DARWIN – A CHINESE PORT China has expressed concern over the Strait of Malacca as a vunerable choke point for its energy supplies from the Middle East oilfields. In the near future two strategic straits may enter maritime discussions, the Torres Strait and the Bering Strait. The 99 year lease of Darwin port to Landbridge, a Chinese company, by the Northern Territory government has now acquired an added significance. Darwin is well placed for Chinese authorities to monitor and provide services to commercial and other shipping using the choke points of the Lombok and Torres Straits and the developing oil fields in the Timor Sea. Both these straits are used by the West Australian iron ore trade to China and the by vessels bound for east Asian ports and North America. Darwin could well become a valuable strategic pendant hanging of the ‘string of pearls’ within the One Belt One Road Chinese expansion policy
CHOKE POINTS & MARITIME TRADE Choke points are critical to the protection of maritime trade routes. With China expressing concern on Indian navy surveillance of its military vessels in the Malacca Strait the increasing importance of the Lombok and Torres Straits are becoming apparent. The Torres Strait is the only direct route between the Indian and Pacific Oceans and is nominally under the control of the United Nations Law of the Sea (UNCLOS), the navigable channel for commercial shipping is 800m wide and 13m deep. This constitutes a navigational and stategic choke point. Control of choke points in times of international tension or hostilities is vital for the preservation of national interests. Examples of srategic choke points are: the Danish Strait into the Baltic Sea, the Straits of Dover into the North Sea, the Strait of Gibralter into the Mediterranean , the Gulf of Hormuz into the Persian Gulf, the Malacca Strait into the South China Sea. The Lombok and Torres Straits are now becoming increasingly important as safe maritime passages, as a consequence military build up will follow. Those with vested interests are Australia, Indonesia and China.
As an extension to this scenario the Bering Strait between the United States and Russia is looming as a choke point with China very much ‘The Third Man’. Commercial shipping has doubled over the past five years and will steadily increase as the Arctic ice cap melts to create wider, safer seaways. China is developing trade routes west to Europe and east to Canada and the United States. Unfortunately Australia is situated far to the east distant from the trading hubs, but could become a way point for oil imports to China from the Persian Gulf.
John Hill, email@example.com Current Affairs Flash Points, towardsthefinalhour.com
AUSTRALIA’S UNSUSTAINABLE HEALTH AND SOCIAL SECURITY SYSTEM.
PREAMBLE The catalyst for this offering is a statement by John Roskam, Institute of Public Affairs, to the effect that after twenty years of economic growth, the Australian welfare state is becoming unsustainable particularly since 51% of the work force is not paying tax. (Between the Lines, ABC RN, 9 July, 2017) This is a significant statement when taken in conjunction with other economic and social factors bedevilling the Australian nation. The inescapable fact is currently that Australian living standards are drifting lower, under employment is drifting higher and the natural resources ‘boom’ has peaked. Social security and health expenses have risen strongly over the past decade and are becoming unsustainable. No political Party has admitted to this over arching consolidating situation.
In the foreseeable future Australians will face the choice of whether to massively increase export income, tighten the collective belt or borrow money from overseas to maintain an unsustainable life style. The following comments are an attempt to define issues that singley are manageable but collectively will make it difficult to “put another prawn on the barbie”, unless solved.
THE LUCKY COUNTRY Re-enter Donald Horne, author of The Lucky Country. In 1964, Horne warned Australians were not appreciating that their apparent good luck was built on ephemera that could not last. First gold, then the sheep’s back, then followed the curse of natural resource endowment and finally a growing dependency on the welfare state. Horne wrote “Throughout the world the basis of material prosperity is likely, for the first time in history, to be with clever educated people. The need to build cleverness is considered to be unAustralian.” In 2017, this sentiment has been repeated – see Education in the next section. Historically, politicians and the media have deliberately misconstrued the title, resulting in Australians being lulled into a false sense of security. For a quarter of a century Australians have basked in steady, stable growth (GFC excepted) due to a demand for minerals from global growth not from their own intellectual effort.
Materialising from subliminal shadows are recurring budget deficits to $30 billion a year, rising national debt of $474 billion and increasing (Jan. 2017) and serious personal debt of 123% of GDP, third highest in the world. (macroeconomics.com, Feb. 2017) In a buoyant manufacturing export oriented economy, the above data would not be of critical concern but in an economy stressed by the curse of natural resource endowment, this is a serious situation. Somehow, somewhere Government expenditure must be reined in, taxation increased or export income generated.
