How to avoid being conned by business lobby groups

The obvious question arising from big business’s onslaught against Anthony Albanese and his government is: do Australia’s voters know which sides their bread is buttered on? Sorry, boss, I think they usually do.

Last week the (Big) Business Council let fly against Albanese & Co. with both barrels. According to its chief executive, rather than feeling confident in our growing national prosperity, many of the big-business chief executives who make up the council’s membership “feel we are losing our way”.

“Instead of taking big steps on the things that matter, we are taking incremental – but noticeable – steps backwards. We have let the balance shift too far away from encouraging Australians to grow, hire, innovate and be more competitive on the world stage,” he said.

What were the big steps Albanese was failing to take? Reducing red tape, making workplace laws more flexible, making planning systems simpler and the tax system more efficient.

But “abolishing multi-employer bargaining must be seen as a priority,” he said.

This fits with the equally vehement criticism from the Mining Council the previous week, which claimed Albanese’s “reckless” industrial relations laws were already bringing conflict “to every workplace in every industry”.

Ah. So that’s what’s biting big business. But the criticism doesn’t stop there. As the business press revealed, even former trade union leader Bill Kelty – who was virtually a member of the Hawke-Keating government’s cabinet – was highly critical.

The Albanese government “seems to have lost its way” and was “mired in mediocrity”, Kelty is reported to have said to a private business gathering. “We need a Labor Party agenda in which the big issues are confronted.”

What the business press didn’t seem to know is that Kelty’s “big issues” are hardly likely to have much in common with big business’s big issues. And I very much doubt that Albanese’s industrial relations changes would have been among them.

There are plenty of good reasons for being disappointed with this government’s performance. Also last week, former Labor heavy Gareth Evans has accused the Albanese government of political timidity, condemning its instinct to “move into cautious, defensive, wedge-avoiding mode”.

Evans said in a speech: “One can’t avoid the impression that more and more people are asking: what exactly is this Labor government for?”

Just so. Now that’s a criticism many of us could share, without bearing the government any ill-will and, unlike the business lobby groups, without our disappointment concealing some purely self-interested barrow we’re pushing.

I think it’s past time voters were told more about the major role the many lobby groups play in federal politics. It’s as though lobbying has become Canberra’s second-biggest industry.

The business, employer and industry lobby groups engage in three main activities. First, they lobby the government, top bureaucrats and key senators in private, without any of us noticing. They press for policy changes that would make it easier for their businesses to increase their profits, and press against policy changes that would make it harder for their businesses to increase profits.

After just about every proposal to change a government policy, Treasury or some other department opens a “consultation”, inviting interested parties to say (in private) what they think about the merits and practicality of the proposed changes.

This is when the Canberra-based lobby groups, and private firms of lobbyists (many of them former politicians or ministerial staffers from the party that happens to be in power) swing into action. Responding to these offers of private consultation with the bureaucracy is the main way they earn their living.

Their objective is always to persuade the bureaucrats to persuade the government to tone down the change, making it less restrictive and costly to the businesses they’re representing. Often their argument will be that it’s a nice idea but, unfortunately, hugely impractical. Would cost them millions to comply.

A second role of the lobby groups is to respond publicly to changes their clients don’t like with exaggerated claims about the death and destruction the changes will cause. Just about any increase in the minimum wage will lead to thousands of Australians losing their jobs, we’re told. The latest changes to industrial relations rules will “bring conflict to every workplace in every industry”.

They exaggerate to ensure their press releases are picked up by the media. Their purpose is partly to put pressure on the government (or the Fair Work Commission), but mainly to use the media to send a signal back to their fee-paying member businesses around the country: “Don’t worry, you’re getting good value for having us here in Canberra fighting tirelessly to protect your interests against the wicked government.”

The lobby groups’ third role is the one we saw last week. Once all your private lobbying has failed to deter the government from doing something your clients really hate, take the fight public.

You try to pressure the government via the voters, by cooking up an argument that the people who’ll suffer most from the changes you don’t like aren’t the shareholders and bosses of the businesses you represent, but the country’s ordinary workers and consumers.

“We’ll be forced to pass all the new tax on to our customers. So we’ll be right, but we’re really worried about what the government’s doing to our poor customers.” (In which case, why are you fighting the tax so hard?)

As for all the industrial relations changes designed to reduce the insecurity of so many workers and to give workers in smaller businesses the ability to gain some bargaining power by uniting with workers in other businesses, this won’t improve workers’ job security, pay or conditions, but will stifle investment and productivity, make Australian businesses less competitive against the sweat shops of Asia, and cause many people to be unemployed, we’re told.

Some of these arguments contain a grain of truth, but they’re attempts to use concocted, pseudo-economic arguments to con ordinary voters into believing their interests coincide with the interests of big business, and so get them to pressure the government to stop doing things that business objects to.

A big part of this con involves the use of code words that sound more innocuous than they are. “Flexible” means flexibility for the boss, but inflexibility for the worker. “Reform” means a change that benefits business at someone else’s expense. “Populism” means a change that benefits many ordinary people at business’s expense.

“Red tape” should mean excessive form-filling that serves no useful purpose. In the mouths of big-business people, however, it means laws and regulations that limit their freedom to build new mines and other projects in places that would do great damage to the natural environment.

The Albanese government’s timidity in all but industrial relations is disappointing, but I doubt it’s so hopeless it fails to ensure voters know that what big business wants for itself is contrary to their interests.

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Governments share power with multitudinous lobbyists

You may think the media is full of the argy-bargy of politics, full to saturation point. There is, however, a level of politics we rarely hear about. You may not have noticed, but it raised its ugly head at the time of the budget earlier this month.

One sign was the anger, almost outrage, of the big banks when, on budget night, Scott Morrison surprised them by announcing a small new tax on them. Why weren't we consulted about this, they shouted.

Just a few days earlier, Education Minister Simon Birmingham surprised us by announcing the government's conversion to needs-based federal grants to schools, a la St David of Gonski.

The Catholic school authorities were deeply saddened. Birmingham's plan was to gradually unwind decades of special sectarian deals, the most recent of which had been made with the previous Labor government.

Why in Heaven's Name weren't we consulted before this unholy decision was made public, they cried.

When I heard both interest groups making their loud complaints I reacted the same way. Who the hell do these guys think they are?

You and I don't expect to be consulted before governments announce their policy decisions, so what gives these people the right to special treatment?

Well, I'll tell you: it's because that's the way they're used to being treated. Governments are considering making changes affecting a powerful and vocal interest group, so they – and more particularly, the top bureaucrats in the relevant government department – engage in private discussions with industry leaders and lobbyists.

If Birmingham decided on a new school funding arrangement without consulting the most-affected interest groups, it must have been because he knew they'd move heaven and earth in their efforts to ensure it didn't happen.

And, come to think of it, it's not all that unusual for new tax measures to be announced in the budget without prior consultation. You could justify this as necessary to ensure people aren't able to profit from inside information.

