Robert Deutsch

The recent furore regarding the passing of the mining tax is a good reason to refocus attention on some important statistics relating to the mining industry in Australia.

Perhaps of most interest is the breakdown of iron ore and coal production across the states and territories of Australia. In this context one needs recall that the mining tax will specifically apply only to iron ore and coal and to a very limited extent to gas that is incidentally extracted as part of the process of extracting iron ore and coal. Left out of the equation are other minerals, in particular precious metals such as gold and silver and base metals like copper, lead and tin.”

When one examines the statistics a number of interesting features emerge:

• The overall value of minerals extracted in 2011 is in the order of $158 billion.
• Of that total approximately $110 billion is from iron ore and copper and $48 billion is from all other metals.
• In relation to iron ore the equation is very heavily weighted towards Western Australia where of the $66 billion of value extracted nationally $65 billion of it is in Western Australia.
• Surprisingly of the other four states which have sizeable iron ore deposits, the largest extraction and therefore the strongest effect of the mining tax will occur in Tasmania where something in the order of $340 million of iron ore value was extracted in 2011.
• Coal is responsible for $44 billion of the total value of minerals extracted in 2011 and perhaps most surprisingly the two largest States in this context are Queensland ($23 billion) and New South Wales ($20 billion). Western Australia has a relatively small coal extraction industry with only $495 million.
• Focusing on the total for iron ore and coal, it is readily apparent that the State most directly affected by the mining tax by a significant margin will be Western Australia with a total production value across iron ore and coal of $65.8 billion. The second most directly affected will be Queensland ($24 billion) and New South Wales ( $20 billion – coal assets only).
• Interestingly, Victoria is entirely unaffected by the mining tax with neither iron ore nor coal mining present.

All these statistics carry with them a number of messages that are relevant to the breadth and operation of the recently enacted mining tax.

First and perhaps most importantly since iron ore and coal make up the bulk of the value of all minerals in Australia any argument to extend the mining tax will in revenue terms have only a very marginal consequence. In this regard precious metals represents the largest component but even that in comparison to iron ore and coal is a very small amount ( ie $14 billion).

Secondly, the impact of the mining tax as currently drafted is most likely to have the greatest force in Western Australia and to a lesser extent in Queensland but the importance of the coalmining operations in New South Wales, which are significant, has largely been overlooked in most of the discussion.

Thirdly, the negative implications of the mining tax will largely be unnoticed in Victoria, South Australia and the Northern Territory.

The other interesting aspect of the recently released statistics is that in Australia there are currently somewhere in the order of 61 major developed mines spread throughout the country but with a large concentration in Western Australia, Queensland and New South Wales. Of these 61 major mines 17 are controlled by BHP-Billiton, 19 by Rio Tinto, 10 by Xstrata and 7 other companies (e.g. Newmont and Newcrest) control the others.

This highlights the fact that the amount of the mining tax which will or will not be paid by BHP and Rio Tinto will be critical to determining the overall take from the mining tax.

Professor Robert Deutsch is a professor of taxation at the Australian School of Business.

Vic Edwards

The Australian dollar has fallen almost one US cent on fears that China could be about to witness a sharp economic contraction. China’s National Bureau of Statistics on Tuesday showed profits in the country’s industrial sector fell 5.2 per cent in the first two months of 2012.

Although the World Bank has played down fears of a hard landing in China, the dynamics of Australia’s relations with China are undergoing a rapid process of change, and this will reshape international and foreign policy between our two countries. This comes as China prepares its 12th Five Year Plan – an unstable time for its economy.

China’s growth this year is below last year’s level as weakening external demand has hurt investment and exports. Very poor Chinese manufacturing data shows it is at a 32 month low. Alas, contagion from Europe is impacting China, and that is causing pressure on Australia.

China is the world’s biggest energy consumer and steelmaker. And yet fuel prices are rising for the second time in less than six weeks and the nation’s steel production is slowing. The World Bank has forecast that inflation will fall further, down from the 37 month high of 6.5 per cent in July, as its economy slows.

The world’s second largest economy fell heavily into the red last month after running huge trade surpluses for much of the past 10 years. A surge in imports saw the country post a US$31 billion trade deficit, which follows a string of other disappointing economic data, including weak car sales which may miss industry forecasts this year as economic growth slows to 7.5%, the lowest since 2005.