EDUCATION AND COMPETITIVENESS “Lets start at the very beginning” so trills “The Sound Of Music” and so it should be, but an OECD report places Australia 27th out of 35 advanced countries in terms of expenditure on early childhood education. (Education at a Glance, 2014) The above situation is reflected in the OECD PISA for surveys between 2000 and 2012 which confirmed Australian declining education ratings namely, Maths – 6 to 19, Science – 8 to 16 and Reading – 4 to 13. (OECD Australian PISA Rankings) The falling standards reinforce comments by the former Chief Scientist, Professor Chubb, who warned about Australia’s declining STEM ability. Among the findings of the Davos Economic Forum (January 2017) was the conclusion that Australia’s ability to benefit from automation and artificial intelligence developments would be hampered by lack of preparation and a deficiency in STEM ability. A contributing nail to this educational coffin is the current Government budget that is reducing university income and restricting 457 visas to academic staff – another impediment to creating innovative exports.
A final word on education by Professor Greg Austin, Centre for Cyber Research, Australian Defence Force Academy, is instructive – “Over the past twenty years Government has been fostering a culture of incompetence in training and computing skills in cyber security” – which brings Australia back to the full meaning of The Lucky Country!
TAXATION AND EMPLOYMENT The recent ‘Between the Lines’ program indicated 51% of the work force is not paying tax. Digging deeper it is recorded that 48% of Australians, 12.2 million ‘income units’, pay no tax. Further, the top 10% of income earners contribute 47% of national income tax. After welfare payments the average Australian only pays $3,424 in tax after deducting welfare benefits. (National Centre for Social Economic Modelling, The Conversation, July 2015) In a population of around 24 million, the low ‘income units’ become understandable when it is revealed that there are 1.1 million registered under-employed while the unemployment rate has risen from 5.7 to 5.9%. (SMH, March 2017) In the youth sector, the jobless rate at 13.5% is at the highest level in forty years while under-employment hovers round 18%. (The Guardian, 27 March 2017) The continuing rising under-employment trend will continue to reduce ‘income units’ and increase demand on the social security and health budgets. To compound this problem of rising under-employment and social security costs the BIS Oxford Group have forecast a serious slump in building activity within the next two years. This will reduce Australia’s declining ‘income units’ and impose a downward pressure on GDP.
Australia, blessed with the curse of natural resources, despite excellent research institutions, has languished in developing industries driven by technological advancement capable of replacing export income from natural resources. As the Davos Forum concluded, Australia’s collective skills are not yet in place. While a high value export industry can absorb above-average wage rates, it is concerning that Australian rates, within a relatively unskilled work force, is significantly higher than rates in competitor manufacturing countries. (Table 1)
$A per hour
$A per hour
SOCIAL SERVICE AND HEALTH COSTS The preceeding information provides a backdrop to forecast unsustainable social security and health costs. The Australian Institute for Health (2014) reported health costs have increased from $4,600 per person per year (2002) to $6,400 per person per year (2012), that is from 8.6 to 9.7% of GDP and costs are still increasing by around 4% year on year. The projection of Government spending by portfolio (Table 2), provides a funding challenge for those born today who will be forty-something in 2060 – the ‘sins of their fathers ‘ will indeed weigh upon them. In confirmation, the Institute of Actuaries determined Health Cover costs will rise from 6.5% to 10.8% of GDP over the next 50 years.
T2 Projection of Government spending (% GDP) Productivity Commission
2011 - 12
2059 - 60
NATIONAL BUDGET 2017–18 The summary below illustrates the impact of Social Security and Health on the National budget.
NATIONAL BUDGET 2017- 18
Fringe B Tax
Company & RR Tax
Non Tax Items
Deficit is 445 minus 464 = ($19) billion. The combined Social Security and Health budget totals $329 billion, which is equivalent to 51% of expenses or 54% of revenue. With a population of 24 million, this equates to a cost per person per year of $9,900, say $10,000. Budget deficit projections in billions for years 2018-19 ($16), 2019-20 ($3), and 1920-21 ($11). The Grattan Institute forecasts that deficits will continue until at least 2025. (Australia Exports and Budget, June 2017). The deficit will be under additional pressure due to declining corporate tax rates from 30% to 25% over the next few years.
AUSTRALIAN TRADE BALANCE For the year 2016-17, the Australian terms of trade were in the red. (DFAT) Total exports were $259 billion and total imports were $267 billion, therefore a trade deficit of $8 billion. For three years from 2013, Australia’s terms of trade were negative to the tune of billions of dollars. Since late 2016, terms of trade have dramatically improved but this may not be all good news. The trade surplus is, in part, due to a decline in imports which reflect a softening in domestic demand due to weak wages growth and increasing under-employment. A dangerous sign – Australians were using savings for the Christmas splurge. Based on this information, Christmas 2018 might be a commercial disaster. There has also been a small rise in commodity prices – the economy again saved by the curse of natural resources endowment. (CNBC-Economy, April 2017)
The Australian economy requires a strong positive terms of trade to offset budget deficits – major contributors being social security and health, and to assist in the annual interest payments of $16 billion (and rising) on the $474 billion (and rising) of national debt. (DFAT: The Treasurer, smh, 29 January 2017)
Australia’s salvation must primarily rest with a strong terms of trade generated by STEM, artificial intelligence and automation. And so again to “The Sound of Music”, “Lets start at the very beginning.”!!
