’t it? </p>
<p><a href="http://www.commissionofaudit.qld.gov.au/reports/interim-report.pdf">A review</a> of Queensland Pty Ltd by Peter Costello revealed a precarious balance sheet. Time to get things right, or at least moving in the right direction. Probably the word “responsible” needs to be inserted here too.</p>
<p>Part of that agenda is an evaluation of state costs and revenues. Part also is the evaluation of state assets and liabilities. Coal reserves are an asset, and the extraction of coal reserves generates a revenue. So it is hardly surprising that coal should feature in Queensland Treasurer Tim Nicholl’s new fiscal planning.</p>
<p>When the Treasurer said at his press conference that “Queenslanders own the resources in the ground here and are entitled to get a return on those resources”, he’s right.</p>
<p>The charges state governments make for the extraction of coal are called royalties. The term causes confusion, for it suggests they are charges made by the crown and hence they get conflated with the crown’s capacity to appropriate taxes. But royalties are not taxes. </p>
<p>Hancock Prospecting, the company at the core of Gina Reinhart’s corporate wealth, made its fortune charging royalties for the extraction of Hamersly iron ore. Royalties attach to the ownership of in situ reserves, and that ownership may or may not lie with the state.</p>
<p>So we need to think of coal reserves as a warehouse, and when you take commodities out of a warehouse, you diminish the asset base. There is appropriately a charge. The royalty is to be understood as a cost of production that must be paid along with the costs such as labour and freight. </p>
<p>It is inherently contentious how much of the cost of a tonne of extracted coal is to be called a cost of digging the stuff up, and how much of it the value of the stuff itself. </p>
<p>There is, accordingly, a debate to be had about dividing up the revenue of a tonne of coal, for each mine has different costs of production (difficulty of getting it out the ground, onto ships, and into the hands of end-users), mines can have different efficiency, and the coal itself can be of different qualities. </p>
<p>So how the revenue divides between profits, royalties, rent (for use of the surface land) and other costs is something of an arm wrestle.</p>
<p>But the in-situ reserves are finite, and the owner of those reserves can reasonably say that any tonne of coal can only be extracted once, and if the payment to the owner of the coal is not high enough, they might prefer to leave it in the warehouse (the ground) and sell it at another time.</p>
<p>So the Queensland Government is well within its rights to amend the price. BHP Billiton chairman Jac Nasser has described the coal royalty increases as “unbelievable” and “disappointing”. That’s as expected, for it comes off the bottom line of BHP coal mining profits. But he cannot contest the principle that there should be a reasonable price for access to in situ reserves, just as there should be for labour, equipment purchase and transportation.</p>
<p>But the puzzling thing is that the Queensland Government has framed its royalty policy to look like a surplus profits tax, and so it feeds the Nasser response. </p>
<p>The policy is to increase the rate for coal royalties to 12.5% on the value per tonne between $100 and $150 and to 15% thereafter. </p>
<p>But the rate for coal below $100 a tonne is not changing. According to the Treasurer <a href="http://www.brisbanetimes.com.au/queensland/coalfired-bid-to-get-budget-back-in-black-20120911-25pt4.html">Tim Nicholls</a>: “It is only when prices start climbing that the new higher rates will progressively apply, ensuring Queenslanders share in the upside of the value of their resources.”</p>
<p>So if the charge is a royalty, the government could reasonably say that every tonne of its in-situ reserves has a “reserve” price. But when there is one rate when the price of coal is low, and another when the price of coal is over a threshold, it looks like a different claim. </p>
<p>Either it is simply an exercise of <a href="http://www.investopedia.com/terms/m/marktomarket.asp">mark-to-market accounting</a> (that the value of coal reserves change directly with each movement with the price of coal) or it looks like the Queensland royalty policy is being framed more as a claim on profits, not a cost of production.</p>
<p>Conceptually, it’s a minefield.</p>
<p>Nonetheless, the Queensland government has a good case. Yet it never really plays itself out as just described. Not only is coal sold on long-term contracts, but there are jobs (and votes) at stake. The mines will never open and shut to secure a constant royalty, and no-one is arguing that they should!</p>
<p>Moreover, in the sphere of national politics, these theoretical niceties disappear. If it looks like a profit-related charge, the Feds will be onto it. They have a right to surplus profits tax, not the states. </p>
<p>So royalties are a cost of production, but it is virtually impossible for state governments to make them appear as such. They appear as a claim on revenue, not as a cost of production, and hence an incursion on the federal government’s domain.</p>
<p>The funny thing is that Gina Rinehart’s royalties do appear as a cost of production for mining companies, but somehow they became tied up in a debate about surplus profit taxes. </p>
