Out Of Our Depth

by Michael Bachelard - The Australian

Peter Costello does not have a manifesto. His leadership ambition has not yet yielded a Menzies speech nor any Hawke-like statements.

But Costello does have a vision for the future. And in the nature of treasurers, it's contained in an economic document - and it's gloomy. It's called the Intergenerational Report.

Yesterday's budget, with its concentration on getting welfare recipients back to work, boosting childcare and reducing the weight of pensioners on the economy, is the realisation of that vision and its dire predictions about the effects of an ageing population on the economy.

The challenges facing Australia are longer term and broader than those covered in this budget. The emergence of China, the impact of global warming, the deficiencies in the nation's education system and Australia's role in Asia require bigger solutions.

Caught in what Australian National University economist Ross Garnaut describes as a "great complacency", our politicians, says ANU political scientist Glenn Withers, are not up to the task. He argues there are deficiencies in the level of public trust in institutions and the capacity of those institutions to deal with long-term issues.

Speaking at the Future Summit in Melbourne last week, Withers said radical surgery was required if Australia was to regain the policy pre-eminence it enjoyed in the early part of the century, when Australia led the world in spending on infrastructure and education. He accuses political leaders and the media of thinking short-term, of having "a distortion towards consumption rather than investment in the future". The circus that is question time in parliament reduces public trust in our leaders and corrodes their ability to convince us of the necessary changes.

Withers says the squabbling between the states and commonwealth is debilitating and suggests making it easier to change the Constitution, so the country can respond more nimbly to problems as they arise.

Many speakers at the conference agreed with Prime Minister John Howard that, if we were designing the federal system now, it would be entirely different. Withers criticises the faction-dominated, smoke-filled-room system of party preselection, calling instead for open campaigns to pick candidates, along the lines of primaries in the US. And he suggests that an annual participation day would allow ordinary people to discuss ideas and forward them to political leaders.

NSW Opposition Leader John Brogden agrees political parties are becoming less democratic as people demonstrate they are "reluctant joiners". The media and advertising landscape means oppositions, including his own party, "need to carpet-bomb [the government's policies] before you can raise some new ideas of your own".

Roger Wilkins, director-general of the NSW Government's Cabinet Office, says the problem goes to the heart of executive government. If we could start afresh we "would not design the current system of cabinet", he says. Under the existing system, ministers lack access to expert advice, making cabinet ill-suited to sorting out difficult issues.

"It's ministers who are, at best, gifted amateurs, advised by a bunch of officials like me and ministerial staffers - who have a monopoly on advice - in a process that is entirely secretive and working on a three or four-year cycle."

Even so, Wilkins and others rejected South Australian Premier Mike Rann's idea of bringing outsiders into cabinet, saying there were accountability problems.

Another key concern raised at the Future Summit is the lack of investment in education, particularly lifelong education that goes beyond university graduation. "We need to move from a 20th-century skills-based model to a 21st-century knowledge-based model," says information technology consultant Terry Cutler. "We need incentives to keep reinvesting in education, tax concessions. This is research and development for a knowledge economy." He says it makes no sense to spend most of our education dollars training people to the age of about 25, and then leaving them to fend for themselves.

Outgoing CSIRO executive director Mehrdad Baghai says Australia's universities, which are facing a decline in income from overseas students, should offer short courses, not just degrees, and arrange centres of excellence. This way they could train millions of overseas students, most of them from Asia.

Relations with Asia are another challenge and will prove crucial for Australia in terms of defence, diplomacy and trade. Realising the need in this term to engage with Asia, Howard has backed free trade negotiations with China and strengthened relations with Malaysia (also through the mechanism of free trade negotiations). Vietnamese Prime Minister Phan Van Khai visited Australia this month. Relations with Indonesia are the strongest for some years as police from the two countries work closely together on terrorism and drug smuggling.

Former Department of Foreign Affairs and Trade secretary Philip Flood says Australia's spontaneous response to the Boxing Day tsunami demonstrates we feel an emotional tie to our region.

And if Singapore MP Penny Low is to be believed, Australia has made it into Asia's "comfort zone", particularly because the vast majority of overseas students trained in Australian universities are Asian. "When you bring a student to a country, you establish people-to-people links and a culture of co-operation," she says.

But severe deficiencies remain. Expatriate academic Jonathan West speaks almost apocalyptically about China, saying Australia is under immediate threat of being swamped by its massive output growth. West, an associate professor at Harvard University in Massachusetts, says China produces goods in a different cost paradigm: fine wine at $1 a bottle, cars at $500 each.

To imagine, as Australia's political leaders and some people do, that we can ride China's coat-tails to prosperity is "dangerously wrong", as our exports face competition from China; we are also competing with the rest of the world for access to China's vast and fast-growing market.

Ken Courtis, the managing director of Goldman Sachs, Japan, says China will make manufacturing - which employs tens of thousands of Australians - a "residual industry, dwarfed by the service sector". "We should be extremely careful of what's coming," Courtis cautions. "It's going to require extraordinarily agile leadership and a lot of commonsense for a country like Australia."

Diplomatically, Australia is at risk of being caught in a vice between its rock-solid relationship with the US and China, the emergent superpower. NSW Premier Bob Carr describes it as "the great challenge we've got in Asia". "If there is a mishandling of that relationship, it could to go the brink. It will be the biggest role of the new Australian ambassador in Washington: to caution and mediate with the people in the US who are hostile towards the economic and military growth in China, and would steer people towards sympathy with the independence of Taiwan," Carr says.

It comes down to whether our leaders and institutions are up to the challenge. Former senator Peter Baume argues Australia's political structures "may have reached the end of their life, they might be at their use-by date now". Philosopher Richard Hames describes political leadership, as an "extreme sport", saying it is spectacular but high-risk and prone to destructive failure.

Peter Costello should take note.


Michael Bachelard is The Australian's political reporter in Victoria.