But I suspect it happens also because Treasury likes it that way. In the annual preparation for the budget, which goes on for months, Treasury ensures decisions about tax changes are made just days before budget night. That way, there's no time to consult and no time for ministers to be dissuaded from acting.

So the consultation happens after the move has been announced, when the government would lose face if it backed down too far.

Indeed, major tax and policy changes are invariably put into an industry consultation phase before being legislated. You can justify this practice by saying the world's become a complicated place and that the affected industry will always have an understanding of the practicalities of implementation that's superior to the bureaucrats'.

But there's more to it. I think industry representatives are routinely consulted on policy matters affecting them because, in practice, elected governments have come to share their power with a multitude of lobby groups.

You and I don't see the huge extent of contact that occurs between peak industry groups, consultant lobbyists and visiting executives, on one hand, and ministers, parliamentarians and bureaucrats on the other.

Indeed, we non-Canberrans don't realise the extent to which lobbying has become that city's second-biggest industry. That's particularly so if you include Canberra's small army of economic consultants, who earn their living by concocting "independent" modelling which, purely by chance, always seems to prove their clients' case.

And that's not counting the big four accounting firms which, when they're not doing "independent" modelling for the small fee, give extensive – and no doubt expensive – consulting advice on policy questions to government departments.

Why do they need such advice? Why is policy expertise moving from the public service to outside consultants? Because the yearly imposition of "efficiency dividends" on government departments means they keep getting rid of their policy experts. The words "false economy" spring to mind.

For an idea of just how big the lobbying industry has become, consider this. Buried in the budget was an announcement that the government had accepted the recommendations of a review of the financial system's arrangements for resolving external disputes.

Some lobby groups were unhappy with this decision, so last week they issued a press release saying so. It was issued in the name of six industry groups: the Mortgage and Finance Association of Australia, the Customer Owned Banking Association, the Australian Collectors & Debt Buyers Association, the Association of Securities and Derivatives Advisers of Australia, the Australian Timeshare and Holiday Ownership Council, and the Association of Independently Owned Financial Professionals (each with their own logo).

But if all the industry groups and other lobbyists did was issue press releases there would be little to worry about. Lobbying in public is just the tip of the iceberg. What matters is all the private contact with bureaucrats, ministers and politicians, particularly crossbench senators, we know nothing about.

Late last year I wrote prematurely about an eye-opening book by Dr Cameron Murray and Professor Paul Frijters, Game of Mates, which has finally been published.

The book reminds us that one way moneyed interests gain influence in the halls of power is by rewarding co-operative senior bureaucrats and politicians with post-retirement patronage. You too could be gamekeeper-turned-lobbyist.

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Competition is a wonderful thing - up to a point

The older I get the more sceptical I become. Goes with being a journo, I guess. I've become ever-more aware that no one and nothing is perfect. Not political leaders, not parties, not any -isms, not even motherhood.

Take competition. Economists portray it as the magic answer to almost everything, but the more I see of it, the more conscious I become of its drawbacks and limitations.

Which is not to say I don't believe in it. Far from it. We could use a lot more competition than we've got. But only in the right places and for the right reasons.

The recent draft report of the review of competition policy, chaired by emeritus professor Ian Harper, argues that we need to step up the degree of competition in the economy if we're to cope with three big sets of challenges and opportunities that we face: the rise of Asia, our ageing population and the advent of disruptive digital technologies.

Dead right - up to a point.

We need more competition in the economy because it's what keeps the capitalist system working in the interests of the populace, not the capitalists. But that doesn't mean it makes obvious sense to take areas of our lives that have been outside the realm of the market and turn them over to the capitalists.

Economics is about efficient materialism; making sure the natural, man-made and human resources available to us are used in ways that yield maximum satisfaction of our material wants. It argues that economies based on private ownership and freely operating markets - "capitalist" economies - are the most efficient.

What's to stop the capitalists using markets to exploit us and further aggrandise themselves? Competition. Competition between themselves, but also between us (the consumers) and them (the producers).

Get this: the ideology of conventional economics holds that the chief beneficiaries of market economies should be, and will be, the consumers, not the capitalists.

Market economies are seen as almost a con trick on capitalists: they scheme away trying to maximise their profits at our expense, but the system always defeats them, shifting the benefits to consumers (in the form of better products and lower prices) and leaving the capitalists with profits no higher than is necessary to keep them in the game.

What it is that performs this miracle? Competition. It's not nearly as fanciful as it sounds. Since the industrial revolution, the history of capitalism is the history of capitalists latching on to one new technology after another, hoping for the killing that never materialises.

Take the latest, digital technology and its effect on my industry, news. Who's losing? The formerly mighty producers of the soon to be superseded newspaper technology, including many of their journalists and other workers. Who's winning? People wanting access to as much news as possible as cheaply as possible.

For good measure, the cost of advertising - reflected in the prices of most things we buy - is now a fraction of what it was. Tough luck for producers, good luck for consumers. Competition at work.

But, amazing though this process is, it's far from perfect. Competition doesn't work as well in practice as it does in theory, for many reasons. A big one is "information asymmetry" - producers know far more about products than consumers do. Another is the presence of economies of scale, which has led to most markets being dominated by a handful of big companies.

Perhaps most pernicious, however, is the success of some producers in persuading governments to protect them from the full rigours of competition. Some industry lobbies are particularly powerful, and the ever-rising cost of the election arms race has made the two big parties susceptible to the viewpoints of generous donors.

The report produced by Harper, a former economics professor, emphasises that competitive pressure needs to be enhanced for the ultimate benefit of consumers. With so many big companies enjoying so much power in their markets, we need laws against anti-competitive practices. He proposes refinements to make these laws more effective.

He points to industries where governments need to reform laws that limit competition at the expense of customers: retail pharmacies, taxis and coastal shipping. He advocates "cost-reflective road pricing" and an end to restrictions on "parallel imports" of books, recordings, software and so on (fear not, the internet's doing it for us) and local zoning laws that implicitly favour incumbents (Woolies and Coles, for instance) at the expense of new entrants (Aldi and Costco).

But, predictably, there's little acknowledgement that competition has costs as well as benefits. It's assumed that if some choice is good, more must be better. And competition-caused efficiency outweighs all social considerations.

So the report advocates liberalising liquor licensing, and deregulation of shopping hours on all but three holy days a year (the holiest being Anzac Day), without any serious consideration of the effects on sobriety and crime in the first case or family life, relationships and what I like to call re-creation in the second.

Similarly, it sees nothing but benefit in maximising choice and competition between schools, and wants much more outsourcing of the delivery of government-funded services to profit-motivated providers.

The inquiry we need is one to check how well previous experiments in mixing government funding with the profit motive - in childcare, for instance, or training courses for international students - have worked in practice. We need more evaluation and fewer happy economist assumptions.