A blow-out in China’s trade deficit raises concerns about the country’s future economic growth, raising questions about whether the country’s economy is tailing off more rapidly than anticipated. The only bright economic star was that inflation slackened more rapidly than expected.

The overall results prompted analysts to predict that China will ease monetary policy over the coming months to bolster growth—but few expect a package remotely on the scale of the stimulus spending and lending that occurred in 2009 and 2010 in response to the global financial crisis. The market treats the Aussie dollar as a proxy for China so that slowdown in exports in China is perceived by the market as being a bad sign for Australia. However the recent $30 billion swap agreement between Australia and China augurs well for bilateral trade and investment between the two countries over the next few years and may set things back on track for free trade agreement discussions. Australia will need to improve its trade standing with China in order to preserve its position as a major supplier of raw materials, as China is actively pursuing other sources particularly through its new BRICS arrangements, particularly with South Africa and India.

Vic Edwards is a Visiting Fellow in Banking and Finance at the Australian School of Business.

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Robert Deutsch

The mining tax that contributed to Kevin Rudd’s downfall has now passed the Senate: however the question is if the debate and angst expressed in response to the passing of the mining tax is actually justified.

 The reality is with the compromise deal the government was forced into, the Bill that has passed through Parliament is a very much watered-down version of what was originally anticipated by the Henry report in 2010 – just look at the narrow focus on iron ore and coal to the exclusion of other minerals.

Coal and iron ore miners will now have three taxation regimes: company income tax, ad valorem mine production royalties and now a new resource rent tax on profits that will be calculated quite differently to the other two.

To suggest that Australia is somehow unusual in this area is misleading as almost every country with substantial natural resources has worked frenetically over recent years to introduce similar measures. These measures have similar motivations, namely to prevent the extraction and utilisation of non-renewable resources without adequate compensation for the broader community. This increases taxation which makes additional funds available for other unrelated non-mining activities.

Instead of an overall tax at 40 per cent as the Henry review proposed, the tax is now 30 per cent, and with a cut of a quarter for an “extraction allowance” reduces the effective rate to 22.5 per cent. The tax is also only levied on coal and iron ore and only on profits above $75 million, so it doesn’t replace state royalties as originally proposed by the Henry review.

Of course other countries have implemented their own version of the mining tax:

Brazil levies a specific mining tax on aluminium, manganese and potassium (3%); iron ore, coal and certain other mineral substances (2%); gold (1%) and other precious metals (0.2%).

India levies a mineral tax which is imposed at rates ranging from 0.2% to 20% depending on the type of mineral and a mining royalty is also payable to State governments, the amount depending on the type of mineral involved.

South Africa imposes a secondary tax on companies in the mining sector which is 10% of the dividends which are distributed by such companies. Royalties are also payable on minerals classified as either refined or unrefined with the payments calculated in terms of a set formula. The royalty rates vary by the level of refinement – the royalty rate on unrefined minerals are set at a maximum of 7% and for refined materials at a maximum of 12%.

Russia subjects companies to minerals resource extraction tax levied at rates ranging from 3.8 to 8% based on the value of the extracted mineral. The tax is calculated by reference to the quantity of minerals extracted multiplied by their sales price with some adjustments.

In Canada each province imposes its own mining tax under systems that vary significantly with applicable rates varying from 10 to 16%.

In Kazakhstan there is a separate mineral extraction tax which is levied on the cost of produced volumes of minerals. The current rates for such minerals are fixed depending on the type of mineral extracted but it is applied to the value of the produced mineral where value is based on the world price of such minerals. There is also a general excess profits tax which subjects certain profits beyond a base to progressive rates of tax ranging from 0 to 60%.

Added to this are proposed new mining tax arrangements in Indonesia, Ghana, Guinea, Namibia, Zimbabwe, Nigeria, Mongolia, Peru, the Democratic Republic of Congo, Chile, Zambia and of course China. In addition South Africa apart from the measures referred to above is currently debating a 50% windfall tax on super profits and a 50% capital gains tax on the sale of mining tenements.

What this short world tour has demonstrated I hope is that the attempt to extract tax from the utilisation of non-renewable resources is not a narrow Australian phenomenon.

