By Cameron K. Murray and Paul Frijters. Published by Authors
As Ross Gittins says on the cover of this book, ‘This book will open your eyes to how Australia really works. It’s not good news, but you need to know it’. Knowing how Australia really works will shake up our attitude of ‘she’ll be right mate’. No, it won’t be right if we can’t stop the Game of Mates.
It’s An Old Story
The Game of Mates started way back with the first fleet and has continued ever since. The Property Game of Mates was instituted then, when James Ruse was granted a parcel of land and, three years later, sold it for 40 pounds. He was granted more land, in total 186 acres, over the next 30 years and, at the age of sixty, in 1819, he had amassed, in today’s money, more than $1.5 million, all a ‘Gift’ from the government. This is a loathsome tale of how Australia became one of the most unequal societies in the Western world while, merely a generation ago, it was one of the most equal. It is a story of how groups of Mates have come to dominate our corporate and political sectors, and managed to rob us, the Australian majority, of over half our wealth. It is a story, meticulously analysed, by two economists who show us reality in the raw, and it’s certainly not a pretty picture.
How It Works
I need to give you some definitions: The authors call the mates, James. They call the Australian majority Bruce, and the ‘gifts’ that the James receive are called ‘Grey Gifts’. James’ wealth comes from discretionary decisions made by politicians and bureaucrats in such areas as property development, mining, infrastructure projects, banking, taxation, health and education, on and on. It touches most of the areas of economic activity in Australia, and has huge impacts upon our society. James will actively seek to influence these decisions by various means, including donations to politicians, doing favours, making suggestions to politicians and bureaucrats as to the merits of their plans. Some of these plans require rezoning of land, building certain infrastructure, obtaining favourable tax treatments, etc. He employs the best and brightest to lobby for his projects. These people are often those same bureaucrats and politicians who used to be the decision makers.
Shameful Roll Call
For instance, in the Mining Industry, Mark Vaile is now employed by Whitehaven Coal, John Anderson was employed by Eastern Star Gas, Martin Ferguson is Chairman of the Petroleum Production and Exploration Association, Greg Combet and Craig Emmerson are consultants to AGL and Santos. Sophie Mirabella now works as a Canberra-based lobbyist for Gina Rinehart. I’m sure there are others, but nothing is as blatant as the appointment of former Resources Minister Ian McFarlane to the Queensland Resources Council as CEO.
Tony Abbott gave us a peek behind the curtain recently, in his tribute to former resources minister Ian McFarlane. Said Abbott: “It was a magnificent achievement by the member for Groom in his time as minister …. and I hope the sector will acknowledge, and demonstrate their gratitude to, him in his years of retirement from this place.”
How It Works
Here is how the Game of Mates has taken over the building of public infrastructure: Private Public Partnerships have been implemented by private companies to tell us that we need to reduce public debt, so they will build (and implement tolls upon) roads, so that future generations will not be burdened with these costs. Governments, of course, like this idea, as it provides an opportunity to downsize, and perhaps dismantle, Public Works departments and infrastructure. The Private Companies do not necessarily borrow private money, but often borrow from the government at low interest rates, loans which frequently do not need to be repaid, unless certain revenue levels are achieved. Exaggerating anticipated traffic volumes with road/tunnel projects is often the way that James overcomes the necessity to pay back these tax-payer-provided loans.
The authors have examined 17 official PPP’s from thirty-eight major projects since 1992, and found that the average PPP had traffic outcomes 40% below forecast. Therefore, loans to the NSW government of $223 million for the Harbour Tunnel, and the Victorian government’s $426 million loaned to Transurban have not, until now, been repaid. In other words, they were given huge Grey Gifts from us, the Taxpayer.
To illustrate the kind of deception at play, consider the Clem7 tunnel in Brisbane. It was constructed by a PPP consortium of James called Rivercity Motorway. James promoted the scenario that this project would generate a fifteen minute time-saving compared to existing roads. However, it delivered only eight minutes. James promised 90,000 trips per day, but achieved only 25,000. James promised a $2 toll, but Bruce got a $5 toll. As a result, Brisbane now has an almost empty tunnel running under congested surface roads, which do not attract tolls! A highly inefficient outcome. In addition, James persuaded certain Superannuation Funds to invest in this project, and they are reported to have lost all their investments as a consequence.