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Abbott's red tape play-acting hides rent-seeking

The world of politicians gets deeper and deeper into spin, and so far no production of the Abbott government rates higher on the spin cycle than last week's Repeal Day.

Hands up if you believe in red tape? No, I thought not. So how about we package up a huge pile of window dressing with some worthwhile but minor measures, slip in a few favours for our big business supporters and generous donors, and call it the most vigorous attack on red tape ever? This will give a veneer of credibility to our claim it will do wonders for the economy.

In the process, of course, we'll have changed the meaning of "red tape". It's meant to mean bureaucratic requirements that waste people's time without delivering any public benefit. In the hands of the spin doctors, however, it's being used to encompass everything from removing dead statutes to the supposed deregulation of industries.

Repealing redundant laws and regulations dating back as far as 1900 is mere window dressing. By definition they don't waste anyone's time - if they did they'd have been repealed long ago. Their primary purpose is to allow Tony Abbott to quote huge numbers: today I announce the abolition of more than 1000 acts of Parliament and the repeal of more than 9500 regulations. A trick you can pull only once.

Somewhere in there is some genuine, time-wasting red tape we're better off without, but it doesn't add up to much - hence the need for so much padding. Governments of both colours are always promising to roll back red tape, mainly because it gives people such an emotional charge.

But while it's true there are examples of mindless, unreasonable bureaucratic rules and requirements that could be eliminated or greatly simplified at no loss to anyone, much alleged red tape is in the mind of the beholder: it's red tape if you don't like it and good governance if you do.

There are plenty of small business people who'd try telling you supplying information to the Bureau of Statistics was "pointless red tape", maybe even filling out tax returns. In an era when big business is going overboard on "metrics", it's whingeing about the "reporting burden" the government imposes so it - and the rest of us - can know what's going on in the economy.

When business isn't complaining about "compliance costs" it's demanding greater transparency and accountability from governments. Guess what? They're opposite sides of the same coin. The world is and always will be full of compliance costs. The sensible questions are whether they're higher than they need to be and whether the benefits of compliance outweigh the costs.

The notion that all so-called red tape comes from power-crazed bureaucrats is a delusion. Most excessive regulation comes from politicians. Sometimes they act at the behest of lobbyists for particular industries, sometimes they're merely trying to create the appearance of action (an old favourite is laws to make illegal something that's already against the law) and sometimes they pass an act to impress the punters while carefully leaving loopholes and escape hatches for the industry pros.

But the most objectionable feature of the whole red tape Repeal Day charade is the way it has been used as cover for rent-seeking by the Coalition's industry backers. It's an open secret the protections for investors provided by the Future of Financial Advice legislation are being watered down at the behest of the big banks, which want to be freer to incentivise unqualified sales people to sell inappropriate investment products to mug punters.

Then there's the strange case of the Charity Commission,which was set up only recently to reduce inefficient regulation and red tape. It's to be abolished despite the objections of most charities, presumably because the Catholic Church doesn't like it.

It's being claimed all these dubious doings will "drive productivity, innovation and employment opportunities", not to mention "creating the right environment for businesses of all sizes to thrive and prosper and to drive investment and jobs growth".

Yeah sure. The claimed savings of $700 million a year (don't ask how that figure was arrived at) are equivalent to 0.04 per cent of GDP, and yet they'll work wonders. Must be an incredible multiplier effect.

We're told we'll be getting at least two Repeal Days a year, with the goal of achieving savings worth $1 billion a year. Really, a minimum of six Repeal Days in Abbott's first term? What's the bet that promise will be quietly buried?

But for as long as this pseudo reform lasts it seems it's intended as a substitute for genuine deregulation.

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Rent-seeking stymies genuine reform

For most of the past decade I’ve defended Australia’s mining companies and their boom against unreasonable criticism. So I could hardly be said to be anti-mining. But one of my failings is that don’t get any fun out of telling people what they’d like to hear. So when I was asked to speak at the federal government’s annual conference on resources and energy last month I decided to tell the miners a few home truths. This is a shortened version of what I said.

With the change of government I'm sure you're a lot happier about the prospects for the economy and its management, and a lot more confident of a sympathetic hearing from the new government. I wouldn't be so sure.

I suspect the mining industry's lobbying success is reaching its zenith as we speak. It won't surprise me if, looking back on the life of the Abbott government, you come to realise the big gains the industry made actually occurred under the Labor government. They occurred no thanks to Labor, and all thanks to the Coalition, but they occurred in reaction to the policies of Labor as part of Tony Abbott's successful four-year campaign to fight his way back into office.

Why did Abbott immediately oppose the mining tax and promise to repeal it? Because he genuinely believed it would wreck the mining industry and do damage to the wider economy? I doubt it.

He did it primarily because he saw opposing the tax as a popular cause and was hoping for a lot of monetary support from the big miners in the 2010 election.

Why did Abbott set his face against the carbon pricing scheme? Because it was the price of getting the backing within the party that allowed him to wrest the Liberal leadership from Malcolm Turnbull and because he could see what a popular cause it would be to oppose this "great big new tax on everything".

Now, I have no doubt that keeping his promises to get rid of the mining tax and the carbon tax will be among his priorities. But my point is this: having delivered so handsomely for the mining industry, I doubt if he'll feel in any way indebted to the miners.

Indeed, he may well feel he's the one that's owed. Certainly, he'll feel the miners have had enough favours to be going on with.

And it won't surprise me if that's the attitude other industries take: that the miners have had their turn and it's time to give other industries a go.

Does this analysis seem cynical? Sorry, it's just being brutally realistic. We all pursue our self-interest, but we all cloak our self-interest in arguments about how this would be in the best interest of the economy. All I'm doing is stripping away the bulldust.

Most people in business are hoping that with a more enlightened government in power with a big majority in the lower house and a workable Senate after July, we'll see some major economic reform, if not in Abbott's first term then certainly in his second. I think this is an idle hope.

In a prophetic speech he delivered in May - and which he's in the process of expanding into a short book - Professor Ross Garnaut argued that our political culture has changed since the reform era of 1983 to 2000, in ways that make it much more difficult to pursue policy reform in the broad public interest.

"If we are to succeed, the political culture has to change again," he said. Policy change in the public interest seemed to have become more difficult over time as interest groups had become increasingly active and sophisticated in bringing financial weight to account in influencing policy decisions.

"Interest groups have come to feel less inhibition about investment in politics in pursuit of private interests.
"For a long time, these past dozen years, it has been rare for private interests of any kind to be asked to accept private losses in the interests of improved national economic performance.

"When asked, the response has been ferocious partisan reaction rather than contributions to reasoned discussion of the public interest in change and in the status quo," Garnaut said.

I would remind you that, though John Howard's introduction of the GST is a notable exception, many of the reforms of the Hawke-Keating era were achieved with bipartisan support - something that's unthinkable today.