Although the rates and methodology for imposing the tax vary greatly and it may well be that after careful analysis one jurisdiction is somewhat more favourable for mining than another, it is unlikely that companies would go offshore.

The idea that somehow those mining companies operating in Australia currently will pack up their tents and move offshore as a result of the introduction of the mining tax is to a large extent fanciful. The inevitable question is where would they go? Our main competitors in relation to the two critical areas where the Australian mining tax will apply (iron ore and coal) also have in place mining taxes and some are looking at the introduction of further taxes which go way beyond what has been successfully passed in Australia. With a more ingenious implementation more revenue would have been generated for the state, and still with no danger of any businesses moving overseas.

Professor Robert Deutsch is a professor of taxation at the Australian School of Business.

This article first appeared in the Australian Financial Review.

Professor John Piggott

Should superannuation portfolio allocations be adjusted with age to reduce the financial exposure of senior Australians to stock-market crashes?

Certainly, I feel it is essential to take age and wealth into account in deciding on an individual’s asset allocations, including the government-mandated low-cost MySuper.

The architect of the federal government’s superannuation reforms, ­Jeremy Cooper, has commented today that stock-market crashes indicate fund managers should invest more in bonds, particularly for members nearing retirement who have less time to recoup losses. He highlights the way baby boomers that were just about to enter retirement lost a lot of wealth during the 2008-09 stock market crash, when the ASX 200 fell about 50 per cent.

I agree. Australian superannuation is constituted to a very unusual design and we rely very heavily on self-funded or privately funded superannuation to provide retirement income, much more heavily than most other countries. We need to be especially aware of the connection between an individual’s circumstances and the portfolio he has in his superannuation fund, and make portfolio allocation as flexible as possible.

Australia is one of many countries that have a rapidly ageing population. However there are few products that provide longevity insurance, which is protection against the risk of individuals living too long, running out of cash and then relying on the state.

We also need to have more superannuation products.

It is probably best early on in life for savers to invest in the stock market – they can ride out the natural peaks and troughs, and gain the benefits of a long term investment. However later on, when workers are approaching retirement, they really need to put their assets in a less volatile investment, such as bonds. If a default system is to be introduced on a mandatory basis then there should be multiple defaults determined by an individual’s age and wealth.

John Piggott is the Director of the ARC Centre of Excellence in Population Ageing Research at the Australian School of Business.

Professor Peter Shergold | CSI blog

Let me begin with an extended apologia.  Actually it has two elements.

First, I plead tardiness – back in October 2011 I wrote a blog on the residential property developer, Stockland as a ‘shared value’ company creating social good (building communities) even as it seeks financial return.  I promised I would soon provide a second Australian example.  So here it is, I hope better late than never.  It’s AMP.

Second, I acknowledge conflict of interest.  I sit on the Board of AMP Ltd, its subsidiary AMP Life and a member of the Audit Committees of both organisations.   That means I understand AMP from the inside.  It also means that I can scarcely pretend to objectivity.  What follows are my personal reflections which, I should emphasise, don’t necessarily reflect the view of AMP.

Financial planners get a bad rap.  Last year’s Roy Morgan ‘Image of Professions’ survey suggested that only 28% of respondents awarded financial planners a high or very high rating for honesty and ethical standards (up from 25% in 2009 and 2010).  To put that score in perspective, car salesmen rated 3%, real estate agents 7%, journalists 11% and Federal politicians 14%.  At the other end of the scale, nurses scored 90%, school teachers 76% and police 69%.

The portrayal of financial planners in the media is often hostile.  The most egregious characterisations present the profession as little more than glorified loan sharks, squeezing from their hapless clients outrageous high fees for self-serving advice.

The inadequacy of the government and the opacity of their financial dealings have fuelled the anger and resentment of Wall Street Movements world-wide.  Financial planners, nearly all whom operate as small and medium community-based enterprises, have become associated with the dubious ethical standards that were displayed by some of the grants of international banking.

I suspect that many blog readers will think it purposeful provocation when I suggest that financial planning might have a positive social value.  Yet I’m not being a political contrarian.  Rather I’m returning to my academic roots as an economic historian.