POSTAMBLE The purpose of this article is to present a snapshot or illustrate a trend that will create a problem funding increasing Social Security and Health portfolios. This situation has already been described as unsustainable. For an economy able to fund its own operating expenses, excluding infrastructure improvements, revenue from terms of trade, tax and other sources should cover other outgoings. We have heard the Government bleat “we must live within our means”. It is not doing this.
Australia is in an invidious position for several cogent reasons:
under employment is increasing,
‘tax units’ are decreasing,
export income is still reliant on natural resources,
export income to replace natural resources is not being generated fast enough,
the education system is not adequately preparing the young Australian workforce skills in STEM, artificial intelligence and automation.
The rising trend in social security and health costs, if continued, will be a contributing factor to jeopardising Australia’s AAA credit rating. If savings cannot be made to the budget or income boosted by exports then Australia’s living standards will decline further, then interest rates on the national debt will rise.
The 2017 budget levy on banks to raise $6 billion over four years does nothing to offset the $239 billion (and increasing) social security and health budget.
John Hill Current Affairs Flash Points towardsthefinalhour.com firstname.lastname@example.org
This autobiography records issues prior to the ‘low dishonest decade” of the 1930s, through World War 2, the loss of Empire, the rise of failing states, the halcyon decades of post war global growth, the convulsive 1990s decade commencing with the implosion of the Soviet Union. Finally to a state of non-retirement during which the curse of natural resources endowment has become obvious for Australia. This autobiography is published by Austin Macauley, London and is available in book shops and on line.
As a member of the Timor Bush Fire Brigade I was involved in a massive bush fire that destroyed an extensive area of eucalypt forest and pasture. The roar of the flames and the choking smoke were a fitting backdrop for stands of burning Xanthorroea which resembled martyrs at the stake in the reign of Queen Mary in 1555.
Rain fell to finally quench the fires. The sunset, due to the smoke haze, was among the most speseacular ever seen in the Timor locality.
Justice Michael Kirby addressed the Sydney Institute on the 21st June dealing with North Korea’s human rights record including comment on the case of Mr O F Warmbier. The ensuing discussion, while relevant to the specific issue, was unable to articulate a solution to the current geopolitical situation.
The overarching problem is the nature of the North Korean regime and the nuclear threat it poses. The Cold War between the Warsaw Pact and NATO (1945-90) did not erupt into a nuclear holocaust because NATO maintained an around-the-clock airborne nuclear armed vigil. It was a case of mutual deterrence . If the Soviet Union had released ICBMs, major Russian cities would have been annihilated by incoming NATO weapons.
Today a comparable situation is emerging should North Korea direct missiles towards American interests or South Korea it would probably be neutralised by airborne and submarine-based ballistic missiles.
America is in the difficult situation should a definite immediate threat become manifest. There would be a retaliation that would have to, simultaneously, destroy the armaments along the ‘demilitarised zone’ and identifiable missile launch sites. The urgent problem is how to prevent North Korea progressing to perfecting its delivery system. To expect China to accomplish this is to misunderstand the geopolitical situation. Although China supports the United Nations sanctions on North Korea, it does not push too hard due to concern over regime instability that could precipitate millions of refugees crossing the border into China. Furthermore, North Korea’s nuclear ambitions are partially diverting America from China’s increasing hegemony in the East and South China Seas. A wild card into this situation is that America might reach a clandestine agreement with China on the 9 Dash Line in return for neutralising North Korea’s nuclear delivery threat. This arrangement might be considered in conjunction with negotiating a more balanced trading relationship that would boost American export industries.
Lessons from the 1962 Cuban missile crisis could be useful. China, as a proxy Russia, might convince North Korea, as a proxy Cuba, to dismantle its nuclear capability under supervision, in return for development funds and a guarantee of national security. A sweetener for China might be that America would withdraw its B52 nuclear bombers from the region. Decisions would also involve Japan. North Korea is no Cuba but a ‘defuse’ mechanism might lie in this logic.
A frontal attack poses an unacceptable threat for America. To bring North Korea to nuclear impotence would require a simultaneously stepped military assault:
stealth bombers must destroy anti-aircraft missile systems and command centres;
the virtually instantaneous destruction of thousands of artillery pieces along the DMZ trained on Seoul and nearby cities harbouring some 24 million souls;
the massing of an invasion fleet that could not be hidden from China or North Korea causing the latter to consider a pre-emptive strike.
There may be members of the International Community that have hoped for a modified French Revolution (1789) or a Bolshevik Revolution (1917) or preferably a Soviet implosion (1991). However, these alternatives may fade in the light of new relationships being developed in East Asia.