Much of that reform, particularly in taxation, involved packages of measures in which particular interest groups suffered some losses, offset by other gains. As Garnaut argues, and I'm about to demonstrate, this kind of co-operative give-and-take between interest groups willing to accept reforms in the wider public good isn't conceivable today.

My way of making Garnaut's point is that since the reform era of the 1980s and '90s, we've regressed to a culture of rent-seeking. You can see this at the level of the political parties and at the level of the industry lobbies.

When Howard had the courage to propose introducing a GST, Labor saw its chance to regain office by running a populist scare campaign against it, and came within a whisker of winning the 1998 election. At the time it professed to be righteously opposed to such a regressive tax, but when it finally regained power seven years later, the idea of doing something about that supposedly abhorrent regressivity never crossed its mind.

When, in turn, the Rudd government attempted the risky reforms of installing the "economic instrument" most economists recommend for responding to climate change, and rebalancing the tax system by reforming the taxation of mineral deposits and using the proceeds to reduce taxes elsewhere, Abbott lost little time in deciding to take advantage of Labor's vulnerability.

Do you really think the events of the past three years will have no bearing on the Labor opposition's attitude to any controversial reforms Abbott might propose in the next six years, or that Abbott's foreknowledge of this attitude will have no bearing on his willingness to propose such reforms?

The truth is the nation has fought itself to an impasse on controversial reform - of the labour market as well as taxation - and, among the industry lobbies, the miners have played a more destructive role than the rest.

Now, you can respond that the miners did no more than what you'd expect them to do: oppose taxes they perceived to be contrary to their industry's interests. But this is making my point: the reason the outlook for reform is now so bleak isn't solely because the two sides of politics have regressed to short-sighted, self-interested advantage seeking, it's also because the industry lobby groups have done the same thing.

There's nothing new about industry lobbying but in the past dozen years it's become far more blatantly self-interested and far more willing to devote large sums to advertising campaigns to oppose whatever government reforms an industry sees as contrary to its interests. What hasn't yet occurred to many business people - but you can be sure is well understood by the politicians and their advisers - is that when industries lobby governments for favours, or in opposition to new imposts, the various industries are in competition.

It's easy to imagine the government's coffers are a bottomless pit but, in fact, there's only so much rent to go around. As an economist would say, all concessions have an opportunity cost. It's easy to believe all industries could pay less tax if the pollies would only make households pay more tax, but I wouldn't hold my breath waiting for it to happen. I doubt either side of politics would see that as consistent with their own self-interest.

The truth is, when one industry gets in for a big cut, there's less left in the pot for the others. That industries don't understand this simple point about opportunity cost - don't realise they're in competition with each other - is easily demonstrated by the demise of Labor's mining tax package.

Think about the original package: the big three miners were going to pay more tax on their resource rents, but most of the proceeds were going to be distributed to other industries.

In particular, all companies (including miners, big and small) were getting their company tax rate cut by 2 percentage points, small miners were getting a resource exploration rebate, small business was getting instant write-off of most assets, the banks were getting more concessional taxation of depositors' interest income, and the financial services industry was getting its dream of having compulsory super contributions jacked up from 9 per cent to 12 per cent, a one-third increase in contributions.

So three big miners had a lot to lose, but the rest of industry had a lot to gain. So what was the rest of industry's attitude to the resource super profits tax? Didn't like the sound of it.

And what did they do when the miners sought to scuttle the new tax? Precisely nothing.

What happened then? The exploration rebate was to first thing to disappear and, in several stages under Labor, the cut in the company tax rate got whipped off the table.

Now, with Abbott's plan to abolish the cut-down mining tax, the small business concessions are being withdrawn and the phase-up of compulsory super has been deferred for two years.

With all the pressure on the Abbott government's budget, and the super industry extracting a promise from Abbott not to make any further savings on the concessional taxation of super, I'm prepared to bet the two-year deferment will become permanent.

Thus did the rest of business allow the miners to screw them over. And thus did the miners destroy faith in one of the techniques tax reformers believed made major tax reform possible: put together a large package with a mixture of wins and losses and the various industry lobbies keep each other on board in the wider interest.

But it doesn't stop there. When the miners and the rest of business dream of further tax reform under the Abbott government what do they have in mind? Mainly, a big cut in the company tax rate. Do you really see the Abbott government daring to fund such a cut by increasing the GST?

Had the minerals resource rent tax survived and got past its accelerated depreciation phase, the fact that the most highly profitable part of the corporate sector (along with the banks) was paying a lot more tax on its profits would have greatly strengthened the argument for a general cut in the company tax rate. This is particularly so because mining is so heavily foreign-owned. So the absence of the resource rent tax makes a cut in the company tax rate a lot less likely.

One way a cut in the rate could still be afforded is if it was covered by a broadening of the base by the removal of sectional concessions. But the bitter experience of the demise of the mining tax package makes it less likely any government would risk proposing such a compromise.

We can continue going down the road of ever-more blatantly self-interested behaviour by political parties on the one hand and industry lobby groups on the other, but while we do so it's idle to dream of major reform.

What we can do - as the miners have shown - is veto any reform we don't fancy.

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Gas lobby working a scam on NSW citizens