It’s too rarely remembered now, only a generation after the great wave of demutualisation, that the AMP was born in the Australasian colonies of the mid-nineteenth century as the Australian Mutual Provident Society.  Geoffrey Blainey wrote a fine business history of the company, setting its growth within the fiercely competitive world of friendly societies, mutual benefit associations and cooperatives that were the foundation stone of much nineteenth-century enterprise.

In those days providence (the exercise of foresight in the management of one’s own affairs) was seen as a positive social value.  It was based on the unwavering belief that working people had both the responsibility and capacity to look after themselves.  By lives of exertion, punctuality and thrift the ‘deserving poor’ could become self-reliant.  Through frugality, without government assistance or charity, they could provide for the future needs of their families.

The means to achieve that was through mutualisation.  AMP – and other great institutions like National Mutual Life Assurance and Temperance and General (now both part of AMP’s corporate genetics) – were run on the view that ordinary working people possessed collectively the power to control their lives and care for themselves.  Those who paid subscriptions for protection were members of the businesses they ran.  Surpluses were reinvested for their mutual benefit.

One key to this remarkable ambition was what today we would call financial planning.  The ‘mutuals’ provided life assurance, income protection and deferred annuities.  They issued endowments for children and made loans available on the security of the policies held.   Friendly societies offered reimbursement of medical expenses or, failing that, the cost of a funeral.   The broad sweep of wealth management (to use contemporary jargon) was perceived to have social purpose.  Those who provided it were driven by a sense of social mission.

Today AMP is one of Australia’s top investing publicly-listed companies, with 980,000 shareholders, around 6,000 employees, 2,900 self-employed and employed financial planners and relationships with a further 6,000 independent financial advisers.  It provides planning advice, superannuation, income protection, life assurance, banking products and investment (including shared, fixed interest, property and infrastructure). It’s a large, modern corporation.  Yet what it offers, in its essence, is not so very different from 150 years ago.

That’s why I am so delighted that the current CEO of AMP, Craig Dunn, in addressing employees and financial planners, has restored that sense of societal value in espousing the ‘noble purpose’ of what they do.

It captures the sense that AMP has the capacity to make a positive social impact even as it seeks to maximise the long-term value to its policy-holders and shareholders.

I see at least four ways in which AMP (as an institution) and financial planners (as a profession) have the capacity to deliver societal value.

First, by helping Australians and New Zealanders take personal responsibility for the financial security of their families.  AMP is not a business that accepts that the challenge of solving social problems – of creating social impact – resides solely with government.

Second, by making the opportunities for building financial security as accessible as possible, catering to those with modest incomes not just those who have accumulated high net worth.   AMP needs to provide low-cost entry to superannuation.

Third, by recognising that AMP contributes directly to the public good and civil society.  It does so, for example, by reducing pressure on publicly-funded retirement savings and by investing capital assets in building Australia’s productive infrastructure.

Fourth, by emphasising the integrity of its corporate behaviours and transparency of actions, AMP can help to restore faith in the market economy (generally) and the responsibility of our financial institutions (particularly).

In the nineteenth century AMP’s mission was ‘to be a sure friend in uncertain times’.  Today, in more contemporary language, it is committed to ‘helping people own their own tomorrow’.  Both statements, appropriately pursued, have the potential to create societal value in pursuit of investor returns, underlying profits and shareholder dividends.

This, at least, is the message that I’ve now twice had the opportunity to deliver to senior executives at AMP.  If you would like to read the longer version of my address to them it’s now available.

I’d welcome your comments.

Peter Shergold is the Macquarie Group Foundation Professor at the Centre for Social Impact (CSI) at UNSW. This blog post first appeared on the CSI blog.

Professor Wolfgang Buehler

Banks and investment funds holding Greek debt must decide by today whether to cancel half of the money they are owed. This is a key component of a joint IMF and EU plan to keep Greece from defaulting.

Requests for the euro-zone to boost funds to fight the crisis have been loud and clear since the G20 meeting in Mexico, however little seems to have been achieved. Germany and other Northern European countries are still reluctant to increase the volume of the European Stability Mechanism, a permanent rescue fund to bailout members of the Euro zone.

This fund has a major signalling function that Europe is ready to fight possible contagion effects from Greece to other weak European countries. The German parliament vote last week to accept a bigger European bailout fund refers to Greece alone and has the purpose to buy again more time to give Greece a chance to recover. It will support European banks with a heavy exposure of Greek government bonds, and to ring fence the consequences of a Greek default. The European support of Greece comes with some unparalleled control measures impacting on the sovereignty of Greece, which the country has already found hard to accept. And yet Greece still has to accept further austerity measures.