The President of South Korea, Moon Jae-in, favours engagement with North Korea which could morph into a rapprochement between Pyongyang and Seoul. In addition there are deepening trading ties between China and South Korea. Should closer ties develop between the three nations there may be pressure on America to reduce its forces in South Korea. The Kim dynasty is only interested in its own survival not in the well being of the North Korean people. Ultimately, to ensure a safe haven, the current ruling elite might be accepted in China or be ensconced in an enclave in North Korea. Pure conjecture!!
Should the three East Asian nations form a closer association, then America might need to rethink its ‘Pivot to Asia’ policy and southern members of the ANZUS Alliance may have to review their relationship with East Asian nations.
JOHN HILL Current Affairs Flash Points towardsthefinalhour.com email@example.com
This autobiography chronicles history, painful politics and social issues in the aftermath of imploding Empires and the rise of Failing States, it is about the life of a mining geologist living and working in far away places as events swirled around him through the 20th century and into the 21st century. In non-retirement the author ran a cattle property in the Upper Hunter, New South Wales. He now lives on the coast north of Sydney.
Cattle dogs are an essential requirement for the cattle industry. Most cattle are amenable to mustering but frequently some animals require more robust treatment to drive them into a fresh paddock or the mustering yards. Despite their size steers can move with great speed and ferocity.
This was no ritual fighting, it would continue for a long time, the biting and kicking with clawed feet created bleeding injuries. At intervals the kangaroos would turn back to back to lick wounds then in a trice it would be on again. Ultimately one , bleeding and limping, would hop away while the victor would sidle up to a quietly eating doe nearby.
TIMELINES & FAULTLINES is available from Amazon and UK book shops. It is available as a Kindle. TIMELINES & FAULTLINES is published by Austin Macauley, London..
John Hill Current Affairs Flash Points towardsthefinalhour.com firstname.lastname@example.org
Preamble “Exports and Education” should be the Australian Government’s budget mantra, not “Jobs and Growth” or “Fairness, Opportunity and Security”. Neither defines the Australian problem as does “Education and Exports”.
Export income is the key to Australia’s future prosperity and the control of its annual deficit. The problem is Australia does not produce enough income to meet its expenses. Australia’s national debt as at April 2017 now stands at $552 billion (RBA) and the Reserve Bank of Australia must keep interest rates down in order to minimise interest repayments and to promote economic activity. It is not enough to promote jobs without putting the emphasis on export income which will create a strong balance of trade to reduce the monthly trading deficit. Unless this happens, there will be a slow devaluation of the currency which will only assist the export industry if it does not rely on overseas inputs. Strong exports are the key to Australia’s future.
Australia’s problem is well illustrated in the population density map of this island continent. The virtually unpopulated inland produced 60% in 2014 of Australia’s export income derived from natural resources and farm produce (beef and wheat). Another 9% was derived from education and tourism. The remaining 31% came from financial services, agriculture, chemicals, pharmaceuticals and specialised engineering products.
Australian Exports Australia’s top goods and services exports (DFAT 2014) are set out below:
AUSTRALIA”S TOP GOODS AND SERVICES EXPORTS (DFAT 2014) TABLE !
Percent of Value
Minerals, Oil, Gas
Natural resources are still the economic pillar but will have to be replaced if Australia is not to become a Chinese quarry to be mothballed at will. Agricultural products will become more important but will be unable to fill the void should natural resource exports decline. Unfortunately educational exports may be held back due to budget restraints placed on universities, the unfavourable Davos report and the declining OECD education ratings. (See May Blog – Education)
Currently, significant export growth can only come from non-labour intensive industries such as specialised engineering, medical advances, pharmaceuticals, chemicals, food products and legal services. The financial services sector will face increasing competition from Singapore and Hong Kong.
The ABS 2016-17 Budget Figures for Australia define a problem: within the expenses are costs for health – $71 billion, social security – $158 billion, that is $229 billion which is 55% of Government revenue. In the long term this is unsustainable, clearly export income is a priority. The Gratten Institute (CEO, John Daley, April 2013) has concluded that Australia will face a decade of budget deficits, adding to this problem the proposed corporate tax cuts could exacerbate this problem if the American experience is considered – see below.
TABLE 2 THE ABS 2016 – 17 BUDGET SUMMARY
In assessing Australia’s long term export potential, two factors will ensure interest rates will remain low due to a continuing sluggish economy and the continuing annual deficits which will put Australia’s credit rating at risk. These factors are the explosion in public and private debt and the Government debt to GDP ratio and its relevance to Standard and Poor’s ratings – see below.
National Financial Problem Australia’s looming problem is the inexorable rise of the Public (Government) and Private. debt, as far back as 2007 the RBA warned of this dangerous situation when debt was only $58 billion. As of April 2017 this figure has risen to $552 billion while Private debt stands at $2.7 trillion and both rising, (RBA and Debt Clock).
