Voting No? You may have this key assumption wrong

If you’re thinking of voting No in the Voice referendum because governments have been spending so much taxpayers’ money trying to “close the gap” without much sign of success, perhaps you need to reconsider. If the Voice to parliament of Aboriginal and Torres Strait Islander people is enshrined in the Constitution, obliging our politicians and bureaucrats to listen, chances are that money will be better spent.

But I can tell you now the message First Nations people will be trying to get across: we want the local spending on health and education and the rest to be administered by Indigenous-led local organisations.

Why? Because when you do it that way, the money’s spent by people with a much better understanding of what the problems are, and the best ways to go about fixing them. Because when the government’s being represented by Indigenous-run outfits, they get much more trust and co-operation.

I’ve realised this mainly by reading a report, Better Outcomes and Value for Money with a Seat at the Table, issued by the Lowitja Institute, a largely government-funded, Indigenous-controlled health research organisation, based in Melbourne.

Let’s start with some facts about government spending on Indigenous people.

According to the Productivity Commission’s most recent estimates, for the 2015-16 year, spending by all levels of government on Indigenous people totalled $33 billion, representing 6 per cent of those governments’ total spending of $556 billion.

Some mates of mine believe Aboriginal people get a lot of government money the rest of us don’t. Only $6 billion of that $33 billion was specifically targeted to Indigenous people. The remaining $27 billion was the share of ordinary spending on hospitals, education, aged care and, importantly, the justice system, used by Indigenous people.

Even so, that $33 billion represents average annual spending of $44,900 per Indigenous person, compared with $22,400 per non-Indigenous person.

Why are Indigenous people getting twice as much? Because they have more disadvantage than the rest of us, and so need more help. For instance, their burden of disease is 2.3 times that of non-Indigenous people, the report says.

Indigenous people “have survived centuries of systemic racism, economic and social exclusion, and intergenerational trauma. As a result, our peoples now die far earlier and experience a higher burden of disease, disability, poverty, and criminalisation than other Australians,” it says.

But here’s the upside. Because governments are spending so much, “slight improvements in the efficiency of the existing spend would generate substantial savings, both directly and through flow-on impacts to other policy areas,” we’re told. For a case study, read to the end.

The federal government first signed a statement of intent to work in partnership with Aboriginal and Torres Strait Islander peoples in 2008, to “achieve equality in health status and life expectancy … by 2030”.

This partnership was refreshed and strengthened in 2020 by a National Agreement on Closing the Gap, made between peak Indigenous community organisations and all federal, state, territory and local governments.

The agreement accepted four priority reforms: formal partnerships and shared decision-making, building and strengthening the community-controlled sector, transforming government mainstream organisations, and shared access to data and information at a regional level.

Are you getting the message? In practice, however, the report says, “these changes have been patchy and incremental despite increased investment from government”.

“An Aboriginal and Torres Strait Islander Voice could support more effective public investment in our wellbeing because our communities know what they need and how to deliver outcomes with the right support,” we’re told.

The report argues that government-run, top-down programs to close the gap haven’t worked as well as community-controlled initiatives.

Research indicates that Indigenous-controlled community health organisations “attract and retain more Aboriginal and Torres Strait Islander patients than mainstream providers, are more effective at improving our health, and see more significant health benefits per dollar of expenditure,” the report says.

It was Indigenous community health organisations that had the knowledge and expertise to rapidly respond to the especially great threat presented to their people by COVID-19.

Throughout the first year of the pandemic, just 147 cases of the virus were reported among Indigenous people, out of 28,000 total cases in Australia. There were no Indigenous deaths and no identified cases in remote Aboriginal communities.

In the second year, Indigenous community health organisations worked tirelessly to ensure their communities were vaccinated.

Turning to education, the report says the federal government’s “remote school attendance strategy”, begun in 2013, with total spending of more than $200 million over eight years, had seen falling attendance rates.

By contrast, the report argues, in 2017, the community-led Maranguka justice reinvestment project in Bourke achieved a 31 per cent increase in year 12 retention, a 23 per cent reduction in recorded rates of family violence incidents, and a 42 per cent reduction in adult days spent incarcerated.

These improvements were calculated to have saved the NSW economy $3 million that year – five times the project’s operating costs.

I’ve drawn my own conclusions from all this. So close to the vote, I leave you to draw yours.

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If only the Indigenous had the worries of the well-off aged

One thing I hate about elections is the way politicians on both sides seek to advance their careers by appealing to our own self-centredness. I suppose when they know how little we respect them for their principles, they think bribing us is all that’s left.

The federal election campaign hasn’t started officially, but already the one issue to arouse any passion is the spectacle of the most well-off among our retired screaming to high heaven over the proposal that, though granted the concession of paying no tax on income from superannuation, they should no longer receive tax refunds as though they were paying it.

We teach our children to respect the needs and feelings of others, and to take turns with their toys, but when it comes to politics you just get in there and fight for as much lolly as you can grab. And if my voice is louder and elbows sharper than yours, tough luck.

When someone at one of those rallies of the righteous retired had the bad manners to suggest that the saving would be used to increase spending on health and education (and increase the tax cut going to those middle-income families still required to pay tax on their incomes) they were howled down. Health and education? Don’t ask me to pay.

You gave me this unbelievably good tax deal, I paid the experts to rearrange my share portfolio so as to fully exploit it, and now you tell me you’ve discovered you can’t afford it and other people’s needs take priority. It so unfair.

Meanwhile, at the other end of the income spectrum, Scott Morrison delivered a Closing the Gap report to Parliament last Thursday. It was the 11th report since the practice began, following Kevin Rudd’s National Apology in 2008.

Morrison was the fifth prime minister to have delivered the report. The fifth obliged to admit how little progress has been made in achieving the seven targets we set ourselves.

The original targets were to halve the gap in child mortality by 2018, to have 95 per cent of all Indigenous four-year-olds enrolled in early childhood education by 2025, to close the gap in school attendance by 2018, to halve the gap in reading and numeracy by 2018, to halve the gap in year 12 attainment by 2020, to halve the gap in employment by 2018, and to close the gap in life expectancy by 2031.