The gas industry is working a scam on the people of NSW, in collusion with other business lobby groups and federal and state politicians. It's trying to frighten us into agreeing to remove restrictions on the exploitation of coal seam gas deposits. Failing that, the various parties want to be able to lay the blame for an inevitable jump in the price of natural gas on the greenies and farmers.
According to the gas lobby, the manufacturing lobby, the Business Council, federal Industry Minister Ian Macfarlane and former Labor minerals and energy minister Martin Ferguson, we have a looming gas supply crisis in NSW and must unlock our local coal seam gas resources if we're to avoid shortages and the price hikes they bring.
NSW Minister for Resources and Energy Chris Hartcher, at whom most of lobbying is aimed - his government boasts of "the toughest coal seam gas controls in Australia" - must fully understand the deception, but seems reluctant to expose the dishonesty of his Coalition and business mates.
The problem, we're told, is NSW produces only about 2 per cent of the natural gas its households and industrial users consume. And when facilities for liquefying and exporting gas start operating within a year or two, producers in Queensland and Victoria will switch to exporting their gas to gain the higher foreign prices.
So NSW is facing a massive shortage of gas, which will cause a big jump in gas prices and threaten the jobs of thousands of people working in gas-dependent industries. The obvious answer, we're told, is for NSW to fill this supply gap and avert the price hike by urgently developing its own supply of coal seam gas.
There's just one problem with this neat story: it reveals - or exploits - an ignorance of how markets work. The lobbyists' faulty logic is ably exposed by the Australia Institute's Matt Grudnoff in his paper, Cooking up a price rise.
For many years, the prices paid for natural gas by consumers on Australia's eastern seaboard have been a lot lower than prices paid in other countries. The absence of plants to liquefy the gas so it could be exported meant our market was cut off from the world market.
We had no liquefaction plants because we didn't have enough gas to make them profitable. What's changed is the advent of fracking, which has enabled us to begin exploiting our extensive deposits of coal seam gas.
The development of "unconventional" gas in Queensland has progressed to the point where it's become economic for three liquefaction plants to be set up near Gladstone. When those plants start operating in a year or two, the barrier that separated our eastern seaboard gas market from the world market will disappear and the era of low gas prices will end.
Grudnoff estimates the wholesale price of gas will double or treble from between $3 and $4 a gigajoule to the world "netback" price of $9 a gigajoule. "This is because Australian gas producers will have the option to sell to the Japanese, who are willing to pay $15 a gigajoule," he says.
The difference between $15 and the netback price - also known as the export parity price - is the cost of liquefying the gas and transporting it overseas. If you're as ancient as I am, this should remind you we've already been through a similar process of the low local price rising to the high world price when the Fraser government introduced export-parity pricing for oil in the late 1970s.
The percentage rise in retail gas prices paid by households will be a lot smaller than the rise in the wholesale price. Estimates by Hugh Saddler, of the energy consultants Pitt & Sherry, suggest Sydney retail prices will rise by 11 per cent to 18 per cent - roughly twice the rise caused by the introduction of the carbon tax.
The point is, wholesale and retail prices will rise to the new export parity price throughout the eastern seaboard. In Queensland where the frackers have had an easy ride, and in Victoria where the present moratorium on fracking seems likely to give way to an unrestricted regime, just as much as in NSW where the frackers are given a hard time.
Because of pipelines between the states, how much gas a state produces has nothing to do with the prices its households and businesses pay. According to the gas lobby's logic, the coming ability of producers to get much higher prices by exporting their gas should produce shortages of gas for local users in Queensland and Victoria, not just NSW.
In truth, there will be no shortages of gas in any state, just a requirement to pay the higher, netback price. There's no reason producers would prefer to sell to foreigners if locals are offering to pay the equivalent price.
With the advent of fracking and access to higher prices, it's not surprising gas producers are desperate to extract as much coal seam gas as possible as soon as possible. But their argument that increased production in NSW could hold down NSW gas prices is economic nonsense.
Any new gas producers in NSW won't be willing to sell to locals for anything less than the equivalent price they could get by selling to foreigners. That's the scam.

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Our ever-rarer elixir: restraint

There's a paradox at the heart of modern capitalist economies: if they really worked the way economists think they work, they wouldn't work for long, they'd seize up. And as the Yanks have been busy demonstrating, it's a similar story for modern democracies.

Economists believe the motivating force driving market economies is self-interest: businesses and consumers do what they do purely for their own benefit. But the "invisible hand" of market forces transforms all this selfishness into a system by which everyone benefits.

Although most economists prefer the euphemism "self-interest", Professor Paul Frijters, of Queensland University, prefers to call it "greed" in his path-breaking book written with Dr Gigi Foster, of the University of NSW, An Economic Theory of Greed, Love, Groups and Networks.

Frijters argues that a variety of "institutions" is required to ensure individuals' greed doesn't prevent the operation of free markets. If people will do anything to increase their material wealth, as implied by the Homo Economicus view of humanity, why would they simply pay the prices traders wanted to charge? Frijters asks.

"Why would they not, for example, steal products or production technology, kill competitors, or in some other way seek a market advantage through dishonest or immoral behaviour?" he asks.

Because of the existence of formal and informal institutions. Formal institutions include parliaments that pass laws prohibiting certain behaviour and police and courts that enforce those laws.

But ask yourself this: is your knowledge that it's illegal and that you risk being punished the only reason you don't steal from shops, your employer or your neighbours? Do you adhere to contracts only to avoid having to defend your behaviour in a court case with the other side?

Of course not. Even where we're confident of not getting caught, almost all of us refrain from doing those things because we don't believe they're the right thing to do. And there is any number of perfectly legal things we could do, but choose not to. So our behaviour in the marketplace - or in politics - is also constrained by a host of informal institutions, such as notions of fairness, conventions, customs, rules we've internalised and other norms of socially acceptable behaviour.

"Formal and informal institutions in combination are important in the running of societies, as together they form the rules of the game to which people adhere. They constrain the possibilities for opportunistic behaviour in human interactions," Frijters says.

This isn't the first time the US Congress has refused to pass the budget and thus shut down the US government, but it's rare. The Financial Times' Martin Wolf, doyen of the world's economics editors, observes that if President Obama's political opponents are prepared to inflict such damage on their own country, "the restraint that makes democracy work has gone".

Dr Chris Caton, of BT Financial Group adds: "Thank god that couldn't ever happen in Australia!" Not half.

Just as we need social norms to restrain our instinctive selfishness and so keep the economy functioning smoothly, we need restraint among the players in the political game to ensure we don't descend into impasse and policy impotence. But as the Americans' appalling predicament reminds us, restraint isn't a given, and can't be taken for granted. Our selfishness does propel the economy onward and upward, but when voluntary restraint breaks down - almost always egged on by competition - we can end up with greedy bankers causing the devastation of the global financial crisis.

Similarly, we need our adversarial two-party system of democracy to keep a check on the corruption and incompetence of governments, but when personal ambition and party rivalry become unrestrained, government suffers.

The sweeping economic reforms of the Hawke-Keating era were made possible by John Howard's principled restraint in providing bipartisan support. But bipartisanship in the interests of good government ended with Labor's opportunistic scare campaign against Howard's GST.

Tony Abbott returned the favour with his ruthlessly dishonest scare campaigns against the carbon tax and the mining tax. Now how do you think Labor will react should Abbott propose a controversial reform in this term or the next?

The self-seeking, short-sighted, rivalry-fanned lapse in restraint by both sides makes further major economic reform highly unlikely until, by some hard to imagine means, the former norms of acceptable political behaviour are restored.

But don't blame it all on the politicians. That's too easy. As Professor Ross Garnaut observed in May, the past dozen years have seen "interest groups" - I'd say industry lobby groups - become less inhibited in pursuing private interests at the expense of the wider public interest, ferociously resistant to reform proposals involving private costs to them, and willing to pursue their private interests by costly ad campaigns and party donations.

Less restraint, less reform.

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How business lobbies to block tax reform

There are a lot of people moving office in Canberra, thanks to the election. But not all of them are politicians. There is a parallel changing of the guard among the lobbyists - a change that will have far more effect on what happens to us in the next three years than most people realise.

As has been well reported by Matthew Knott, of Crikey.com.au, Liberal-aligned lobbying firms - full of former politicians and staffers - are expanding their presence, while Labor-aligned firms are downsizing.

These people are selling access and influence with the side of politics that happens to be in power.

Since businesses pay big money for the assistance of these people - many of them seeking to cash in on their former lives in politics - we must assume it makes a difference, that businesses represented by someone of the same persuasion as the government get a more sympathetic hearing.

