AUSTRALIA

I visited Australia this week on behalf of the IFSC. I t was my first ever visit to a country, in which so many Irish people have come to make a new life over the last 200 years.

IRISH CONNECTIONS

In fact, among the first Europeans to settle in the Sydney area, were 160 convicts transported there from Cork. 

I visited the impressive Parliament building of the state of Victoria to learn that in the 19th Century, two of the Parliament’s speakers were

+  Peter Fintan Lalor, brother of James Fintan Lalor, the Young Ireland revolutionary, and

+  Sir Charles Gavan Duffy, who had also taken part in the Young Ireland movement before going to Australia. Gavan Duffy’s son George, became a politician and a judge back in Ireland in the early years of the State.

THE ABORIGINAL PEOPLE

Although Irish people were among the first European settlers, Australia was already inhabited, for thousands of years, by an aboriginal people with their own strong traditions and values. 

Initially, these aboriginal people were badly treated, driven from their traditional hunting lands and marginalised in society. Their educational performance and participation in society has lagged, and their life expectancy is still 10 years below that of the average Australian.

In this sense their position is similar to that of the Travelling Community in Ireland, and for many of the same reasons .

At public events, including at the Mass I attended in St Patricks church in Sydney, the aboriginal peoples, who originally inhabited the site in question, are formally acknowledged by name, which is good and fair thing. It may not undo the damage done, but it causes people to pause and reflect.

AUSTRALIA IS VERY DEPENDANT ON MINERALS

Income per capita in Australia is very high, $10000 per head higher than the United States, and about $15000 per head higher than Germany.

Public debt is low, about 30% of GDP.

Australia has experienced almost 22 years of continuous growth and is expected to grow by 1.6% this year. Unemployment is only 6.25%.

But the prosperity is vulnerable because it is so dependent on non renewable sources.

Minerals have been, and remain, an essential contributor to the Australian economy.

But mineral prices are volatile, and this expose Australia to booms and busts.

Extracting minerals consumes a lot of energy and, as a result, greenhouse emissions per capita are higher in Australia than in any other OECD country.

Iron ore represents 22.6% of all Australian exports, coal, 12%, natural gas 5%, gold 4%, and crude oil 3%. 

So 46% of all Australian exports are of raw materials that are non renewable, and subject to volatile price movements. Iron ore prices are down now, because of reduced demand in China, and this will slow the Australian.

Since European settlement began, Australia has enjoyed three eras of long and sustained economic growth,

    from the start of the Gold Rush in 1851 up to the early 1890’s,

    from the end of World War Two up to the  early 1970s, and 

    from 1992 to the present.

Despite its large land area and low population density, agriculture plays a relatively small part in the Australian economy. Wheat and beef are less than 4% of Australian exports. Water shortage is the key problem.  Finding a way to boost agricultural production, by using solar energy to desalinate sea water, and thereby improve Australia’s food production, is a priority. The centre of Australia is largely uninhabited because of water shortage.

Services are the big components in the Australian economy, Finance (10%), Construction (9%), professional services (7.5%) and Health (7.5%) are the biggest contributors follows by public administration, transport and education. Manufacturing contributes only 7.5% of Australian GNP. 

The service economy is sustained by minerals exports.

Up to the 1980’s, Australia pursued protectionist policies. The minerals boom has enabled it to abandon these without too much pain.

Nowadays, 32% of all Chinese exports go to China, 15% to Japan, and 7% to Korea. Only 5% go to the US, and only 2.4% to Britain (its traditional market). A downturn in Asia would hit Australia very hard. This is unlikely, but private debt in China has reached 200% of GDP, and Chinese residential construction has slowed down. This could dampen demand for Australian exports.

RENEWING OLD ACQUAINTANCES

During my visit, I met two Australian politicians, who were my contemporaries in politics and who I had got to know well over the years.

One was John Dawkins from Freemantle, who was a Labour politician and Treasurer (Finance Minister).

The other was Phillip Ruddock, a Liberal MP, who is still in Parliament, and was Immigration Minister, and until very recently Government Chief Whip.

While in Australia, I read an excellent book by another political contemporary.

Former Australian Prime Minister and Finance Minister, John Howard. Our times in both of those offices in our respective countries overlapped. John’s book  is entitled “The Menzies Years”, and covers Australian political history from 1949 to 1972. It is a remarkably fair minded book, and an excellent background for understanding Australia today.

THE CONSTANT SEARCH FOR NOVELTY IN ANNUAL BUDGETS LED TO THE 2008 CRISIS, AND IS NOT THE WAY FORWARD NOW... EXPENTITURE CEILINGS SHOULD BE REALISTIC AND MEANINGFUL

The Spring Economic statement by the Irish Government  has come in for criticism, mainly that it contains “nothing new”.

This sort of criticism is understandable from the point of view of a media ,for whom novelty is what gets attention. 

But  a search for novelty  is what got Ireland got into difficulty in the first place.

The persistent search for novelty and “new initiatives” in annual budgets, every year from 2000 to 2007,was one of the reasons Ireland overspent, and got itself into a crash. Novelties in annual budgets eviscerated the tax base, and led to unsustainable spending commitments. 