<p>Perhaps the Queensland government has something to learn from Gina. Indeed, looking at the public sector sackings that are also part of the Queensland budget, is seems like they already have. It’s a frightening thought, but it will no doubt be on the mind of the Federal Treasurer as he determines his response.</p><img src="https://counter.theconversation.com/content/9548/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dick Bryan receives funding from the Australian Research Council.</span></em></p>The Queensland Government has decided to raise coal mining royalties. Seems reasonable, doesn’t it? A review of Queensland Pty Ltd by Peter Costello revealed a precarious balance sheet. Time to get things…Dick Bryan, Professor, Department of Political Economy , University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/93922012-09-12T04:27:59Z2012-09-12T04:27:59ZThe floating fortunes of our iron ore barons<figure><img src="https://images.theconversation.com/files/15326/original/h4b6j384-1347339144.jpg?ixlib=rb-1.1.0&rect=17%2C56%2C1979%2C1194&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australian iron ore producers have had a torrid time in recent months - but how they quickly they can respond to such fluctuations will be critical to their continued success.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Despite the recent fluctuations of the iron ore price, producers such as mining billionaires Andrew Forrest and Gina Rinehart entered the iron ore market with eyes wide open and understand the long-term risks, but also the short-term opportunity. </p>
<p>This dynamic plays out by those who take great delight each time the iron ore price tanks and encourage us to eat the rich each time it spikes. </p>
<p>Rinehart and Forrest as well as their rivals in the industry, are captive to the fortunes of the Asian steel producers and must continually turn the iron ore tap on and off when demand fluctuates. </p>
<p>Unanticipated mine closures and job cuts as well as rapid expansions will be a feature of this industry for at least another 30 years.</p>
<p>Australians are hesitant to celebrate wealth creation. We all expect the rich to behave in a certain way such that the privileges that accompany wealth are counterbalanced by its attendant responsibilities. An <a href="http://www.youtube.com/watch?v=B3CcxRbFiLg">immodest display of wealth</a> is a swift and sure method of estranging oneself. </p>
<p>But do present day mining magnates really behave in this way? Much of the wealth of Mr Forrest and Ms Rinehart is heavily concentrated in the relative fortunes of their companies. </p>
<p>Indeed half of Ms Rinehart’s wealth is embedded in the worth of a single mine, Roy Hill. Profitable iron ore mining demands a level of output that achieves a critical mass of a scale sufficient enough to cover the fixed costs of production. In modern times there is no such thing as a small mining entrepreneur and gold prospectors seeking their fortune somewhere in the Klondike do not count.</p>
<p>Unlike other wealthy individuals, Australia’s mining magnates are <a href="http://www.themonthly.com.au/wayne-swan">heavily criticised</a>. This contrasts to the US, where rich individuals like Warren Buffet are able to maintain a certain perspective and are philanthropic because they have already crystallised much of their wealth and their business empires are to a large degree self-sustaining. </p>
<p>The real wealth of Australia’s mining entrepreneurs is embedded in the fortunes of their companies and success is almost entirely dependent on the global demand for steel. </p>
<p>This is not assured. Obviously, their wealth is not immune from volatility and will continue to fluctuate with iron ore prices. </p>
<p>To date, their fortunes have been greatly assisted by the index pricing of iron ore, which has reshaped the production landscape.</p>
<p>Unlike commodities, where the availability of liquid spot and forward markets allows prices to quickly respond to changes in demand, iron ore price agreements were dominated by an annually agreed benchmark price up until 2008.</p>
<p>The benchmark price was always agreed between the large producers and the large consumers, leaving the second and third tier producers at the mercy of a select number of negotiators. The large producers could leverage their own economies of scale which left the smaller producers at a significant disadvantage because they could never compete on price.</p>
<p>While benchmarked prices offered cost certainty to Chinese, Japanese and Korean steel producers, many smaller smelters took advantage of the opportunity to buy iron ore at annually fixed prices and on-sell it to other steel producers who were short of supply in the spot market. </p>
<p>The spot market in China traded large volumes of iron ore imported from India and elsewhere. Smaller smelters were able to buy iron ore at $100 a tonne from the large producers and then sell the same parcel for over $300 a tonne on the spot market. For many smelters, it was more profitable to cease steel production altogether and simply trade iron ore.</p>
<p>One of the largest producers of iron ore, BHP Billiton, took the initiative to eliminate this practice and ensure that upstream producers, rather than intermediaries, captured the full margin. With the help of two investment banks, BHP Billiton initially took a loss-making short position of one million tonnes of iron ore to inject sufficient liquidity to create a market with reliable index prices. </p>