Interest payments on Government debt will rise from $17.6 billion in 2016-17 to over $20 billion on a projected debt of $659 billion by 2020 (The Australian, MYEFO 20 December 2016). The continuing low interest rate (1.5%) and the sluggish economy are not conducive to generating a strong export-led economy. The opinion emanating from Union Bank of Switzerland is that increasing debt and continuing budget deficits might place further pressure on Australia’s AAA credit rating. Should there be a downgrade there would be a serious rise in annual interest payments. The figure below illustrates Australia’s vulnerability to a credit rating adjustment leading up to 2020.
Should Australia Really be a AAA Credit? ( AFR 12 May, 2016) S & P AA AAA AAA ???
A Snapshot of Exports Past Data on Australia’s top ten trading is revealing – there is imbalance and emerging concerns.
TABLE 3 AUSTRALIA’S TOP TEN TRADING PARTNERS (DFAT-Business Insider, 8 August 2014)
Iron Ore, Coal, Gold
Iron Ore, Coal, Beef
Beef, Aircraft/Space Parts, Alcohol
Iron Ore, Coal, Petroleum
Computer Parts, Vehicles, Pharmaceuticals
Coal, Gold, Lead
Gold, Petroleum, Aluminium
Petroleum, Copper, Nickel
Gold, Oil Seed, Fruit
There are two concerns. Firstly, there is obviously a disproportionate reliance on coal and iron ore for export income. There will be a slow global decline in coal usage as alternative energy sources come on stream. With iron ore there are vast new iron ore deposits being opened up in Africa and South America. Regarding iron ore deposits in Brazil, it is concerning that the Chinese government has indicated it is increasing production from this source in order to reduce Australia’s near monopoly on iron ore supply. Secondly, the Australian services sector representing 49% of export income, employs 80% of the work force. By implication, natural resources and agriculture which produce 51% of export income employs only 20% of the work force. (See Table below). If Australia is to prosper these statistics must change. It is well documented that the “trickle down” effect does not apply to nations blessed but ultimately cursed with natural resources.
Australia’s reliance on natural resource and farm product (DFAT, 2014) is illustrated below:
Future Exports The next decade is slated to be one of immense growth opportunities for Australian export industries which are food manufacture, oil and gas extraction, education, tourism and legal services promoting south-east Asian industrialisation. With a growing Asian middle class around 750 million, annual growth rate of these industries will be baby foods – 2.9%, dairy/processed foods – 2.1%, education – 3.1%. (NAB-IBIS World 13 November 2013)
The above projected growth rates are significant taken in conjunction with the extent of Chinese investment and obviously ongoing acquisitions of Australian assets. Examples are – the dairy, wine, beef and power industries. (See Chinese Foreign Investment, May Blog, 2016) It should now be clearer why Darwin port is currently controlled by Chinese interests. Darwin will become an important periphoral to the Chinese One Belt One Road expansion policy.
If Australia is to increase export income and provide secure power for its export industries, it will have to take a more hard-nosed approach towards the oil, coal and gas potential of this continent. One of Australia’s problems is the rising under-employment and slowly falling standards of living among the citizens, not the political elite. Queensland is desperate for coal development and jobs in the Galilee Basin; South Australia would benefit from oil exploration in the Bight (abcnews.com 16 November 2016); New South Wales, Victoria and Western Australia would no longer be facing a power crisis if shale gas production was encouraged. When only a few hundred jobs may be created in any part of the country becomes newsworthy, one wonders how thousands of jobs and billions in export income can be foregone by lack of firm Government policy. The Government is desperate to encourage “Jobs and Growth” and yet projects are stalled or delayed despite stringent safeguards.
Postamble Australia has been blessed with the curse of natural resources. The past is now stalling our future. Global studies have proved that economies with abundant natural resources tend to industrialise less rapidly than natural resource-scarce economies (NBER Working Paper 5398, 1995). For Australia to materially generate nation wide export growth, OECD education ratings must be significantly improved, the Davos findings on STEM expertise must be addressed and university funding must be increased to permit export directed research.
While the 2016-17 Budget does promote export growth, there appears little specific short term incentive that encourages exports. Long term corporate tax reduction, existing trade deals and promotion assistance are peripherals to the core problem of education improvement, university funding and innovation. Concerning corporate tax reduction, both President Regan and Bush reduced corporate tax rate to stimulate the American economy, the result was devastating budget deficits. President Clinton raised taxes, created jobs and reduced the deficit. Has the Government considered this vignette? (The Conversation, 13 May 2017)
Postscript This month much has been made of Australia’s recession-free growth during the past two decades by the Treasurer. Looking behind this soothing statement there should be concern not euphoria. The construction industry did indeed inflate the GDP, however, it did not contribute to export income unless there was massive foreign investment. The image below illustrates Australia’s dangerous reliance on mineral exports over the past twelve years. Currently the value of mineral exports is decreasing as China’s demand weakens and this will reinforce the inexorable slow decline in Australian living standards, this will continue unless alternative exports can be generated. The Treasurer’s statement obscures this real unpalatable truth but is in keeping with my September 2016 article ‘The Australian Economy – Stupid’.