Over the past two weeks, the European Central Bank, the Bank of England and the Bank of Japan have both increased their programs of expanding the money supply by buying their own governments’ bonds. Morgan Stanley has also forecast that the US Federal Reserve bank will be printing money again before the end of the year.

If the euro is to stay alive in the long run there have to be major changes. Easing liquidity and credit conditions are only short-term measures – there is no structural change in the banking system which is Europe requires. What we need is a plan to support real growth in the weak European countries, especially in Greece, Portugal, and Spain. If these countries decide to stay in the euro-zone, the Government sector has to shrink, and production costs have to decrease.

These austerity measures will have a huge impact on many people; the social and political consequences cannot be foreseen, and it presents a stark risk to political stability. It will be a major challenge to support these countries as they restructure their economy. It is similar to the way the USA had to revitalise Europe’s economy after the Second World War. There are still huge economic problems ahead – and for the Greek people that means more austerity, more wage cuts, and more unemployment.

Investors have until this afternoon to join an unprecedented debt swap worth up to 107 billion euro known as private sector involvement, which was agreed in February after months of tough negotiations. Concern that investors will not be willing to agree to the swap has caused sharp falls in stock markets around the world.

I feel it is crucial to avoid a disorderly default by Greece with a contagion effect that might spill over to the US and Australia. Mind you even Australia will probably feel the impact of the problems in the euro-zone. For example if exports to Europe as a whole go down by half that would decrease Australian exports by about 5% because Europe takes about 10% of Australian exports. Plus, we would then have what is called a ‘second order’ effect, whereby China would also see an impact because it exports a huge amount of goods to Europe. Consequently the demand for minerals to Australia would also drop.

Geographically we may be a long way from Europe, but there are close economic ties.

Rosemary Howard

Today is the 101^st anniversary of International Women’s Day, a day celebrated around the world to mark the legal, political, social and economic achievements of women.

The change in corporate governance gender reporting requirements for listed companies is to be applauded. The Australian Securities Exchange now makes it mandatory for top companies to report on how they are managing gender balance and gender diversity in their workplaces all the way from the board down.

The theme of International Women’s Day for 2012 is Connecting Girls, Inspiring Futures – meaning if we set the right example for our girls and young women now, they will be inspired to a brighter future for all. And yet the movement of women into top leadership roles in Australian organisations has been excruciatingly slow. It is now regarded as ‘big news’ when someone like Martin Parkinson makes an announcement that the Treasury will adopt a long-term target of making 35% of senior executives women by 2016 from 23% in 2011.

In Australia women have comprised the majority of university graduates in Commerce, Economics and Law – all those feeder disciplines into leadership roles – for over two decades now. There are 1.3 women to every one man in our university system – we are investing a lot of money in educating our women. So you may wonder why there are comparatively few women on the senior leadership career path.

Perhaps it is best to look at the example of one who has risen above the ranks, to become the first female Prime Minister of Australia. She appears to be able to win the support of her work colleagues convincingly but is unable to connect with voters. I fear what we see here are the challenges that senior executive women across Australia face every day being played out very publicly in federal politics.

Here is a leader who has successfully managed a complex minority government to achieve a remarkable amount of legislative change in a short period of time. However some of her public persona revolves around commentary and cartoons on her hair, voice, and marital status, rather than on achievements as the first female PM of this country. Even after thousands of years of history, women in leadership roles are still judged by different and often more superficial standards than their male peers.

Gillard has taught all executive women an important lesson: take a close look at your career-defining moments. 

The change to ask companies to report on how they are managing gender balance and gender diversity in their workplaces may be thought to relate just to board positions but it’s actually about the whole organisation and it became mandatory for listed companies just over a year ago. More recent changes to Federal Government legislation will now see reporting on gender diversity outcomes for employers of over 100 people. Some companies are doing quite well in regard to their reporting and the programs for for both women and men that they’re introducing to support gender balance in the workplaces. Not all though.