<p>This was followed by another short position several months later to sustain the market’s development. It was reckoned that sacrificing a short-term loss was a small price to pay for the benefits of capturing the full margin that producers were entitled to receive. </p>
<p>While buyers greatly resisted the new price regime they were powerless to stop it. For the first time, prices would not be determined by the dealings of a select number of producers and consumers at the negotiation table. The market for coking coal, also essential for steel production, experienced a similar transition. </p>
<p>This market is now largely self-sustaining and is reasonably liquid to reflect short and long-term supply and demand. </p>
<p>This has offered newer entrants to the iron ore market like Fortescue and Hancock a unique opportunity to earn a fair margin on their product without the inefficiencies created through price negotiation that previously characterised the market. </p>
<p>Index prices are now observed with relative transparency, allowing for a more refined picture of expected long-term dynamics. The price transition has allowed mining companies to better manage capital expansion planning and future cost control. Along with the recent increased use of contract mining, iron ore producers can easily cut production when prices recede and ramp up production again when they rally.</p>
<p>Historically, margins earned on iron ore are very low and booms have always experienced much shorter duration than busts. The index pricing of iron ore has thus greatly changed the production landscape since junior players can more easily adjust output to changes in price.</p>
<p>For Mr Forrest and Ms Rinehart, among others, the rapid accumulation of wealth is to some degree, a matter of being in the right place at the right time. They both have the requisite appetite for risk that is essential for such ventures. But they must be prepared to quickly alter direction if conditions dictate. </p>
<p>History is replete with entrepreneurs who saw opportunity and invested their personal wealth and reputation at a critical period but failed to adjust when the global economy shifted. </p>
<p>The huge empires of railroad entrepreneur Samuel Insull and steel producer Charles Schwab collapsed when global conditions changed faster than they could respond. </p>
<p>Twiggy and Gina could learn from the lessons of these and other failed empires while keeping a close eye on the iron ore index.</p><img src="https://counter.theconversation.com/content/9392/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jason West does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Despite the recent fluctuations of the iron ore price, producers such as mining billionaires Andrew Forrest and Gina Rinehart entered the iron ore market with eyes wide open and understand the long-term…Jason West, Associate Professor, Griffith Business School, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/78582012-06-22T04:50:53Z2012-06-22T04:50:53ZFortescue launches High Court challenge to mining tax<figure><img src="https://images.theconversation.com/files/12085/original/86h2d7fj-1340338467.jpg?ixlib=rb-1.1.0&rect=35%2C47%2C1916%2C1263&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Fortescue founder and current non-executive chairman, Andrew Forrest has been a prominent critic of the federal government's mining tax. The company has finally launched a much anticipated High Court challenge to the tax.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Perth-based mining giant Fortescue Metals Group has launched a last-minute High Court action against the mining tax, planning to argue the legislation - due to start on July 1 - breaches the Australian constitution.</p>
<p>Founding chairman of Fortescue and now non-executive chairman, Andrew Forrest has been a prominent critic of the tax and has previously vowed to oppose it through the courts. The challenge has been mooted for months. </p>
<p>In a <a href="http://www.asx.com.au/asxpdf/20120622/pdf/426zgf7061m7fv.pdf">statement</a> to the the Australian Stock Exchange, Fortescue’s chief executive Nev Power said it was challenging the tax on the grounds it discriminated against the states, gave preference to one state over another, and restricts a state’s ability encourage mining. It also said it curtailed state sovereignty. </p>
<p>“We believe we have a good case for challenging the MRRT on constitutional grounds and we look forward to the resolution of these important issues by the High Court,” Mr Power said. </p>
<p>Constitutional law expert, Michael Crommelin, Professor of Law at the University of Melbourne, explains the legal arguments Fortescue will rely on. </p>
<hr>
<p><strong>Could you explain in detail some of the grounds Fortescue’s challenge is using?</strong></p>
<p>I haven’t seen the documentation relating to the challenge but I think there are a couple of likely bases for the challenge. One is Section 51 (ii) which is the Commonwealth’s taxation power under the constitution. It provides that Commonwealth taxes must not discriminate between states or parts of states and that could well be one of the bases for the challenge. And linked to that is Section 99 of the Constitution which says the Commonwealth in relation to any revenue measure can’t give preference to one state over any other states. I think discrimination and preference issues will be involved. </p>