As you see, four of the seven targets expired last year. None of them was achieved. They’re being replaced by updated – and more realistic – targets.

In his progress report, Morrison was able to say only that two out of the seven targets were on track to be met.

The first of these is the goal of having 95 per cent of Indigenous children in early childhood education by 2025. This was achieved in the latest figures, for 2017, with NSW, Victoria, South Australia, Western Australia and the ACT now at 95 per cent or more.

The other is halving the gap in year 12 attainment by 2020. Morrison says this is the area of biggest improvement, with the Indigenous proportion jumping by 18 percentage points since 2006.

With the key target of life expectancy, the figures show some improvement for Indigenous people from birth, but associate professor Nicholas Biddle, of the Centre for Aboriginal Economic Policy Research at the Australian National University, warns that the figures are dodgy.

So why have we been doing so badly? Biddle and a colleague argue that the original targets were so ambitious they couldn’t have been achieved without radically different policies, not the business-as-usual policies that transpired.

That’s one way to put it. It’s common for politicians to announce grand targets that make a splash on the day, without wondering too hard about how or whether their successors will achieve them. And no one was more prone to such “hubris” (Morrison’s word) than Kevin07.

A second reason, they say, is that successive governments’ policy actions haven’t always matched their stated policy goals. Their employment target, for instance, hasn’t been helped by the present government’s abolition of its key Indigenous job creation program, the community development employment project.

Then there’s the present government’s soft-target approach to limiting the growth in government spending, which has involved repeated cuts to the Indigenous affairs budget, particularly in Tony Abbott’s first budget.

The most significant Indigenous policy initiative in ages, the Northern Territory Intervention – which preceded Closing the Gap, but has been continued by governments of both colours – may have directly widened health and school attendance gaps.

As well as disempowering Aboriginal people in the territory, the immense amount of money and policy attention devoted to the Intervention “could have been better spent elsewhere”.

Third, they say, measures intended to achieve the targets have rarely been subject to careful evaluation and adjustment.

Morrison professes to have learnt these lessons. But, the authors say, if his “refreshed” approach “does not put resources – and the power to direct them – into Indigenous hands, the prospects for closing socio-economic gaps are likely to remain distant”.

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Indigenous small business is on the rise

It’s the season of good cheer, so let me give you some good news: we’re not making the progress we should be in Closing the Gap between Indigenous and non-Indigenous Australians, but when it comes to increasing the ranks of Indigenous small-business people we’re doing surprisingly well.

The number of Indigenous owner-managers is conservatively estimated to have increased by 32 per cent between 2006 and 2011, and by 30 per cent between 2011 and 2016.

That’s coming off a low base but, even so, the number increased from 10,400 to 17,900 over the decade to 2016. This took the proportion of Indigenous owner-managers in the over-15 population from 3.2 per cent to 3.4 per cent.

This may not seem much, but it occurred while the proportion of non-Indigenous owner-managers actually decreased from 10 per cent to 8.6 per cent – a fall that probably reflects the difficulties affecting the economy since the global financial crisis in 2008.

It says Indigenous small businesses are making headway in the economy despite its relatively low growth over the past decade.

The figures have been derived from census data in a paper by Siddharth Shirodkar and Dr Boyd Hunter, of the Centre for Aboriginal Economic Policy Research at the Australian National University, and Professor Dennis Foley, of the University of Canberra.

The authors note that the historical exclusion of Indigenous Australians from mainstream economic life has led to low accumulation of wealth across many Indigenous communities. Only a relative few gained formal business experience before the past decade.

The result is that the vast bulk of entrepreneurially inclined Indigenous Australians probably lack the key preconditions to start a business and prosper in our capitalist economy, they say.

Today, however, things are improving – to some extent as a result of government policy. In 2015, the Indigenous Procurement Policy established targets for federal government departments to buy what they needed from Indigenous suppliers.

The value of successful tenders by Indigenous business owners has grown from about $6 million in 2012-13 to more than $1 billion in the policy’s first two and a half years to the end of 2017. Today, more than 1000 indigenous businesses are contracting with the feds.

This year the government also announced the Indigenous Business Sector Strategy, which includes measures to provide greater business support, improved access to finance, stronger connections to business networks and better sharing of information about commercial opportunities.

But all of that is insufficient to explain the rise in Indigenous enterprise over the past decade. And get this: official analysis of the register of Indigenous businesses suggests that Indigenous-owned firms are between 40 and 50 times more likely to hire Indigenous employees than are non-Indigenous firms.

So the establishment of Indigenous businesses is an important mechanism to deliver economic development and increased Indigenous participation in the workforce. And this, the government tells us, is shifting the narrative from welfare and dependence to aspiration, empowerment and independence. (A lovely thought – if only it had more substance.)

Certainly, “Indigenous entrepreneurs offer their community an avenue for greater and long-overdue economic self-determination, create positive role models within families and communities, and can serve as mentors to young, entrepreneurial Indigenous Australians,” as the authors say.

The businesses these owner-managers run are spread across Australia, but the vast majority of owner-managers are located on the east coast, particularly in greater Sydney and the rest of NSW. Large numbers also live in Brisbane, the rest of Queensland and in Melbourne.

The growth in capital cities over the past decade has occurred at double-digit rates except in Darwin, where the number of Indigenous businesses fell over the five years to 2016.

But the pattern in the regions was mixed. In regional parts of NSW, Queensland and Victoria there was double-digit growth over the decade, with the number in regional NSW doubling to more than 2700.

In regional South Australia, Western Australia and Tasmania, however, numbers remained flat between the censuses of 2011 and 2016. And they actually fell by 44 per cent in regional Northern Territory.

This could partly reflect the reduction in business opportunities following the end of the resources boom, though the same effect isn’t apparent in regional Queensland, probably because its business activities are more diverse.

But mining doesn’t fully explain the falls in the NT. Here the feds’ NT “intervention” may be to blame.

The largest declines in the number of owner-managers were in remote regions of the NT and very remote parts of WA. This reinforces the story that remote areas, where about 20 per cent of the Indigenous population lives, are underdeveloped in terms of access to markets. Clearly, it’s getting worse.