If so, the formal lobbying process plays a bigger part in our governance than it suits the politicians to admit or the media to keep us informed about. Lobbyists prefer to practise their dark art without the glare of publicity and, for the most part, the other players respect their privacy. Most obliging of them.

Of course, there are two classes of lobbyists in Canberra: the firms of influence-pedlars we've been discussing, but also the national peak bodies representing business in general, particular industries, small business and even many non-government organisations.

The peak bodies' lobbying efforts - while they no doubt have their private, let's-not-talk-about-it side - are a lot more overt, with the outfits issuing an unending stream of press releases and submissions, and their spokespeople seeking airtime for their reactions to a Reserve Bank decision to raise interest rates, the budget, the election of a new government, or an absolutely crippling rise in the minimum wage.

My guess is that, when the peak bodies are engaged in a major campaign, they quietly enlist additional assistance from the professional lobbyists.

Much of the time the peak bodies are lobbying for their own "reforms": a cut in the rate of company tax, changes to Labor's Fair Work Act, a cut in the top rate of income tax and increase in indirect taxes, and so forth.

But I think they're at their most effective - and most insistent - when they're trying to block or seriously modify some change initiated by the government. Consider the chequered history of the departed Labor government.

We could start with the business lobbyers' success in getting Labor's original emissions trading scheme watered down and, for all we know, the success of some in egging on the Coalition's climate-change deniers, who persuaded the parties to ignore the "mandate" Labor had to introduce such a scheme. So much for mandates.

But the most spectacular blocking effort must surely be the success of three of the world's most profitable mining companies - acting under the cover of the Minerals Council of Australia - in knocking off the original resource super profits tax and getting it replaced by the badly designed minerals resource rent tax, which the Coalition is about to abolish not long before it starts raising significant amounts of revenue.

Labor's handling of the mining tax was abysmal, but much of the big miners' success (which also came at the expense of the small miners) is owed to Tony Abbott's willingness to oppose the tax for reasons of short-term political gain.

Non-mining businesses have yet to twig that the miners' success will come at their expense. With the miners soon to be so undertaxed, the scope for a further cut in company tax has gone. It's called opportunity cost.

More recently, we have the success of the financial services lobby in winning a multi-year exemption from further reforms to superannuation (achieved, it's said, because of the lobby's threat to launch an election advertising campaign against whichever side of politics failed to give it the exemption it was demanding).

This is not to mention the success of the medicos in getting a delay in the clampdown on abuse of the self-education tax deduction and the success of the novated leasing industry in getting Abbott to preserve the company car tax rort.

If you saw this sorry saga as a testament to Labor's political ineptitude you wouldn't be wrong. But there's another lesson to be learnt: the more business looks the other way while particular industries frustrate governments' efforts to reform the tax system, the less likely it becomes that business in general will get the changes it's seeking.

Tax reform doesn't grow on trees.

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The four business gangs that run America

IF YOU'VE ever suspected politics is increasingly being run in the interests of big business, I have news: Jeffrey Sachs, a highly respected economist from Columbia University, agrees with you - at least in respect of the United States.

In his book, The Price of Civilisation, he says the US economy is caught in a feedback loop. "Corporate wealth translates into political power through campaign financing, corporate lobbying and the revolving door of jobs between government and industry; and political power translates into further wealth through tax cuts, deregulation and sweetheart contracts between government and industry. Wealth begets power, and power begets wealth," he says.

Sachs says four key sectors of US business exemplify this feedback loop and the takeover of political power in America by the "corporatocracy".

First is the well-known military-industrial complex. "As [President] Eisenhower famously warned in his farewell address in January 1961, the linkage of the military and private industry created a political power so pervasive that America has been condemned to militarisation, useless wars and fiscal waste on a scale of many tens of trillions of dollars since then," he says.

Second is the Wall Street-Washington complex, which has steered the financial system towards control by a few politically powerful Wall Street firms, notably Goldman Sachs, JPMorgan Chase, Citigroup, Morgan Stanley and a handful of other financial firms.

These days, almost every US Treasury secretary - Republican or Democrat - comes from Wall Street and goes back there when his term ends. The close ties between Wall Street and Washington "paved the way for the 2008 financial crisis and the mega-bailouts that followed, through reckless deregulation followed by an almost complete lack of oversight by government".

Third is the Big Oil-transport-military complex, which has put the US on the trajectory of heavy oil-imports dependence and a deepening military trap in the Middle East, he says.

"Since the days of John D. Rockefeller and the Standard Oil Trust a century ago, Big Oil has loomed large in American politics and foreign policy. Big Oil teamed up with the automobile industry to steer America away from mass transit and towards gas-guzzling vehicles driving on a nationally financed highway system."

Big Oil has consistently and successfully fought the intrusion of competition from non-oil energy sources, including nuclear, wind and solar power.

It has been at the side of the Pentagon in making sure that America defends the sea-lanes to the Persian Gulf, in effect ensuring a $US100 billion-plus annual subsidy for a fuel that is otherwise dangerous for national security, Sachs says.

"And Big Oil has played a notorious role in the fight to keep climate change off the US agenda. Exxon-Mobil, Koch Industries and others in the sector have underwritten a generation of anti-scientific propaganda to confuse the American people."

Fourth is the healthcare industry, America's largest industry, absorbing no less than 17 per cent of US gross domestic product.

"The key to understanding this sector is to note that the government partners with industry to reimburse costs with little systematic oversight and control," Sachs says. "Pharmaceutical firms set sky-high prices protected by patent rights; Medicare [for the aged] and Medicaid [for the poor] and private insurers reimburse doctors and hospitals on a cost-plus basis; and the American Medical Association restricts the supply of new doctors through the control of placements at medical schools.

"The result of this pseudo-market system is sky-high costs, large profits for the private healthcare sector, and no political will to reform."

Now do you see why the industry put so much effort into persuading America's punters that Obamacare was rank socialism? They didn't succeed in blocking it, but the compromised program doesn't do enough to stop the US being the last rich country in the world without universal healthcare.

It's worth noting that, despite its front-running cost, America's healthcare system doesn't leave Americans with particularly good health - not as good as ours, for instance. This conundrum is easily explained: America has the highest-paid doctors.

Sachs says the main thing to remember about the corporatocracy is that it looks after its own. "There is absolutely no economic crisis in corporate America.

"Consider the pulse of the corporate sector as opposed to the pulse of the employees working in it: corporate profits in 2010 were at an all-time high, chief executive salaries in 2010 rebounded strongly from the financial crisis, Wall Street compensation in 2010 was at an all-time high, several Wall Street firms paid civil penalties for financial abuses, but no senior banker faced any criminal charges, and there were no adverse regulatory measures that would lead to a loss of profits in finance, health care, military supplies and energy," he says.

The 30-year achievement of the corporatocracy has been the creation of America's rich and super-rich classes, he says. And we can now see their tools of trade.