<p>The other possible basis is Section 114 of the Commonwealth, which says the Commonwealth can’t impose any tax on property of any kind belonging to a state. The minerals in question are state property as they exist in the ground.</p>
<p><strong>One of the grounds it will use is that it <a href="http://www.theage.com.au/business/fortescue-challenges-mining-tax-in-high-court-20120622-20rzk.html">curtails state sovereignty</a>. What do you make of that?</strong></p>
<p>This are difficult to understand because states don’t have sovereignty under out constitution; they are components of our federal system and within that constitutional system, they don’t have sovereignty.</p>
<p><strong>So on the other points, how strong are these arguments?</strong></p>
<p>That’s difficult to say because the provisions that I have mentioned haven’t received a great deal of attention in recent years from the High Court. There is some earlier authority in relation to them, and on that, the Fortescue case is probably not very strong.</p>
<p>But that authority is not recent, and really it’s going to be a question about what weight is given to that earlier authority.</p>
<p><strong>How important an action is this in setting a precedent, and what are the wider implications?</strong></p>
<p>It’s a very important case in terms of its potential to make a significant impact on the relevant law. It will be very closely followed. </p>
<p>It relates generally to the Commonwealth taxation power, so it’s not an issue specific to the activity of mining. So if Fortescue were successful - and that is a big if - then its implications would extend to all areas of Commonwealth taxation. </p>
<p><strong>So could it open to the door to other appeals against other unpopular taxes - such as as the carbon tax?</strong></p>
<p>It’s not apparent to me how the carbon tax could run into trouble here as it constructed on a quite different basis - but that’s not impossible; these things are always matters to be looked at.</p>
<p>But the first step is for Fortescue to win - and on present authority, it’s not obvious that it’s going to win.</p>
<p><strong>There’s not a lot of time - the law is due to start on July 1. Could this delay things?</strong></p>
<p>No, I don’t think the introduction of the law will be delayed by it. But if Fortescue were successful in establishing that the tax was invalid, that would have enormous implications, including possible repayment of any amounts that had already been levied by the Commonwealth.</p><img src="https://counter.theconversation.com/content/7858/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Crommelin owns BHP Billiton shares.</span></em></p>Perth-based mining giant Fortescue Metals Group has launched a last-minute High Court action against the mining tax, planning to argue the legislation - due to start on July 1 - breaches the Australian…Michael Crommelin, Zelman Cowen Professor of Law, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2302011-06-15T20:44:01Z2011-06-15T20:44:01ZTwiggy’s sticking to his MRRT story, so it’s time for a miner history lesson<figure><img src="https://images.theconversation.com/files/1675/original/forresthands.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Will Andrew Forrest succeed in his push to change the mining tax? Others have succeeded in the past.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Andrew “Twiggy” Forrest’s visit to Canberra earlier this week <a href="http://www.smh.com.au/business/minister-fells-forrests-hopes-for-changes-to-resources-tax-20110614-1g1xa.html">didn’t prove particularly effective</a> in swaying the government on its freshly drafted mineral resources rent tax (MRRT) legislation. </p>
<p>But the Fortescue Metals Group boss could be forgiven for seeing the Gillard Government as open to persuasion on the way it taxes Australia’s booming mining industry.</p>
<p>After all, the MRRT draft legislation, which was released on Friday, represents a compromise between the government and the big three mining companies on the much more severe resource super profits tax.</p>
<p>Amid long-running debate on this tax, it is easy to lose perspective on the historically fraught relationship between state and federal governments and the big miners.</p>
<p>In recent months, the debate has been further clouded by a move by the Western Australian government to raise iron ore royalties. The Federal Government, keen to protect its fragile relationship with miners and maintain the centralising drift in taxation, has retaliated with a threat to cut WA’s share of the MRRT. </p>
<p>This is a tiring and arcane debate that can only really be properly understood within the context of a 50-year struggle between the states, the Commonwealth and the miners.</p>
<p>The time has come for a history lesson.</p>
<h2>Digging deeper</h2>
<p>This is too long a story to tell in full, but it is worth looking at the start and comparing it with where we are now. </p>
<p>We see a history of governments posturing before mining companies, but the mining companies consistently coming out on top.</p>
<p>But first, we need to clarify some terms in relation to mining: rent, royalties and taxes.</p>
<p>Rent is a confusing one. Rent on land is a payment for the occupancy of land, with a premise that the attributes of the land will not decline by its use. </p>