Abolition of the Community Development Employment Projects scheme may be another part of the explanation. These involved local community-run organisations creating work experience for participants and opportunities to work in communities and meet community needs through small-scale activities not otherwise funded.

Funding provided for the scheme was used to support the on-costs for these community organisations. Its abolition led to the closure of many of them. Even if they were unlikely to have owner-managers associated with them in the census, they may have supported other local enterprises by providing them with low-cost or subsidised labour.

You can argue that, by giving people subsidised jobs and solutions to community needs, the scheme robbed them of the incentive to find real, better-paid jobs and start unsubsidised businesses but, as the decline in owner-managers suggests, that doesn’t justify simply pulling the plug without providing a better substitute.

Smacks to me of controlling the growth in government spending at the expense of the most disadvantaged people in the most remote parts of the country, where opportunities to lift yourself up by your bootstraps are even rarer than in comfortable middle-class electorates.

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Indigenous middle class arises despite slow closing of the gap

It's easy for prime ministers to make big promises at some emotion-charge moment of national attention, but a lot harder to keep those promises when the media spotlight (and that prime minister) are long gone.

I could be alluding to the promise Kevin Rudd made that the federal government would never forget the needs of the victims of Victoria's Black Saturday bushfires in 2009, but I'm referring to the promise he made a year earlier, at the time of his apology to the stolen generations, to Close the Gap between Indigenous and non-Indigenous Australians.

The gap needing to be closed – and the commitments Rudd made – referred particularly to health, education and employment.

But all of those gaps contribute to another one: the gap between Indigenous and non-Indigenous incomes. What's been happening there?

I'm glad you asked because Dr Nicholas Biddle and Francis Markham, of the Centre for Aboriginal Economic Policy Research at the Australian National University, have just written a paper on the subject.

And, on the face of it anyway, the news is reasonably good.

First, however, some background. You won't be surprised that there is a gap between the two group's incomes. But it's worth remembering that gap has existed since the early days of European settlement of the Wide Brown Land.

To be euphemistic, it's a product of our colonial history. To be franker, Indigenous people were systematically and violently deprived of access to economic resources, especially land, a process that continued until well into the second half of the 20th century.

And though Aboriginal and Torres Strait Islander people engaged with the settler-colonial economy in many ways, underpayment or theft of wages was systematic in many parts of the country until the 1950s and '60s.

This colonial legacy endures into the present, Markham and Biddle say.

They quote another academic saying that "Aboriginal people, families, households and communities do not just happen to be poor. Just like socioeconomic advantage, socioeconomic deprivation accrues and accumulates across and into the life and related health chances of individuals, families and communities" (my emphasis).

The authors use the censuses of 2006, 2011 and 2016 to study what's been happening to the level and distribution of incomes within the Indigenous population, and between it and the non-Indigenous population.

The good news is that the median (the one dead in the middle) disposable equivalised​ household income for the Indigenous population rose from 62 per cent of non-Indigenous income in 2011 to 66 per cent in 2016. ("Equivalised" just means adjusted to take account of differences in the size and composition of households.)

That's the highest the percentage has been since reliable data started in 1981. And, in fact, it's been trending up since then.

There's progress, too, on the Indigenous "cash poverty rate", which measures the proportion of Indigenous incomes falling below 50 per cent of the median disposable equivalised household income of the nation's entire population.

So, as is usual in rich countries, it's a measure of relative poverty (how some incomes compare with others) rather than absolute poverty (whether people's incomes are high enough to stop them being destitute).

It's called "cash poverty" in recognition of the truth that there's more to poverty than how much money you have. As well, it acknowledges that no account is taken of "non-cash income", such as the value of food gained by hunting and gathering in remote areas.

Remember, however, that there are also costs involved in hunting. And the prices of basic necessities are much higher in remote areas.

Measured this way, the Indigenous poverty rate has declined slowly over past decades. More recently, it's gone from 33.9 per cent in 2006 to 32.7 per cent in 2011 and 31.4 per cent in 2016.

Sorry, that's where the good news runs out.

For a start, the rate of improvement is far too slow. Markham and Biddle calculate that if the gap kept narrowing at the rate it did over the five years to 2016, the medians for Indigenous and non-Indigenous incomes would be equal by 2060. That fast, eh?

Now get this: while the gap between the two groups has been narrowing, the gap within the Indigenous group has been widening.

If you take the weekly disposable personal incomes of all Indigenous people aged 15 or older, adjust them for inflation, rank them from lowest to highest, then divide them all into 10 groups of 10 per cent each, you discover some disturbing things.

Between 2011 and 2016, the average income of those in the top decile rose by $75 a week, compared with $32 a week for those in the middle decile. Individuals in the bottom decile had no income (possibly because they were students or home minding kids), while those in the second and third lowest deciles saw their incomes fall.

But what explains this growing gap between the top and the bottom within the Indigenous population?

Turns out it's explained by where an Indigenous person lives. Household disposable incomes are highest – and have grown fastest - in the major cities, with a median of $647 a week, but then it's downhill all the way through inner regional areas, outer regional, and remote, until you get to "very remote", where the median income is $389 a week.

Over the five years to 2016, the real median income in remote areas hardly changed, and in very remote areas it actually fell by $12 a week.

Got your head around all that? Now try this: despite the weakness in median incomes in remote (but not very remote) areas, the incomes of the top 20 per cent are higher and have been growing relatively strongly.

Get it? However poorly we're doing on Closing the Gap, we are getting an Indigenous middle class.

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We're Closing the Gap, but far too slowly

The latest report on government spending on Indigenous people makes shocking reading. So let me explain it to you before some One Nation-type gives you her version.

The report estimates that federal and state spending on Aboriginal and Torres Strait Island Australians was more than $33 billion in 2015-16, a real increase of almost 24 per cent since 2008-09.

That amounts to spending $44,900 a year per Indigenous Australian, twice the equivalent spending per person on the rest of the Aussie population.

See? Proof positive of what many radio shock jocks and One Nation supporters have always said: Aborigines get a host of government benefits the rest of us aren't entitled too.

After the nation's vow to Close the Gap between Indigenous and non-Indigenous Australians on health, education and employment, it's hardly surprising Indigenous spending has grown.