The Big Boys
Some figures show how much the ‘Game of Mates’ is skewed towards the “Big End of Town”. The Australian Economy is now around two and a half times larger per capita than in 1975, and it appears that the Mates have captured all of the growth since then, so they have gained 60% of the economy since that time. ACCC Chairman Rod Simms noted in a speech as to how much of the economy is controlled by the top companies. Total revenue of the top 100 companies in Australia increased from 15% to 47% of GDP between 1993 and 2015, an astounding concentration of power over the economic activities of the country which, of course, comes with amazing political power as well.
Let’s now look at the Mining Game of Mates. Apart from seeking to gain advantage by being given mining leases over their properties, (which we saw in the ICAC investigation into Eddie Obeid and his mates), one way of gaming the system for James in the mining industries is to underestimate the bond that needs to be paid to clean up the mining sites after they have been exhausted. The Queensland Government’s internal report states that the tax payer will be left with a bill of 3.2 billion dollars to clean up the mess left by miners who had estimated inadequate money to clean up their messes. To clean up after Hazelwood, the ENGIE company estimated $73 million, whereas the official final and total cost to rehabilitate this site will be over $743 million. The Queensland Government is giving the Adani Group concessions in regard to environmental damage, and an uncapped amount of underground-sourced water to assist the mine. This is another enormous Grey Gift that will disadvantage farmers in the district.
Another Game for the Mates is taxation. In 2014-15, 40% of the biggest 1,539 companies in Australia paid no taxes at all. Tax dodging for James and his mates can be facilitated in such accounting practices as discretionary trusts, through which wealthy individuals can spread their income over many family members, thereby diminishing their liabilities. This is a great practice for wealthy individuals which are all James. All up, the authors estimate that treatment for the James, in the area of taxation, deprive the Australian taxpayers of $67 billion per year.
We Wuz Robbed!
After reading this book, I find that everywhere I look lately there is more information in the media about how we are being robbed by the James. Just four articles in the last few weeks show us how the system works for James. Elizabeth Farrelly has written two recent articles about the ‘Priority Precincts’ which the NSW government is putting in place, whereby the permitted heights of building will be 30 stories above, and adjacent to, railway train stations. (Grey Gifts for Developers). Another article says that Sydney’s future is lost to concrete. SMH Sept 23-24, Elizabeth states that the building that is happening in Sydney is funnelling public assets into private coffers, draining the city of its texture, lifeblood and sweetness. There appears to be a mechanism that discourages appeals against any such activities, and such appeals may be fought in NSW courts.
Are we still calling this a democracy? In the SMH on the 6th of October, a headline said that the Westconnex traffic volumes will be below forecast and, as a consequence, the government is being asked to sweeten the sale terms of the project. Overly optimistic traffic forecasts have been blamed for the financial failures of several toll roads in Australia, including the Lane Cove and Cross City Tunnels in Sydney, and the Airport link and Clem 7 in Brisbane.
The NSW Government is funding an ‘education’ campaign to have motorists use more Ethanol based fuel. The $5 million to fund this campaign is really a great (Grey Gift) advertising campaign for one company that supplies ethanol.
One way to stop this Game of Mates is to put a price on Grey Gifts, so that (for example) if land is rezoned and the owner is likely to derive a financial benefit as a result, then the owner must pay the costs of having the land rezoned. The taxation system needs to be arranged so that fair taxes are being paid. This is a process that is occurring, but not quickly or adequately.
Mining companies need to be paying greater prices to build a mine in the Australia, and an independent body needs to assess the costs of cleaning up a mine. Norway has a system that we should emulate. They have a public ownership structure of resources, and their oil and gas companies are taxed with a super-profits tax that has earned the country over $337 billion in two decades.
Jobs for the Boys
Jackie Lambie is asking for legislation to reflect the extent to which Government members on retirement can slip straight into a lobbying role for big corporations. Let’s hope that this initiative is given due consideration. Commentators and think-tanks are building cases for the curbing of the involvement of the James in the Game of Mates.
‘Game of Mates’ is available from www.booktopia.com.au (Give the code mates for a 10% discount)