AUSTRALIA’S MAJOR EXPORTS 1997 -2009
Key: Mineral Resources, Rural, Manufacturing
“The latest resource boom which commenced in 2003 has already doubled Australia’s terms of trade and is slated to go higher due to oil and gas exports. The growth in mineral commodity exports since 2003 has been phenomenal. Iron ore increased from $5.3 billion to $34 billion (2009) while coal (steaming and metallurgical) increased from $10.9 billion to $34.7 billion (2009). This cannot continue.
On the future of coal – “Some 41% (2009) of global electricity is generated using coal and this proportion is continuing to increase. The trend is towards an increasing use of coal, despite climate change concerns, and the transition away from coal may take decades.”(M Roarty, Resources sector and its contribution to the nation. Parliament of Australia, 23 September, 2010)
Australia has to throw off the curse of relying on natural resources and encourage specialised manufacturing, rural production, university research and education export income otherwise Australia’s standard of living will continue to decline. With inflation at 1.5%, wage growth at 1.9% and a sluggish economy at 2.4 % growth, the May budget may do little to lift Australia out of Government’s current fiscal morass.
Last Word Professor Greg Austin, Centre for Cyber Research, Australian Defence Academy in a radio interview commented that over the past twenty years the Government has been “fostering a culture of incompetence” in relation to training in computing skills and cyber security. The current budget arrangement to implement restrictive policies on the 457 Skilled Visa program will add to the dearth of Australian STEM expertise. This policy does reinforce the Davos findings on Australia’s ability to benefit from automation and artificial intelligence developments. All this does lead back to a budget that does not adequately address poor OECD education ratings and a continued reliance on natural resource exports. (Background Briefing, ABC RN, 11June 2017)
John Hill Current Affairs Flash Points towardsthefinalhour.com email@example.com
Two pillars fundamental to Australia’s survival are education and export income; the May budget apparently does not recognise this fact. Today, comment will be confined to the education budget while the June contribution will examine the budget implications for Australia’s export income.
Before discussing budget issues it is useful to recognise where Australia is situated vis-a-vis global education standards and our national degree of preparation to embrace the current reality of automation and artificial intelligence. On education standards the OECD (March 2015) league tables indicate Australia ranks 14th behind Poland, Vietnam and Germany. Australia ranks 19th behind the United States and United Kingdom in secondary school enrolment rates. The Program for International Students Assessment (PISA) shows a striking decline for Australia between years 2000 and 2012 – for Maths down from 6th to 19th, Science from 8th to 16th and Reading down from 4th to 13th. The results speak for themselves. However, the burning question is – are competitor countries improving or is Australia just getting worse?
At the Davos Economic Forum in January, the Committee on Artificial Intelligence noted Australian business is not ready to embrace the concept or the mathematics of artificial intelligence. The rate of Australian skills uptake and its poor grasp of STEM subjects increases the risk of its industry becoming uncompetitive. In recent years Professor Chubb, former Chief Scientist, frequently mentioned Australia’s serious STEM deficit.
There are five problems Australia must solve if it is to improve OECD rankings:
Teachers must obtain a Masters degree or higher.
Teaching must be raised to the status of the medical and legal professions.
The fractious State Education Departments must be replaced by a unified Federal system.
Australian parents must exert greater discipline on home studies.
Universities must be recognised as integral to Australia’s future and funded to recognise their export reality and innovation potential.
In assessing the OECD rankings of other countries, it is relevant to know which operate under a unified education system. Endeavouring to read between the lines of the Budget discussions, the Budget does not appear to be addressing Australia’s fundamental education problems.
A weakness of the budget forecast is it extends beyond the forward estimates period and is thus vulnerable to regime change. Below is an attempt to distill the core of the budget:
There will be an attempt to halt declining academic standards. This policy will be funded by an $81.1 billion expenditure over four years boosted by $18.6 billion over ten years.
Professor Gonski has been reappointed to decide on expenditure priorities and to direct the program. From this, it implies the Government is unsure of its own priorities.
The School Reserve Standard (SRS) grants seek to ensure all schools provide education on a level playing field, an important issue but on its own will have little effect on overall ranking.
Prior to the budget, The Australian (9 November ’16) under the banner ‘How to improve teacher performance’ provided a glimpse into State education plans –all disparate:
NSW – is attempting teacher improvement through a ‘Great Teaching Inspired Learning’ initiative.
Qld – is targeting teacher quality to attract the best and is introducing teacher training modules.
SA – is offering 200 scholarships of $20,000 each towards Masters degrees. This appears to be attacking the root of the problem.
WA – is providing more teacher training internships.
Vic – is working on a policy to enhance teacher quality to improve student outcomes.