Trouble is, there's little likelihood this apparently massive spending will see the Closing the Gap targets reached.

Bad, eh? Waste on a grand scale.

Fortunately, however, all is not as it seems. As associate professor Nicholas Biddle, a fellow of the Centre for Aboriginal Economic Policy Research, at the Australian National University, has explained in an article on my second-favourite website, The Conversation, a closer look at the figures shows there's no reason to swallow the rubbish peddled by the downward-envy brigade. ("Oh, Aborigines get it so much easier than we do.")

First point is that the $44,900 in annual spending per Indigenous person covers more than 150 spending categories, including social security payments, but also government spending on health, all levels of education, law and order, housing, community welfare, transport and even a share of the cost of the public service and defence.

So most comes in the form of services provided, rather than cash in hand. A bit over half of the spending comes from state and territory governments, leaving a bit less than half from the feds.

The report divides the $44,900 into "mainstream services" – services available to all Australians regardless of ethnic origin – and "Indigenous-specific services".

The latter account for just 18 per cent of the total – about $8000 a year per person. This proportion is down on earlier years.

But this still leaves the annual cost per person of mainstream services for Indigenous Australians exceeding the equivalent cost for other Australians by about $14,500. How's this explained?

Mainly by the greater intensity of Indigenous people's use of mainstream services. For instance, their rate of unemployment is higher. And, rightly or wrongly, a disproportionate share of law and order spending is devoted to Indigenous people.

As well, the Indigenous population is, on average, younger – meaning disproportionate spending on education.

The rest of the difference between the levels of spending on mainstream services is explained by the higher cost of providing those services in remote locations. Biddle says that 22 per cent of Indigenous Australians live in remote and very remote areas.

And remember this. While real spending on Indigenous Australians seems to be rising rapidly in absolute terms, so too is the Indigenous population. It's up by almost 16 per cent over the seven years to June 2016, compared with a little more than 11 per cent for the non-Indigenous population.

Biddle calculates that while real Indigenous spending per person has risen by 6.9 per cent over the seven years, real gross domestic product per person has risen by 7.5 per cent.

Sadly, it's true that the Closing the Gap targets set by the Council of Australian Governments in 2009 look unlikely to be achieved.

That's because progress to date has been so modest. The targets were worthy, but unrealistic. At this stage it's probable that setting revised, more achievable targets would do more to motivate governments to keep trying.

But this isn't to say we're making no progress. Biddle and a colleague at the Centre for Aboriginal Economic Policy Research, Francis Markham, have been examining last year's census for evidence on how we're going with the gap.

On employment they find no noticeable improvement since the previous census in 2011. On education, however, the news is more encouraging.

"Indigenous people are getting into the education system earlier and staying for longer," they say. "This is likely to lead to improved socio-economic outcomes in future."

The proportion of three to five-year-olds attending preschool is up from 43.5 per cent to 48.5 per cent. The proportion of 15 to 18-year-olds at high school is up substantially from 51.2 per cent to 59.7 per cent.

The proportion of Indigenous people who've completed year 12 has risen from 28 per cent to 34.6 per cent. And the proportion of 15 to 24-year-olds in tertiary education is up from 14.1 per cent to 16.2 per cent.

But let's get real in another sense. Checking the figures to see what's been happening to government spending on Indigenous people is fine, but it tells us nothing about whether that spending is efficient, effective or even adequate.

What's more, looking at how we've been going on the various indicators of progress during the same period tells us little about whether that money is being spent well or badly.

Why? Many reasons. Because spending in one year may take many years to have an effect. Because spending in one area can affect multiple outcomes. Because outcomes in one area can be influenced by spending in many areas.

We know we're spending more but not achieving the improvement we'd hoped for. What we don't know is whether we're wasting our money or need to be spending a lot more.

Why not? Because we know too little about the effectiveness of particular spending programs. We haven't done nearly enough research to see what works and what doesn't.

We won't get as far as we should in Closing the Gap until we do our homework. That includes making more data held by government departments available to researchers.

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Australians of the Year utterly out of step with the rest of us

How moving it was to watch Malcolm Turnbull presenting the Australian of the Year awards last week. What impressive people they were. Made me proud to be an Aussie.

I can't help liking Turnbull. At a show like that he's all we could hope for in a Prime Minister. He looked the part and spoke it well. He was completely at ease, someone we can be proud to have represent us to the world.

In his introduction he said all the right things. The "extraordinary finalists" for the various awards – Young Australian, Senior Australian, Local Hero and Australian of the Year – "light the way for us – shining examples of our best selves".

"Generous and compassionate, selfless, never daunted by seemingly impossible odds, brilliant, curious, entrepreneurial, innovative, building bridges to reinforce the mutual respect which secures our harmony and diversity.

"They include First Australians and those who have dedicated their lives to working with them" – such as the wonderful Sister Anne Gardiner, who's spent her life serving the Tiwi people on Bathurst Island.

"They include migrants and refugees who have fled horrors barely imaginable ...

"Yet, however much we celebrate the remarkable, peaceful and diverse nation that we have built together, we always strive to be better. Our Australians of the Year have always shown us how ...

"Respect for women, respect for each other, in all our magnificent diversity, is the foundation on which our harmonious society depends, is the platform which enables every Australian to realise their full potential."

And yet I confess that in the days since that proud night I've suffered a bad hangover. It seems our One Day of the Year has moved from April 25 to January 26.

We celebrate these "shining examples of our best selves" for one night and day before we revert to being far from our best selves for the rest of the year. We hunt up a handful of people who remain "selfless" so we don't feel so bad about the self-seeking lives the rest of us lead?

Far from retaining a strong sense of community, of helping each other and working for the greater good, we live in an era of every person for themselves, where the material almost always gets priority over the social, where our ambitions centre on personal advancement rather than making the world a better place.

If our politicians – of both stripes – are so keen for us to be "generous and compassionate" as well as "respectful" and part of a "harmonious society" why aren't they setting a better example?

What's generous and compassionate about sending social security recipients bills for "debts" owed to Centrelink that you haven't checked properly, then making them prove they don't owe that much with payslips and other documents from past years that you hadn't warned them to retain?