<p>It is a minor issue in our context. But there is a distinct concept of “economic rent” central to the current mining tax debate. Economic rent refers to a surplus return: profits in excess of what is required to keep a mining company operating as it currently is. </p>
<p>Royalties, on the other hand, are paid for the extraction of minerals in the land deemed to be in fixed supply. It is useful in this case to think of a mine as being like a warehouse, with the mining company paying for products it extracts from the warehouse. </p>
<p>In iron ore, the largest and most famous royalty accrues to Hancock Prospecting, founded by Lang Hancock and now run by his daughter Gina Rinehart.</p>
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<span class="caption">AAP.</span>
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<p>It is the cornerstone of her enormous wealth. Hancock had staked the original Hamersley lease in the 1950s and sold it to Hamersley Holdings for a percentage share of mine revenue: a private royalty.</p>
<p>Taxes are, of course, payments to governments. Different forms of government revenue can have more or less tax-like attributes. </p>
<p>Where a government owns the land, rent on the occupancy of land may appear as a tax. </p>
<p>Where a government owns the mineral reserves, royalties will appear as taxes. And of course, governments levy taxes on profits, including taxes on surplus profits or economic rents. </p>
<p>It is important to be clear that the sort of rent referred in the Gillard Government’s mineral resources rent tax is a surplus profits tax. It is not related to the common concept of rent, nor is it a royalty.</p>
<p>These categorical distinctions are contentious – as are their policy ramifications - but they are also critical. </p>
<p>An immediate problem here is the nature of the Australian federal system, for it is contestable as to which government has rights to tax the surplus revenues that arise from high global mineral prices and associated high mining company profits. </p>
<p>The federal government has a claim over a profits tax, while state governments have claims to royalty payments. </p>
<p>So the important question to ask is: are mining profits high because of something inherent in the mineral deposits, or because of something in the efficiency or market power of the mining companies? </p>
<p>If the former, it looks like high profits are the subject of state government royalty claims. If the latter, then they are rightfully in the zone of federal income tax.</p>
<h2>Breaking ground </h2>
<p>It is not my intention to adjudicate here, but merely to reintroduce some historical evidence that is germane to the debate. </p>
<p>In 1938 the Federal Government imposed an embargo on iron ore exports in the belief that Australia’s deposits were tiny. They needed to be kept for domestic needs and away from the Japanese war machine. </p>
<p>But the discovery (though perhaps the correct term is rediscovery) in the 1950s of massive iron ore deposits in the Pilbara changed Australian mining dramatically. With the deposits confirmed, the export embargo was lifted by the Federal Government in 1960 and the government of Western Australia proclaimed the Pilbara open for business. </p>
<p>This year is the 50th anniversary of the first granting of mining rights to Pilbara iron ore. </p>
<p>With mineral deposits owned by the Crown (state governments), the establishment of iron ore mines occurred only by agreement with the WA government . </p>
<p>Moreover, by its ownership of the deposits, the Crown was at liberty to charge a royalty on extracted ore. Indeed, it can be argued, this is not a liberty, but an obligation, for once ore is extracted, it is an asset forever lost to the Crown and, thereby, the people of WA.</p>
<p>Each of these agreements took the form of an act of WA Parliament. In 1963 and 1964 there were five such acts, giving approval for five new mine sites. </p>
<p>Each included royalty payments to the WA government.</p>
<p>These initial agreements specified low royalty payments on output, and instead required the companies to provide all their own infrastructure – mining towns, railways, ports, and so on. </p>
<p>While presented as a demand on companies, the investments could be written off against income tax. Moreover, the outcome of this was that the companies held monopoly rights over rail and ports, with the capacity to set high freight and port prices for later-entry mining companies.</p>
<p>These initial agreements also required mining companies to undertake certain commitments to process iron ore in the state. </p>
<p>The WA government was intent on securing a process of industrialisation, not just a string of quarries. It believed, rightly or wrongly, that the building of processing plants and steel mills, more than payments into state coffers, represented the long-term interest of WA. </p>
<p>The specific terms of these agreements involved the greatest obligations of processing on those ore deposits which were recognised to offer the largest prospective profitability. </p>
<p>With the deposits claimed by Hamersley (Mount Tom Price) and by the Mount Newman consortium (Mount Whaleback) recognised to be the most valuable, it was these two projects which were committed to the most extensive programs of mineral processing. </p>