At that time, if the budget had not contained some sort of big new announcement every year , the Minister would have been open to the criticism that he lacked “vision” or “imagination”. 

Now the same chorus is beginning to be heard again. Memories are indeed short.

The Spring Statement does not contain any such novelties,  but from the point of view of the public, if not the media,  that is a very good thing. It restores an important sense of perspective.

The important perspectives  in the Spring Statement are that 

• Growth in Ireland was 4.8% last year and will probably be 4% this year. This is the highest growth rate in Europe
• 95000 new jobs have been added since 2012, and the IDA plans to attract a further 900 new investments by 2019, adding 80000 new jobs
• net emigration is likely to cease next year, on present trends
• The government deficit of spending over revenue was 15 billion euros, and it is now 4.5 billion euros

In his contribution o the Spring Statement, the Minister for Public Expenditure said again that the government is “now planning expenditures on a multiyear basis”, and  that Departments are operating under “multi annual expenditure ceilings”.

He also drew attention to the fact that the ageing of Irish society will add 200 million euros per year to health costs, and that the high birth rate will necessitate the appointment of 3500 extra teachers by 2021.

In fact, next year, the natural growth in demand for existing services public spending will on its own increase spending by 300 million euros, without ANY change in policy

This natural upward pressure on spending will mean that the setting of expenditure ceilings  for each Department will be a difficult task, requiring honesty and courage. 

This natural increase in spending, without policy change, needs to be spelled out for each Department, and separated completely from any increase that is due to a policy change.

In recent years, the expenditure ceilings for one or two major services have been repeatedly breached. A ceiling that can be too easily breached will not keep out the rain!  It certainly imposes no discipline on local management.

This sort of breach in an expenditure ceiling can, of course, be easily explained, if there has, for example,  been an unexpected increase in unemployment. It is less understandable if the demand for, or the cost of, normal health services has been underestimated .

It should be possible to predict the level of demand for, and the cost of, health services a few years ahead, on the basis of known facts about the age structure of the population, and to separate that from increases in spending that arise from unexpected one off factors. 

The budget system should incentivise local managements, who know their services best, to make the necessary savings and reallocations in time.  That job cannot be done as easily by Merrion Street.

If a Department exceeds its agreed annual expenditure ceiling, there ought to be a special procedure whereby both the Minister, and the Secretary General, of a Department, provides an early special statement to the Dail. This could be provided for in Standing Orders .

The Minister would account for, and quantify any policy changes, unexpected events, or recalculations that account for an excess, and the Secretary Genera would account for any lapses in expenditure management.

That procedure would ensure that future expenditure allocations would  be “evidence based”,  which is one of the  goals of the Minister for Public Expenditure and Reform.  It would add to the seriousness of the Estimates process and impose better accountability.

DEATHS OF REFUGEES CROSSING TO EUROPE FROM AFRICA

Below is a copy of a statement I cosigned, with other members of the European Council on Foreign Relations.

These are deaths of people reduced to desperation by conditions in their home countries. In many ways, they are like the people who left Ireland during the Famine here in the 1840’s, but with the added dimension of their being subjected to physical violence as well as starvation and disease.

They did not make the decision lightly to try to come to Europe, and  had  to undertake long and extremely dangerous overland journeys within Africa itself, before they ever get to the point of embarkation. 

They are people with a strong work ethic. As a prosperous continent, Europe has a moral and legal obligation to help these refugees. The burden should be shared across all EU states,

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“ Statement to Europe’s Heads of State and Government:

While migration is a complex problem that needs a comprehensive and long-term approach, the first priority for European leaders must be to stop the death toll that is a stain on the conscience of our continent. The events of recent weeks show that stopping search and rescue has not dissuaded migrants, but vastly increased the numbers of deaths. According to UNHCR, over 1,600 migrants have died in 2015 while trying to make the crossing. We call on the EU Heads of State and government to go beyond the ten point plan issued earlier this week in immediately restoring an expansive search and rescue operation in Mediterranean waters, with a level of funding and a mandate that match the humanitarian emergency that confronts us. 

The wave of migration from North African shores is fuelled by turmoil and conflict across the Middle East and the Sahel, and amplified by the breakdown of state authority in Libya. The EU is rightly committed to do what it can to help reverse these developments, but there will be no easy or short-term solution. 

In the meantime, the EU must accept that attempts at migration will continue on a large scale, and develop a range of measures that reflect our values and responsibilities, including: 

• Legal channels for asylum seekers through facilities in countries of origin or transit, to reduce the numbers carried by illegal traffickers; allowing individuals to apply for asylum from a country other than their own.

• Set up a system of relocation and redistribution within the EU, to reduce the weight of the burden falling on a handful of member states.

• Policies to secure the accommodation of refugees in non-European countries, as long as they cannot return to their countries of origin, through the construction of safe and decent facilities in third countries.

• Develop cooperation with third countries to destroy the boats used by traffickers.

• Launch a cooperative law enforcement effort to break trafficking networks, confiscate their assets and prosecute those involved.

Measures such as these are necessary to ensure that the EU’s approach to the complex challenge of migration is sustainable, equitable and humane. However the starting point of the European response to the recent surge in migrant deaths must be a recognition that we cannot allow such terrible events to persist among those trying to reach our shores. “