What's "respectful" about treating invalids, the aged, and young workers down on their luck in such a way? What's Australian about denying point blank there's any problem with what you're doing?

Why when you've gone out of your way to honour the place of First Australians do you, the very next day, curtly brush aside their request that the white majority run to the huge inconvenience and expense of changing the date of Australia Day? Respect, eh?

Do we honour the work of the Sister Annes because they salve our consciences? Thank God they're willing to put themselves out, because the rest of us ain't.

Some of us – including many in Turnbull's own electorate – are the children or grandchildren of "refugees who have fled horrors barely imaginable".

Much worse, apparently, than the way we've been treating refugees on Nauru and Manus Island.

Turnbull is right to say we've built a highly successful multicultural society.

Lately it's been fraying at the edges, however, with intolerance of people with unfamiliar religious practices – women's head coverings; halal – fears that all Muslims are terrorists, fears we're being overrun by Asians, and downward envy of government help for disadvantaged Indigenous people.

But it's not just that our political leaders fail to set an example, it's that too often they seek partisan advantage from our moral weaknesses. Rather than seeking to calm our fears of foreigners they compete to pander to them. Let's protect ourselves from the resurgent One Nation by aping its rhetoric, even its policies.

As for respect being "the platform which enables every Australian to realise their full potential" it's sentimental claptrap – especially coming from a government that seems to have set its face against funding the nation's schools on the basis of student need rather than established privilege.

It's schools and pre-schools that should be "the platform which enables every Australian to realise their full potential".

The most worrying message we got from the latest bad news on NAPLAN and PISA testing of students is the wide gap between our best and worst students and the large minority of kids the system is failing.

As Peter Goss, of the Grattan Institute, has demonstrated, we can go most of the way to needs-based funding quickly and without extra spending, provided we're prepared to shift funding from the less-needy to the more-needy.

But that would require Turnbull to exhibit the undaunted, entrepreneurial and bridge-building character traits he so admires in others.

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One way to foster growth and jobs

Things may be gloomy in other countries, and even in parts of our own economy, but there's one aspect of Australian life where everything's on the up: we're enjoying a sustained prison boom.

Consider this. Over the 66 years to 1984, Australia's rate of imprisonment per head of population rose by a paltry 13 per cent. Over just the past 30 years, however, it's more than doubled.

How's that for progress? We now have more than 36,000 people behind bars, meaning our imprisonment rate exceeds that of Canada, Britain and most of Europe.

And I'm happy to acknowledge that the Aboriginal community has made a quite disproportionate contribution to this achievement. The Indigenous imprisonment rate is now more than 45 per cent higher than it was at the time of the Royal Commission into Aboriginal Deaths in Custody.

This exciting news is brought to us by Dr Don Weatherburn, director of the NSW Bureau of Crime Statistics and Research, in a conference paper to be delivered on Thursday.

Weatherburn calculates that if we can only maintain the rate of growth we've achieved in the past five years for another three, we'll be up to more than 43,000 prisoners nationwide.

Think of the contribution to "growth and jobs". A screws-led recovery. And think of the improvement in productivity as we stuff more prisoners into our existing jails.

But that's not the best of it. We've been able to keep prison numbers growing even as rates of crime have been falling. How's that for an achievement?

How's it been done? Easy. Over the past 30 years we've pursued policies that result in more people being refused bail, more people getting a prison sentence and more people staying in prison for longer.

Truly, the prison industry and its backers could teach the commercial world a thing or two about drumming up business.

To be fair, there was a long period when rates of crime got worse and worse. According to Weatherburn, it started in the 1960s when servicemen returning from Vietnam brought heroin with them. The rate of heroin use began to climb, and with it a lot of heroin-related crime.

Between 1973 and 2001, rates of theft and robbery soared. Property crime spread from working-class suburbs such as Redfern, Footscray and Fortitude Valley to middle-class suburbs as well. By 1983, nearly one in 10 Australian households had been victims of some form of household property crime in just the past 12 months.

The public got fed up. Led by the shock jocks, the media jumped on the bandwagon and state politicians competed with each other to prove they were tougher on crime than thou.

Australians became prison-happy. Got a problem? Whack some people in jail. Problem doesn't seem to be easing? Lengthen their sentences. Still not happy? Keep getting tougher, without ever checking to see if it's working.

But now crime rates have been falling since 2000, the time when the heroin problem suddenly went away. The national robbery rate is down by two-thirds, as is the burglary rate. Motor vehicle theft is down by more than 70 per cent and all other forms of theft by more than 40 per cent.

Even the rate of assault seems at last to be coming down in NSW and Victoria.

You could, if you were of a mind to, argue that crime is down precisely because more baddies are locked up. But this ignores all the other factors that may have changed.

Careful analysis by criminologists finds that a higher rate of incarceration does reduce crime, but only to a small extent, too small to explain much of the extent of the fall.

Of course, the nigglers – economists and suchlike – would point out that all this imprisonment is costing taxpayers a lot. In the 12 years to 1994-95, national spending on corrective services almost doubled to $880 million a year.

By now it's almost trebled to $2.6 billion a year. And if it continues its present rate of growth it will be up to $3.5 billion in three years' time.

We're spending a fortune to keep people locked up for ages even though it's not a very effective – and thus a very expensive – way to reduce crime.

But what about what about all the "growth and jobs" we're generating? You won't hear this from politicians, but those niggling economists will tell you we don't need growth for growth's sake, nor even jobs for jobs sake.

The fact is that all spending – by households, businesses or governments – creates jobs, so it's not enough to say this project or that will create jobs. That's why, if we've got any sense, we'll ensure that what we spend on brings us the most of those things we most want.

To give you an idea, the $2.6 billion a year we're spending keeping so many people banged up is the same as the cost of employing about 2800 probation and parole officers for 10 years, or putting more than 100,000 students through university.

At a time when governments – federal and state – profess to have no money to spare for worthy causes, perhaps we should be looking for ways to punish offenders that are more effective in reducing crime and aren't so expensive.

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Reprint from1995: Economics of the Dreamtime

Showing for one night only: Aboriginal Economics. Have you ever wondered what the Australian economy was like before all the whities arrived?