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<img alt="" src="https://images.theconversation.com/files/1677/original/pilbarastock2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/1677/original/pilbarastock2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/1677/original/pilbarastock2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/1677/original/pilbarastock2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/1677/original/pilbarastock2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/1677/original/pilbarastock2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/1677/original/pilbarastock2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">AAP.</span>
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<p>Each was required to establish secondary processing, such as concentration or other benefaction, within WA within 13 years of the commencement of iron ore exports. They were also required to submit plans for the establishment of an integrated iron and steel works in WA within 20 years. </p>
<p>By contrast, the agreement with Mount Goldsworthy required only secondary processing and “additional upgrading or benefaction”. The Robe River project required only a pelletising plant, while the agreement with Western Mining for the small and low grade Tallering Peak mine made, in effect, no processing requirements at all.</p>
<p>Of course, these processing requirements were not what the mining companies wanted. It was effectively the cost of getting access to the huge profit potential that lay beneath the ground. Accordingly, the construction of processing facilities was undertaken reluctantly. </p>
<p>For the Mount Newman project, these obligations changed once BHP joined the project in 1966. </p>
<p>BHP agreed to take Mount Newman ore for its own iron and steel making operations at Kwinana, an industrial area south of Perth. </p>
<p>As a consequence, the Mount Newman consortium was released by the WA Government from any processing commitments. Quite why this was a good deal for the people of the state is hard to see, but it was likely part of a concessionary deal to get an Australian company, BHP, in as a player in Pilbara iron ore. </p>
<p>This was back when the nationality of companies mattered (although BHP had yet to claim the title “the big Australian”), but the Pilbara developments were out of the league of so-called “Australian” companies. </p>
<p>It sounds strange today, but back then BHP lacked investment capacity, and the processing concessions were what made BHP’s entry attractive to the other Mount Newman partners. </p>
<p>With the Mount Newman consortium freed of obligations, it was Hamersley, majority owned by Rio Tinto-Zinc, via its Australian subsidiary CRA, which faced the highest processing obligations. </p>
<p>It had a pellet plant running in 1968. But a steel plant never eventuated and perhaps it would have been a waste of investment anyway. </p>
<p>Lang Hancock knew it at the outset. His royalty payments didn’t begin until extracted ore was sold, so he was keen to see the WA government appeased. </p>
<p>He claimed to have told the Chairman of RTZ, Sir Val Duncan, that Hamersley had to promise the WA Government a steel mill. </p>
<p>According to a biography of Hancock, he once declared, “It would never matter a bugger if it never turned a wheel; he’d still come out on the right side of the ledger”. It is as sharp a statement as you could want to illustrate just how low the government royalty was set.</p>
<h2>Troubled beginnings </h2>
<p>In retrospect, the tax fight between royalties, local processing and national corporate taxation revenue was already fierce by the mid 1960s. </p>
<p>It seems the mining companies played the governments – state and federal – for novices and fed off the conflicts between these different levels of government. </p>
<p>The companies got the low royalties and the tax concessions on infrastructure development, but the down-stream processing didn’t occur as agreed. And what did occur didn’t last. </p>
<p>Instead, the mining companies have become highly profitable, the federal and state governments have taken but a modest share of revenue and, in iron ore, the “big Australian” title now rests with Gina Rinehart whose wealth base is not production of ore or mineral processing, but merely receipt of royalty payments. </p>
<p>Perhaps it is too late to reevaluate the initial deal and challenge the terms on which iron ore companies have, for almost 50 years, accessed publicly-owned wealth. </p>
<p>While the companies themselves have changed a lot in 50 years, it seems to be too short a time to discern a change in relations between mining companies and governments. </p>
<p>Throughout it all, this is a story is of mining industry profits underwritten by governments – a perspective lost in the analysis of the MRRT and the current standoff between the federal and WA governments.</p><img src="https://counter.theconversation.com/content/230/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dick Bryan receives funding from the Australian Research Council</span></em></p>Andrew “Twiggy” Forrest’s visit to Canberra earlier this week didn’t prove particularly effective in swaying the government on its freshly drafted mineral resources rent tax (MRRT) legislation. But the…Dick Bryan, Professor, Department of Political Economy , University of SydneyLicensed as Creative Commons – attribution, no derivatives.