Some organisations are saying they want more time to compile the numbers, while others just think it is not relevant to their business. For example a lot of the more traditional companies – such as mining – still don’t have any women on their boards. And in terms of representation in their workplace, it’s not looking much better either. A particular career point of failure for women is the child rearing years where we need to do a much better job of providing part-time and remote flexible working arrangements for parents.

Indeed, the lack of women in middle to senior positions – in the corporate and not-for-profit sectors – contributes to Australia’s growing talent shortage. We’re essentially wiping out half of our working population. It’s not only a loss of potential talent, but it’s an economically poor way of doing business.

It’s not enough for some women on corporate boards to be getting ahead; we should be campaigning for women at all levels.

Australian companies may well ask what is in it for them. Well, the ambition of women can be rewarding to women themselves as well as the company they work for. It increases global competitiveness, and gives a boost to Australian GDP.

Research from US not-for-profit organisation Catalyst and other global studies point to the fact that all aspects of organisational performance – customer experience, operational excellence, community engagement and the bottom line – are much stronger when there is diverse representation on the board, with up to 35% higher return on shareholder equity.

Major listed companies are catching up with gender balance.  ASX and Federal Government initiatives that require companies to be transparent and list gender outcomes are a positive step forward. The wheels of change are in motion, and we need to maintain the passion and momentum as we’re not there yet. When we reach our goal with gender, we can address our other diversity challenges including ethnicity and age.

Rosemary Howard is the Executive Director and Conjoint Professor of Executive Education at the Australian Graduate School of Management.

Peter Shergold | CSI blog

I was lucky enough last month to visit Canada as a guest of Human Resources and Skills Development Canada although, unfortunately, not quite lucky enough to go skiing.  So, instead of Whistler, Big White and Lake Louise, my itinerary incorporated Vancouver, Victoria, Toronto and Ottawa.

The trip was centred around the promotion of social innovation.  It turned out to be a genuine ‘thought holiday’.  I have returned energised.  A full account can be found at “Postcard from Canada”.

In Vancouver, British Colombia (BC) I had the opportunity to deliver a public lecture to a well-informed and engaged audience, on the potential of cross-sectoral collaboration to catalyse creative approaches to the production of public good.

I took as my text for the evening one of the key thematic motifs from the discussion paper, Together:  Respecting our Future.  The document has been developed by the BC Advisory Council on Social Entrepreneurship.   It reflects on the scale of the task at hand: 

“The social, economic and environmental challenges that we face are shared problems that require shared solutions … we know all this, but working together is still difficult.  Our sectors and systems are not currently organised to support collaboration and collective action.  Our three main sectors – public, private and not-for-profit – often function in isolation and operate with different sets of rules and practices.”

In Canada as in Australia.  Why, I reflected, is it so difficult?  What is needed for change?  How, in particular, can professional public services and community-based organisations work together in pursuit of public and social innovation?

In both countries the traditional methodology of government, based on consultation and submission, is clearly proving inadequate.  So, very often, is the advocacy of community organisations.  Both founder on the rocks of asymmetric political power.  Too often political outcomes are debated and negotiated between those on the ‘inside’ and the ‘outside’ of democratic governance.  Opportunities to work together as equals on solving the wicked problems of society remain rare.

In structuring my ideas for the evening I came to the conclusion that there were five new ways in which greater connectedness could be built.  These seem to me the essential ingredients of ‘partnership’.

First, the delivery of government programs (particularly human services) needs to empower the community organisations that are contracted to deliver them.  Bureaucratic red-tape needs to be reduced to the minimum required for public accountability purposes.  Reporting needs to focus on performance not compliance.   There should be no risk-averse micro-management of outsourced providers.  Rather organisations need to be appropriately funded for the services they deliver and actively encouraged to be innovative in taking new approaches to the implementation of government policies.

Second, the design of government programs needs to incorporate the front-line experience of community organisations.  Tendering is important.  Public services generally do it with integrity and probity.  Even more important, however, is engaging outsourced deliverers in framing the administrative guidelines under which they will deliver the program. 

Similarly, citizens should be encouraged to take responsibility for the budget management of the government support that they require.   A number of jurisdictions, led by Western Australia, are enabling people with a disability to organise and purchase the ‘self-directed’ services they need to live a full life.  Such opportunities to ‘co-produce’ government can be extended to other individuals (e.g. those struggling with mental ill-health) and tailored to the needs of communities (e.g. remote Aboriginal settlements).