I've just been reading a book by our great economic historian, the late Professor Noel Butlin of the Australian National University - Economics and the Dreamtime: a Hypothetical History, published posthumously by Cambridge University Press in 1993.

Though for many years it was believed there were only about 300,000 Aborigines in the land before the First Fleet arrived in 1788, Professor Butlin calculates that it was much higher: between 1 million and 1.5 million.

They lived as bands of hunters and gatherers, ranging in size up to about 40 people. So did they have what you could call an economy? Of course they did - though, naturally, it was very different to ours. There was no money or markets and not much trade between the bands.

But decisions were made about production and consumption, there were rules of distribution, forms of property rights, a division of labour and efforts to raise productivity.

One researcher, Marshall Sahlins, has argued that Aborigines deliberately sought a low standard of living in terms of food, shelter and clothing. But, accepting this, they were "the original affluent society".

Reports from the early explorers suggest that Aboriginal bands hunted and gathered for only four to six hours a day, but frequently appeared to have plenty of food in their camps. They seemed to spend a great deal of their time gossiping, playing or sleeping.

Sahlins's purpose was to combat the modern assumption that material wants are infinite and the old view that hunter-gatherers were exposed to continuous risks of starvation and needed to work long hours each day.

That's fine, but Professor Butlin rejects the corollary that Aborigines failed to develop an advanced culture because of idleness. His argument is that what may seem to be leisure or idleness to Western eyes was actually economic activity to the Aborigines.

For one thing, in a culture without writing, talking is the main way of communicating information. A lot of talking has to take place to preserve and pass on the group's knowledge of how the world works.

He speculates that much of the "gossip" could have been meetings of the band's production planning committee: discussions about what game to hunt, what food to gather, where to look for it, when to move on and so forth.

What has been seen by Europeans as merely leisure-time activities, in which children participate in games of skill and agility, is important as education. "Reputed games of a form of 'football', organised throwing of small spears or boomerangs, climbing and wrestling could all transmit skills; and adult oversight of these activities could appear to be indolence," he says.

And time spent in ritual and ceremony was accorded far more value than mere leisure. Ceremonial activity served the purpose of preserving identity and order within the group, and so preserved economic efficiency and equity.

The general division of labour was that men hunted and women gathered. This fitted their "comparative advantage" since women were responsible for carrying or caring for children. Certain styles of hunting, by tracking and chasing larger animals or by tree climbing and chopping, required the hunter to be unencumbered. Gathering of plants, seafoods or eggs was more suitable for encumbered members of the group.

Some production, including fishing, occurred at night - which would explain why "shift-workers" slept during the day.

Production of capital goods was limited and they were often nondurable. Even so, there was a demand for clothing, bedding, stone tools and myriad wooden and fibre implements, as well as items needed for long-stay and short-stay dwellings, canoes or rafts.

On occasions when the bands joined in tribal meetings, large numbers of men (maybe several hundred), together with dogs, took part in great kangaroo hunting drives. "Efficiency derived from the ability to contain animal movements, more quickly capture wounded animals, share in transportation back to camp and so on," he says.

So this is an example of the pursuit of economies of scale in production. The most striking example of the use of capital equipment to increase production was the development in Western Victoria of massive networks of eel canals, directing and restricting the movement of eels in rivers.

The provision and maintenance of this asset, which entailed a great deal of communal effort, not only increased the yield per person but also enhanced the supply.

Another production technique was "fire-stick farming". The burning of limited areas (which required great skill and effort to limit the area) was used to capture game (in conjunction with net fences) or to expose other foods, including eggs, slow-moving creatures and yam fields.

It can be argued that burning raised the productivity of the land and this is part of Professor Butlin's claim that the Aborigines weren't just hunters and gatherers but "resource managers".

Their moving from place to place was partly dictated by seasonal crops and by drought. But "Aborigines appear to have been concerned with long-term viability and with a degree of resource management that would ensure their ability to return to any location, not merely to 'mine' one and leave it".

There is evidence also of technological advance. Stone tools became smaller, finer and possibly more precise. The exploitation of fine stone spear tips would have improved killing efficiency.

The advent of the hafted fine-stone chisel or adze greatly improved efficiency in the hollowing of logs, the shaping of spear-throwers, the construction of shields and the removal of bark for canoes, housing or artistic products, including all forms of carving.

One technological breakthrough, however, was imported. The dingo arrived with the trepang fishermen from Sulawesi. It appears to have spread rapidly throughout Australia and enabled a great increase in hunting efficiency.

What does all this prove? Well, just for once, it doesn't have to prove anything. But it does show that, to an economist, economics is everywhere.

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How many Aboriginals died after the colonialists arrived?

If we can't lift our minds from earnest discussion of the economy and its discontents between Christmas and New Year's Day, when can we? So let's take a summer squiz at the work of the rapidly diminishing band of economic historians.

One of the most interesting things they do is try to piece together economic statistics covering the years before much official effort was devoted to measuring the economy. The United States didn't start publishing figures for gross domestic product until 1947; we didn't start until 1960.

The global doyen of economic historians was the Netherlands-based Scot, Professor Angus Maddison, who devoted his career to "backcasting" GDP to 1820 for all the major economies and regions of the world.

Despite all the unavoidable and debatable assumptions involved, Maddison's estimates are still widely used. They're a reminder that, before Europe's Industrial Revolution, the two biggest economies were China and India.

Australia's most distinguished economic historians were Noel Butlin, of the Australian National University, and his older brother, Syd, of Sydney University (after whom its Butlin Avenue is named).

Noel backcast Australia's GDP to 1861, then began researching what the Australian economy must have been like before white settlement. He wrote up his findings in Economics and the Dreamtime: A Hypothetical History (which I wrote up in a column on April 5, 1995).

As part of this research Butlin devoted much effort to estimating the size of the Aboriginal population before 1788. The anthropologist Alfred Radcliffe-Brown wrote in the Commonwealth Yearbook of 1930 that it would have been more than 250,000, maybe even more than 300,000.

But Butlin's piecing together of the evidence told him this was way too low. He wrote in 1983 that it would have been 1 million or 1.5 million.