"It began with globalisation, which pushed up capital income while pushing down wages. These changes were magnified by the tax cuts at the top, which left more take-home pay and the ability to accumulate greater wealth through higher net-of-tax returns to saving."

Chief executives then helped themselves to their own slice of the corporate sector ownership through outlandish awards of stock options by friendly and often handpicked compensation committees, while the Securities and Exchange Commission looked the other way. It's not all that hard to do when both political parties are standing in line to do your bidding, Sachs concludes.

Fortunately, things aren't nearly so bad in Australia. But it will require vigilance to stop them sliding further in that direction.

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PM Gillard: hard worker, hard-nosed, hard to read

Having observed Julia Gillard's government for more than a year, I must say she's hard to pigeon-hole. Is the woman who changed the government's mantra from "working families" to "hard-working families" a typical Labor prime minister, as many business critics of Fair Work believe, or a pale imitation of a Liberal leader, as her willingness to sell uranium to India and her opposition to same-sex marriage lead many critics on the left to conclude? Does she stand up to powerful industries or kowtow to them?

You can make a surprisingly long list of social changes you'd expect the Labor heartland to be pretty happy about (even though it seems far from enamoured of its first female federal leader).

The introduction of paid parental leave (which, admittedly, occurred under Kevin Rudd) is an important step in reforming the institutions of the labour market to make them more suited to the needs of the better-educated sex.

Equal pay for women in the community sector - most of the cost of which will be borne by the federal budget - remedies an age-old injustice, which never made sense and couldn't have survived in a world of shortages of labour.

Plain-packaging for cigarettes is preventive-health reform that leads the world. The international tobacco industry has few friends, but very deep pockets to fight the Gillard government with advertising and legal action.

But global tobacco has a fraction of the power the licensed clubs have in opposing compulsory pre-commitment for people using poker machines. Although this issue was forced on Gillard by her lack of a majority, she has yet to waver in her determination to get it passed by Parliament. And though it, too, is a reform without international precedent, it could do much to reduce the gambling industry's indefensible exploitation of people addicted to poker machines.

Rudd should get most credit for several other social improvements: the national homeless strategy, the national rental affordability scheme (tax breaks for investors in affordable housing) and the first injection of funds into social housing in many a long day.

Rudd started, but Gillard has continued, Labor's many measures to pare back John Howard's middle-class welfare by declaring a family on $150,000 a year to be not rich, but comfortable. These measures don't just save money, they make the budget more redistributive in favour of the genuinely deserving.

And Gillard has defied the powerful private health insurance industry by continuing Rudd's efforts to get means-testing of the health insurance tax rebate approved by Parliament.

Gillard has committed herself to making introduction of a national disability insurance scheme her top social reform in the rest of her term. By providing help to people who inherit their disability or acquire it from an accident around the home, this would fill a longstanding gap in our social safety net. It would be a historic advance (and is one of the few reforms Tony Abbott hasn't opposed).

But against all that there are a couple of areas where Gillard's performance has been anything but what you would expect from Labor. The first is her education "reforms" copied from the American Republican Party.

Trying to "incentivate" school teachers as though they were as money-hungry as chief executives merely insults their professionalism. Providing parents with greater information about the performance of schools is fine, but doing so before summoning the courage to correct the bias in federal school funding in favour of well-off schools risks hanging under-resourced public schools out to dry.

Gillard has spent four years postponing change to Howard's middle-class-welfare school-funding formula. Her response next year to the belated review will show whether her courage has recovered.

The tax concessions attached to superannuation have long been heavily biased in favour of high income earners such as yours truly. To call them middle-class welfare would be an understatement.

Rather than using the opportunity provided by the decision to phase-up compulsory employee contributions from 9 per cent to 12 per cent of salary (a multi-billion-dollar gift to the financial services industry) to shift the tax benefit from high to middle and low income earners, the government will merely use some of the revenue from the mining tax to correct the position where workers on the 15 per cent income tax rate gain no concession on their contributions.

But the most puzzling and indefensible aspect of Rudd policy continued by Gillard is the mistreatment of sole parents and, more so, people on unemployment benefits. Both groups were explicitly excluded from the over-generous pension increase in 2009.

For many years, age and invalid pensions have been indexed to average earnings, meaning they rise faster than inflation, whereas the dole has been indexed only to inflation. In consequence, the dole paid to single adults is now less than two-thirds of the single pension, a shortfall of $131 a week.

The dole is now so low it's just 36 per cent of median household income, putting it well below the commonly drawn poverty line of half median income. It's also just 45 per cent of the after-tax minimum wage - meaning there is little risk its generosity is deterring people from taking a job.

One defence of low unemployment benefits is that most people aren't on them for long. But more than half the people on the dole have been on it for a year or more. And the government is also limiting the assistance it gives the long-term unemployed to help them find a job.

This discrimination against the unemployed is now so extreme the Henry tax reform recommended it be corrected. And even the Business Council agrees.

Perhaps Gillard's lack of sympathy for the unemployed arises because, being unable to find a job, they're not hard-working.

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Taxation reform is a cargo cult for business

When you look at the varied contributions to the public policy debate made by business people and their lobby groups, one attitude unites them: the politicians owe them a living.

Government, it seems, has one overwhelming responsibility: to make life easier for business. You see this in business people's views on "competitiveness". Economics has a lot to say about competitiveness, but not what business people imagine it says.

To them, competitiveness refers to the ability of Australian firms to compete in international markets against the enemy, firms from other countries. It's a zero-sum game, apparently: either we win and they lose, or they win and we lose.

Hence our government's obligation to improve our team's competitiveness by cutting the taxes Australian firms have to pay or by weakening the bargaining power of employees and so cutting our firms' labour costs.

What economics actually says is, first, trade is a positive-sum game: both countries win by exploiting the "gains from trade". Second, competitiveness isn't a gift governments confer on their businesses, it's a stricture they impose as the best way of ensuring firms aren't able to make excessive ("super normal") profits at the expense of the intended beneficiaries of competitiveness, Aussie consumers.

Most of the micro-economic reform project was aimed at increasing competitiveness by making life tougher for business: by reducing protection against competition from imports (the exports of our supposed enemies), by removing regulations that inhibited competition between local firms, and by beefing up prohibitions on anti-competitive practices.

We know micro reform failed to achieve a lasting increase in the rate of productivity improvement. Its lasting benefit has been to make the economy more flexible and resilient in response to economic shocks.

In particular, by increasing the intensity of competition in so many markets it has robbed many businesses of their former pricing power - including their ability to conclude sweetheart deals with their unions - and made our economy markedly less inflation-prone.

So much for the happy notion micro reform involves governments making life easier for business.

Further evidence of business's cargo-cult attitude to the role of government can be seen in its approach to tax reform. Business has an insatiable obsession with taxation. It wouldn't matter how much reform we'd achieved, its demands for more reform would be undiminished. That's because it's convinced the less tax it has to pay the easier its life will be.