Dr G Craven, President of the Catholic University and Chairman of the Federal Government Teacher Education Advisory Board, has provided an insight into the problem bedevilling the system. There is an obsession with new teachers which is that young motivated teachers are showing under-performing teachers in a bad light. This obsession is part of an ‘industrial surrender’ by the State Education Ministers, all preoccupied with the blame game instead of investing in education. There are education unions who do not wish to see innovation or improvement rolled out through the entire teacher population.
The Federal Minister for Education, the Hon S Birmingham, supports Dr Craven’s comments under the mantra ‘Quality Schools – Quality Outcomes’. This would hopefully produce effective policy and changes to the industrial relations agreements which will link pay progression to nationally agreed professional standards.
The initiatives of the State Education Departments will not solve the problem of Australia’s declining OECD rankings or STEM deficiency rankings. This problem will only be solved by raising the status and standards of teachers, amalgamating State education departments under a unified system, and learning from those countries that are more highly ranked. This problem cannot be solved during the life of a single parliament.
The University of New South Wales Chancellor, Dr Ian Jacobs, (UNSW News Room, 9 May 2017) has commented that current Government policy on universities is not in Australia’s long term interest. The policy implies universities are an expenditure problem not a long term investment. A recent OECD global study indicated that six Australian universities were in the top one hundred in the world. A Deloitte study recently concluded university research accounts for 10% of Australian GDP, that is $160 billion per year.
The remarks by Dr Jacobs are in response to the 2017 Budget which has cut funding to Universities by $384 million over two years. The mechanism for this reduction is an ‘efficiency dividend’ of 2.5% and a reduction in student contributions of 1.8%. (The Conversation, 9 May 2017)
It is unsurprising Australia is in free fall on the OECD league tables. The funding history and current policy illustrate why. In 1974, the Commonwealth provided 90% of university income. By 2010 this had reduced to 42% and by 2014 it was 20% for the major research universities. This hollowing out of a principal driver to the Australian economy has been supported by both Labor and Liberal to the present day. In 2016 the Government proposed a 20% funding cut in science, engineering, social science and arts education – this during a STEM controversy.
Parliament of Australia Budget Office
Projection of Nominal Government Higher Education Expenditure to 2025 ($billion nominal terms)
The big picture is that Australian spending on higher education has remained static at 1.6% of GDP for some years while the figures for Canada and the United States is around 2.6 to 2.8% of GDP. Australian student fees are now the highest in the OECD – and that does not include the 2017 budget increase.
This ‘penny pinching’ must be viewed against the value of export income derived from the value of international student education. This constitutes Australia’s highest value services export and third most valuable export after coal and iron ore. Data published by the AFR (3 Feb. 2016) indicate Australia hosts 555,000 foreign students in a population of 1.3 million students, i.e. 46% worth, an amount of $19 billion which is ahead of tourism at $16 billion.
Export income from students is increasing.
Dr Jacobs further indicated that Australia’s high academic ranking and proven track record proves there is enormous potential for economic diversification and growth. This is being destroyed by short sighted budget cuts and proposed visa restrictions on well educated foreigners. It is a sad commentary when the Federal Government is in sync with One Nation on its policy to the entry of foreigners to Australia.
Australia’s mantra should be “education, innovation, exports”,
NOT “jobs and growth” or “fairness, opportunity, security”.
John Hill Current Affairs Flash Points towardsthefinalhour.com firstname.lastname@example.org
TIMELINES & FAULTLINES chronicles the saga of a mining geologist, John Hugh Hill. His life has spanned the turbulent 20th Century and into the fraught decades of the 21st Century, from the rise of militant Nazi fascism, the implosion of the Soviet Union and to the rise of militant Islam. He lives in non-retirement in New South Wales, Australia.
This fascinating book is published by Austen Macauley, London and is available from Amazon and major bookshops.
British Solomon Islands Protectorate, Western Pacific, 1957-1959.
In the mid-1950s Japanese war wrecks littered the coast of Guadalcanal. Americans bombed the retreating Japanese troops, rather than sinking at sea vessels were beached to avoid death in shark infested water.
Interior of Guadalcanal. Women returning from jungle gardens. In early missionary years Melanesians were encouraged to resettle along malaria infested coastlines, endemic malaria and malnutrition was a continuing problem.
CYCLONE DEBBIE – AN EXERCISE IN TREND ANALYSIS Trend Analysis is a technique used to estimate and predict future climate.
CYCLONE DEBBIE – THEOI METEORO
The return of the Greek Gods of Sky and Weather, Theoi Meteoroi, have spawned Cyclone Debbie, a category 5 storm which crossed the Queensland coast in March 2017. Considered in isolation, this was no more than an aberrant destructive event, however, considered as an emerging sequence of devastating cyclones, it raises serious implications for stable long term economic development. A review of significant cyclones in north-east Queensland is instructive. Over the past thirty four years two patterns of damaging cyclones are discernible. The Table summarises destructive cyclones since 1986, that is, seventeen years either side of 2000 AD.