Then in 1988 some of Australia's leading archaeologists, led by John Mulvaney, argued that a more accurate estimate would be between 750,000 and 800,000. This has become accepted as "the Mulvaney consensus".

Now enter Dr Boyd Hunter, of the Centre for Aboriginal Economic Policy Research at ANU. With Professor John Carmody, a physiologist at Sydney University, he published this year in the Australian Economic History Review a long paper reviewing Butlin's population estimates.

The point, of course, is that the Aboriginal population declined dramatically in the early days of white settlement. We can be reasonably confident that, by 1850, the Indigenous population was only about 200,000.

Thus backcasting the figures to 1788 involves determining the main factors that led to the loss of Aboriginal lives and estimating how many lives they took, then adding them back. So the paper is a kind of whodunit.

One factor springing to the modern mind is that the unilateral appropriation of Aboriginal land led to much frontier violence, which started shortly after the arrival of the First Fleet and persisted well into the 20th century.

"Like any war, declared or otherwise, the conflict led to many deaths on both sides," the authors say. But even the controversial historian, Henry Reynolds, estimated the number of violent Aboriginal deaths at as many as 20,000, making this only a small part of the explanation.

Butlin allows for Aboriginal "resource loss", where tribes' loss of productive members and land used for sustenance led to people dying of "starvation or dietary-related diseases". Butlin's calculation implies this factor would have involved as many as 120,000 people.

That's still not the biggest part of the story. No, the big factor is the spread of introduced diseases. Such as? Tuberculosis, bronchitis and pneumonia, not to mention venereal disease.

But the big one is smallpox. Butlin and others have assumed that it spread rapidly around Australia along the extensive pre-existing Aboriginal trading routes after its first recorded outbreak in Port Jackson in April 1789.

In 2002, however, the former ANU historian Judy Campbell argued in her book, Invisible Invaders, that it was brought to Northern Australia by the Macassan coastal traders following its outbreak in Sumatra in 1780, then spread across the continent, reaching Port Jackson by early 1789.

This is where Hunter – no doubt relying heavily on the expertise of Carmody – brings to bear modern medical understanding of the infectiousness and mortality rates of various diseases. Although smallpox has a high rate of mortality – between 30 and 60 per cent of those who contract it – it's not highly infectious.

This means it happens most in densely populated areas and doesn't spread rapidly to distant areas. This casts doubt on Campbell's theory that smallpox spread rapidly from lightly populated Northern Australia to densely populated NSW.

But it also casts doubt on Butlin's theory that smallpox spread rapidly from Sydney to the rest of Australia via Aboriginal trading routes.

So what's Hunter and Carmody's theory? Are you sitting down? Gathering all the suspects in a room, detective Hunter deftly turns the finger of guilt from smallpox to the so-far unsuspected chickenpox.

The two are quite separate diseases, but this wasn't well-known in the 1780s. And since they both give rise to rashes or spots around parts of the body, many people may not have been able to tell the difference.

The point, however, is that chickenpox is about five times more infectious than smallpox, meaning it could spread a lot faster. It can recur in adults as shingles, which is also highly infectious. When adults contract chickenpox it can be fatal.

When the authors use chickenpox to do their backcast, assuming a low mortality rate of 30 per cent and also taking account of resource loss, they get a pre-contact Indigenous population (including up to 10,000 Torres Strait Islanders and up to 10,000 original Tasmanians) of about 800,000 – which by chance fits with the Mulvaney consensus.

If so, colonialists didn't outnumber the (much diminished) Aboriginal population until the mid-1840s. And by 1850 the total Australian population was still 25 per cent smaller than it was before colonisation.

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Too busy chopping to make spending effective

The federal government spends a lot of money trying to "close the gap" between indigenous Australians and the rest of us. Actually, we've been spending a lot for years without making much headway. So what should we do?

I suspect there are people within Treasury and Finance who think the answer's obvious: if the spending ain't working, give it the chop. Didn't you know we have a deficit problem?

But the gap between us is so wide in so many respects - life expectancy, health, income, employment, victimisation, incarceration and education - we couldn't in all conscience abandon our efforts to reduce it.

So I have a radical suggestion: why don't the people in charge of the government moneybags get off their backsides and put a hell of a lot more effort into ensuring taxpayers' funds are spent more effectively? Instead of wringing their hands, why don't they bring a bit of science to bear?

Last week Dr Rebecca Reeve, a senior research fellow of the Centre for Health Economics Research and Evaluation at the University of Technology, Sydney, outlined to a meeting of the Economic Society the results of her research evaluating the policies aimed at closing the gap.

She used econometric tools to analyse several surveys conducted by the Bureau of Statistics, noting that the nature of indigenous disadvantage and the best solutions to it may depend on where people are located.

It may surprise you that indigenous disadvantage isn't limited to people living in remote areas. And the majority of Aboriginal and Torres Strait islanders don't live in remote areas. Indeed, more live in NSW than other states or territories. Of those who do, 43 per cent live in major cities and another third live in inner regional areas. Reeve's studies focused on people in the major cities of NSW.

She found that rates of poverty were much higher for indigenous people, home ownership was lower, significantly fewer had completed year 12 and rates of employment were lower. The proportions reporting their health to be poor or fair were at least double those for other people. And the proportion who had been victims of assault was a lot higher.

Although indigenous people make up only about 3 per cent of the NSW population, they accounted for 23 per cent of prisoners. Young people are 26 times more likely to be in juvenile detention.

That's the gap. Reeve used sophisticated regression analysis to identify the key drivers of those gaps. She found that having been at school beyond year 10 made you more likely to be employed, as did participating in more than four types of social activity.

Being a lone parent, being a married female with children or being disabled made you significantly less likely to be employed.

The most significant predictors of having been a victim of physical or threatened violence in the past year were being disabled or having suffered stress from drug or alcohol use.

In this context, "disabled" means having a health problem lasting six months or more. Reeve found that by far the most significant predictor of being disabled was having been a victim of assault.

By far the most powerful predictor of being in jail was having been charged with some offence as a child. And by far the most powerful predictor of having been charged as a child was being male.

What these findings demonstrate is the interdependence of the various aspects of indigenous disadvantage. Problems such as involvement with the criminal justice system, long-term ill-health, victimisation and not having a job are all connected.