There's a large element of self-delusion in this. Neither business people nor punters genuinely understand that, in the final analysis, companies - being inanimate objects - don't bear any tax burden. In the end, only humans pay tax - whether they're the owners, the managers, the employees or the customers of the company.

Just how the ultimate burden of all the various taxes companies pay is shared between those groups does matter, of course, but that's a complex empirical question with uncertain answers. And it's a safe bet all the sparring over company tax at last week's tax forum was motivated more by perceptions and appearances than empirical realities.

The key reform demanded at the forum, pushed hard by the Business Council, was for the rate of company tax to be cut from 30 to 25 per cent, with the cost to be covered by an increase in the GST.

Don't like the sound of that one? Neither did the union reps. But, cried the business people and the tax economists, didn't you know empirical studies show the ultimate "incidence" of company tax falls largely on labour? Since much the same is true of the GST, what rational reason could unions have to object to such a neutral rebalancing of the tax mix? But that question cuts both ways. If the ultimate incidence of company tax is borne by labour, why are company executives so desperately keen to get its rate reduced? (And how do the tax economists explain why such a shifting of the furniture would be so clearly beneficial for the economy overall?)

A point rarely mentioned is that the existence of dividend imputation means the local shareholders of companies have nothing to gain. For them, a lower company tax rate just means smaller franking credits. And that being the case, exactly why does big business imagine a lower company tax rate would be such a benefit? Perhaps because many, maybe most, of the chief executives who make up the Business Council actually represent the interests of foreign shareholders, who aren't subject to the imputation system.

For further evidence of business's cargo-cult mentality, consider what I call the "leadership theory of tax reform", so much in evidence at the forum. Consider the air of righteous disappointment exhibited by business leaders and commentators when Julia Gillard failed to meet the Business Council's demand that she commit to a 10-year program of tax reform.

Oh, if only the government would exhibit some Leadership, they cried. Come again? This government is already knee-deep in unfinished tax reform, all with no active support from business (the deeply divided Business Council) and much active opposition (the business coalition running TV ads against the carbon tax).

This is even though some businesses urged the reform on the government (we want certainty on the price of carbon) and many parts of business stand to gain from the mining tax (20 per cent of the desired cut in the company tax rate, concessions to small business and a one-third increase in the captive market compulsory super delivers to the financial services industry).

All the righteous calls for politicians to show Leadership on tax reform come without the slightest commitment that business will back up the leader when the going gets tough. Dream on, guys.

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Let punters beware of business carbon claims

Sometimes I suspect many business people regard it as quite ethical to lie and mislead the public, provided they're lying in the shareholders' interests. And when you're laying it on thick to pressure some government into giving you a special deal or an exemption from some measure, you're always doing it for the shareholders. What's in the nation's interests - and whether your special deal would damage the nation's interests - is not your concern.

Often, any special concession you screw out of the pollies will come at the expense of those businesses and industries that don't get a similar concession, but there seems to be an honour among thieves that requires those who'd lose from the success of another industry's lobbying to keep their traps shut.

For a rival industry to point out how exaggerated or self-serving the lobbying industry's claims are is just not done. Governments - and the citizens, taxpayers and consumers whose interests they represent - are regarded as fair game. If the totality of business's success in ducking its responsibilities leads to the country being badly governed, that's just bad luck for the country.

Businesses on the make invariably seek to pressure governments by putting the frighteners on the public. And this means they often claim the government measure they're objecting to would lead to huge job losses. This has the additional advantage of frightening their own employees, and so getting the union to join them in the fight.

In the old days, businesses would pluck some big-sounding figure out of the air, but these days the fashion is to pay one of Canberra's many firms of economists-for-hire to do some ''independent'' modelling.

Any economist who can't juggle the assumptions until they get the kind of findings their client is hoping for isn't trying. And economists have no code of ethics that might inhibit them in making sure their customers are happy with the ''independent report'' they paid for.

If you come up with a big-sounding figure for supposed job losses, you can be reasonably sure the media will trumpet the figure in shocked tones. You can also be sure few if any journalists will subject your claims to examination to see how credible they are. Why spoil a good story? I didn't say it, they did. If it's wrong, blame them, not me. All I'm doing is acting as a messenger, recording both sides of the debate. It's not my job to act as a censor.

(This is tosh. Messengers don't decide which messages they'll deliver and which they won't; which they'll shout from the rooftops and which they'll whisper. Every aspect of the reporting and editing process involves judgments about what goes in and what hits the cutting-room floor. It's clear the media is often happy to pass on to its paying punters without comment information it either knows is misleading or hasn't bothered to inquire into.)

With Julia Gillard, the Greens and the independents busy deciding on the precise form their hybrid carbon tax/emissions trading scheme will take, it's open season for industries lobbying for special favours.

Last week it was the turn of the Australian Coal Association, which produced a report prepared by the economic consultants ACIL Tasman claiming that putting a price on ''carbon'' (greenhouse gas emissions) would lead to the loss of 4700 jobs by 2020-21 from existing coalmines in NSW and Queensland. Counting the flow-on effects to other industries would increase the loss to 14,100.

As well, applying emissions pricing to potential new mines would eliminate 25 to 37 per cent of potential new jobs. This, too, would cause much larger losses to the wider economy when flow-on effects were taken into account.

I suspect the key assumption driving these results is the assumed rise in the real price of carbon. After starting at $19 a tonne in 2012-13, it would leap to $47 a tonne in 2016-17, reaching $57 a tonne in 2021-22. But these figures are pure supposition.

The next thing to remember is that almost all the estimates of ''lost'' jobs you see don't involve any actual decline in the number of people employed in an industry. Rather, they refer to the extent to which employment grows by less than it otherwise would.

Whether deliberately or through ignorance, this distinction is almost always lost in translation - as the ''independent'' consultants surely know it will be. But if these job ''losses'' were labelled more carefully the punters would find them much less alarming.

We're in the early stages of a resources boom, which will involve the establishment of new coalmines and the expansion of existing mines. It's no doubt true the imposition of a significant carbon price will cause there to be less expansion than otherwise. But the notion we could see a lot of out-of-work coalminers is fanciful.

If I had enough money I'd happily pay for every industry lobby group in the country to commission an ''independent'' report on the wider, multiplier effects of their industry. I reckon they'd add up to a mighty lot more than 100 per cent of gross domestic product or total employment.

So never take notice of such claims. They're mere puffery. In the coalminers' case they're built on the assumption that money not invested in mining would be left under the bed rather than invested in some other value-adding and job-creating activity. And that everyone who loses their job as a result of the closure of a mine never works again.

In any case, 4700 job ''losses'' may sound a lot, but in the context of an economy of 11.4 million workers, with hundreds of thousands of people moving between jobs and total employment growing by at least 250,000 a year, it's microscopic.

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