Third, the funding of social innovation needs to be facilitated by government.  Public funding and philanthropy will never be sufficient.  Government can play a major role in helping to harness private capital for social impact and, by doing so, drive public innovation.  Recent moves by Australian governments to provide capital start-up funding to mission-driven social enterprises, to support community development financial institutions as intermediaries and to encourage social benefit bonds based on public policy outcomes suggest a willingness to trail new approaches.

Fourth, the full benefits of public policy and social enterprise need to be audited and measured.  Too often government evaluations of programs is narrowly conceived.  If governments are to be persuaded that public funding is investment rather than expenditure, the benefits of intervention need to be articulated and assessed.

Fifth, and underpinning these criteria, governments and public services need to take a new approach to doing.  A focus on ‘customer service’ needs to be accompanied by a commitment to citizen engagement.  Collaboration needs to be more than a statement of principles.  The world of wiki and crowd-sourcing can harness social media to engage civil society in framing policy and rewriting legislation.  Cross-sectoral ‘design laboratories’ can drive innovation from the ‘outside’ but it is equally important to develop collaborative mechanisms on the ‘inside’ of the public service.  I think the Partnership Forum that I chair in Western Australia represents one effective approach:  but so, too, is the establishment of the Not-for-Profit Reform Council at the Commonwealth level.

The podcast of my speech will soon be available on line, courtesy of ISIS at the Sauder School of Business at the University of British Columbia. A blog on the lecture by one attendee, Susan Brinton, is now available.

In the meantime I welcome your views on how to improve and sustain collaboration between the public, private and community sectors.  I’m pretty sure I understand the problems but far from satisfied that I know the answers.  I’d appreciate your views.

Peter Shergold is the Macquarie Group Foundation Professor at the Centre for Social Impact (CSI) at UNSW. This blog post first appeared on the CSI blog.

Michael Peters

The ACCC is to allow Telstra’s structural separation – which splits its wholesale and retails arms – during the roll out of the NBN. However the question is are they creating another duopoly?

After many months of work, including revisions to Telstra’s original proposals, the Australian Competition and Consumer Commission (the ACCC ) has given the SSU the green light and accepted Telstra will split into two, via its Structural Separation Undertaking (SSU) which will be implemented as it migrates services to the National Broadband Network. Certainly I feel we need ongoing surveillance of the National Broadband Network (NBN), in the wake of the announcement.

The announcement is back to the future for the Telco sector. It will be a great challenge for both competition policy and the regulator, and without close scrutiny NBN Co and Telstra will become what Telstra was less than a decade ago. A large monopoly owned by the state. Only this time there will be two of them, and they won’t be allowed to compete for customers – it is a duopoly.

Although it is to be welcomed that Telstra has undertaken to deliver price equivalence to all its copper-based access services and exchanges through new wholesale contracts, it needs to be ensured that – at least as a fallback position – the charges set out in ACCC access determinations will apply. However Telstra was always the ‘bad boy on the block’ and the new split for the NBN looks set to take the same route, with high if equivalent pricing. The failure of competition law to ensure access to the network allowing others to compete is to be deplored. It has yet to be tested as to whether the NBN will encourage new providers to flourish to compete between this new duopoly.

The ACCC has announced new measures which include specific commitments to ensure the quality of Telstra’s supply of regulated services, and the security of wholesale customer information. The undertaking also includes a raft of compliance measures and a dispute resolution processes, including an independent telecommunications adjudicator scheme.

The deal needs to be keenly observed by the regulators – and remember no corporate governance charter for the NBN has been presented to the public as yet. The compliance measures announced by the ACCC are to be welcomed, but there needs to be ongoing surveillance of Telstra and the NBN, and its impact on the productivity of all Australian companies.

The separation of Telstra is perhaps second only to the NBN in significance. Past ACCC experience says that we need an ongoing examination of the Telstra split up, and there remain many questions unanswered by the ACCC announcement. Will they unleash the highway or set up tollways? Will all the promises be kept – or is more regulation needed?

The SSU is a bonanza for lawyers and bankers – but few if any customers will see the benefit.

Michael Peters is a Lecturer in Business Law and Taxation at the Australian School of Business.