TABLE – Destructive Cyclones
1983 - 2000
2000 - 2017
NAME - CATEGORY
NAME - CATEGORY
JUSTIN - C2
DEBBIE - C5
BOBBY - C4
MARIA - C5
ORSEN - C5
ITA - C4
WINIFRED - C3
YASI - C4
Summarising, in the seventeen years prior to 2000 there were four significant cyclones; in the following seventeen years to 2017 there were five devastating cyclones. In the past four years Queensland has been lashed by three cyclones. Estimated damage costs to the public and private sector over this period exceeds $5 billion. The cost to the national economy will have an adverse ripple effect although the reconstruction of thousands of buildings and infrastructure will produce a spike in the local economy. This is unfortunately ‘dead’ money that cannot be used to produce export oriented income. Agriculture and tourism projects will be destroyed, some permanently.
TRENDS IN OCEAN TEMPERATURES
The National Oceanic and Atmospheric Administration (NOAA) has published data showing global sea surface temperature increase from the 1880s base line is 0.6°C and is trending higher. There is a disturbing corroboration of ‘amazing records’ from the Coral Sea lapping the Queensland coast. Temperatures of 0.7°C ( in places as high as 2°C) above the average temperature of 29.16°C have been obtained. (SMH, April 2015)Global Sea Surface temperature trend – 1880-2015 (NOAA)
Recent data from the Coral Sea lapping north Queensland have recorded sea surface temperatures of 0.73°C above recent average temperatures. (The Conversation, April 2016) The historical and inexorable rise in sea surface temperatures compiled by the BOM was recently published by The Conversation. (April 2016)
TRENDS IN GREEN HOUSE GAS CONCENTRATIONS
Green house gas concentrations, carbon dioxide and methane in the atmosphere, prevent global heat loss, hence global warming. For the past 800,000 years atmospheric carbon dioxide levels have not exceeded 300 ppm. Due to the expansion of the Industrial Revolution, the 1950s, carbon dioxide levels now exceed 400 ppm and are trending higher. (United States Environmental Protection Agency)
The trend in global temperature increase entered a critical phase in 1990. Between 1990 and 2013, NOAA established that the ‘radiative force’ (which is the warming effect caused by green house gases) has risen by 34% on the previous measured period. (The Guardian, September 2014)
CLIMACTIC FUTURE Homo sapiens has created its own unique, but probably damned, geological era – the Anthropecene. The International Panel on Climate Change (IPCC) has warned that, if this species does not drastically reduce greenhouse gas emissions from fossil fuels, it will take around fifty years to stabilise the emerging climate. Irrespective, global temperatures will still rise by an estimated 0.6°C thus aggregating to about a 1.3°C increase. This is approaching the catastrophic 2°C level.
Current carbon dioxide concentrations will remain in the atmosphere for thousands of years and, after millennia, the gas would be laid down as carbonate rocks on the sea floor of Mother Earth. (The Conversation, IPCC, December 2014)
The bottom line emanating from Cyclone Debbie is that, if fossil fuels continue to be utilised at the current rate, global warming will rise closer towards 2°C by the mid-2030s, thus crossing the threshold that will harm human civilisation. ( R E Mann, Scientific American, April 2014)
0 DEUS, NOS NISI, NOSTRAE TIBI PECCAVIMUS Oh God, save us, for we have sinned.
TIMELINES & FAULTLINES chronicles the saga of a mining geologist, John Hill. His life has spanned the turbulent 20th Century and into the early fraught decades of the 21st Century; from the rise and fall of militant Nazi fascism to the rise of militant Islam. He lives in non-retirement in New South Wales.
BOOK COVER – TIMELINES & FAULTLINES
RUSSIAN FEDERATION – PHOENIX RISING
During the 1990s, John Hill experienced the implosion of a decayed Soviet Union and the rise of cowboy capitalism in a flawed Russian Federation riven by obscene wealth and death in winter snowdrifts.
The Moscow State University dominates the Moscow skyline. It was built by German prisoners of war under the whiphand of Joseph Stalin (Iosif Vissarionovich Dzhugashvili). It was here, while lecturing in mining economics, that I joined in vodka and black caviar sessions and virulent political discussions.
THE MASK OF SORROW – Gulag Memorial, Magadan
The ‘Mask of Sorrow’ overlooks the port of Magadan on the Sea of Okhotsk. Through this port passed thousands of political prisoners on their way to terrible deaths on the Kolyma goldfields. Hundreds of kilometres north of Magadan I worked in freezing conditions and experienced the Russian banya (Turkish baths), flagellation with branches, vodka toasts and more violent political discussion.
This fascinating book is published by Austin Macauley, London, and is available now from Amazon and major book shops.