In a way, this is good news. It means targeting areas that are expected to reduce one or more of these problems should also mean improvements in other problems.

For instance, Reeve finds that an extra year of education should improve someone's employment prospects directly, but also improve them indirectly by reducing the likelihood of the person being in jail.

And get this one: her findings suggest that reducing drug and alcohol problems should reduce victimisation, which should reduce long-term health problems, which should increase employment, which should increase income.

The downside, however, is that failure to generate improvements in the key drivers of disadvantage will hinder progress in many areas.

The Council of Australian Governments' national indigenous reform agreement recognises the significance of interdependency: an improvement in one building block is reliant on improvements in other building blocks.

But though the COAG reform agenda aligns with Reeve's econometric evidence, the "close-the-gap report card" finds that targets have not been achieved in many areas. And in some areas gaps are widening.

A separate study by Reeve and colleagues on factors driving the gap in rates of diabetes also finds that, although programs are targeting the right areas, there's been no reduction in the high prevalence of diabetes among indigenous people.

I'd be surprised if Treasury and Finance have shown any interest in learning from Reeve's research. The usefulness of that research in showing "what works and what doesn't" seems to have been limited by the lack of detail in the existing official surveys it relied upon.

If we're to become better informed about why all the money we're spending isn't delivering better value we probably need to undertake more detailed, even purpose-built surveys, including longitudinal surveys that make it easier to distinguish between cause and effect.

But as we were reminded this week with all the problems the bureau has had with its jobs survey, successive governments have been reducing our statistical effort, not increasing it.

If Treasury and Finance warned the Abbott government that extracting yet more "efficiency dividends" from government agencies has become counterproductive - making government spending more wasteful in the name of making it less wasteful - there's been no whisper of it.

Reminds me of one of my father's sayings: too busy chopping wood to sharpen the axe.

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How we can do better on Aboriginal imprisonment

You don't need me to tell you that in a country such as America, with all its history of racial conflict, the rate of imprisonment for African-Americans is far higher than the rate for whites. Twelve times higher, in fact. But you may need me to tell you we make the Yanks look good. Our rate of indigenous imprisonment is 18 times that for the rest of us.

Aborigines make up 2.5 per cent of the Australian adult population, but account for 26 per cent of all adult Australian prisoners.

If you want me to give you some economic reasons we should care about this, it's not hard. On average it costs $275 a day to keep an adult in jail. So it's costing taxpayers about $800 million a year just to keep that many Aborigines in prison. And this takes no account of the cost of juvenile detention centres, police costs in responding to offending, the cost of investigating and prosecuting suspected offenders and the health costs in responding to and treating victims.

Obviously, for every Aborigine who was in a job and paying tax rather than in jail and costing money, there'd be a double benefit to taxpayers, as well as a gain to the economy.

But the far more important reason for caring about the high rate of indigenous imprisonment is moral. As the criminologist Dr Don Weatherburn argues in his new book Arresting Incarceration, the consequences of European settlement have been truly calamitous for Aboriginal Australians.

"The harm might not have always been deliberate and it may not have been inflicted by anyone alive today, but it is no less real for that," Weatherburn says. "An apology for past wrongs would be meaningless without a determined attempt to remedy the damage done."

The trouble is, particularly in the case of Aboriginal imprisonment, we've been making such an attempt, but getting nowhere. If not before, the problem was brought to our attention by the 1991 findings of the Royal Commission on Aboriginal Deaths in Custody.

The commission found that Aborigines were no more likely to die in jail than other prisoners. The reason so many died was that they constituted such a high proportion of the prison population.

The Keating government accepted all but one of the commission's recommendations and allocated the present-day equivalent of almost $700 million to put them into effect. State and territory governments committed themselves to a comprehensive reform program.

But get this: rather than declining since then, the rate of Aboriginal imprisonment has got worse.
"It is hard to imagine a more spectacular policy failure," Weatherburn says.

It would be easy to blame the problem on racism in the justice system but, though there may be some truth in this, it's not the real reason. Similarly, Weatherburn argues it's not good enough to blame it on "indigenous disadvantage".

If that were the case, virtually all Aborigines would be actively involved in crime and they aren't. Most are never arrested or imprisoned.

The plain fact is that more Aborigines are in jail because more Aborigines commit crimes, particularly violent crimes. In NSW, for example, the indigenous rate of arrest for assault is 12 times higher than the non-indigenous rate. The rate of indigenous arrest for break and enter is 17 times higher.

Measures taken after the royal commission failed to reduce crime because they assumed this would be achieved if indigenous Australians were "empowered". Much of the money and effort was devoted to legal aid and land acquisition.

Weatherburn argues that if you want to understand indigenous offending, you need to look at the factors likely to get anyone involved in crime, regardless of race.

"The four most important of these are poor parenting (particularly child neglect and abuse), poor school performance, unemployment and substance abuse," he says. "Indigenous Australians experience far higher rates of drug and alcohol abuse, child neglect and abuse, poor school performance and unemployment than their non-indigenous counterparts."

The first and most important thing we need to do, he says, is reduce the level of Aboriginal drug and alcohol abuse. This is key, not just because drug and alcohol abuse have direct effects on violence and crime, but also because they have such a corrosive effect on the quality of parenting children receive, which greatly increases the children's risk of involvement in crime.

Weatherburn's second priority is putting more resources into improving indigenous education and training. As the mining boom in the Pilbara has shown, it's much easier to find jobs for Aborigines when they have the degree of education and skill employers are looking for.

His third priority is investing in better offender rehabilitation programs. Efforts to divert serious and repeat offenders from prison have been a dismal failure. But small changes in the rate of indigenous return to jail have the potential to produce large and rapid effects on the rate of Aboriginal imprisonment.

Much existing spending on Aboriginal affairs is ineffective. Were it not for Tony Abbott's special affinity with Aborigines in the Top End, we could expect the coming federal budget to really put the knife through it.
But this would save money without reducing the problem.

It will be a great day when the advocates of smaller government abandon the false economy of not wasting money on the routine, rigorous and independent evaluation of the effectiveness of government spending programs. Then we might make some progress.

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