In Defence of Opportunity

In Defence of Opportunity

Address to The Sydney Institute

Wednesday, 9 March 2011

Ladies and gentlemen,

Like so many Australians, my family heads to the beach over the Christmas holidays.  There is something liberating about the sand and the surf. It is where we bare our spirits and not just our bodies. Perhaps in my case that’s a frightening thought for many of you!

This is the first summer I can remember where a small bus load of fully dressed Chinese tourists pulled up to my beach.  On this occasion a Chinese woman broke away from the group and walked up to me for a chat.  She was mightily impressed with the blue eyes and blonde hair of my one year old son.

She was seeing the ocean for the very first time.  My initial reaction was that this was a sign of the new China – enough prosperity for many of its citizens to now become global jetsetters.  However, as we talked, I was reminded of how far China has to go if people are to enjoy the life opportunities that we take for granted.

After asking me about my three children she pointed out that she was only allowed by her Government to have one child, a nine year old girl. If she could afford to pay the Government the required fees she could have a second child, but on their family wages that would never happen she said.

She and her husband were not allowed to buy a car to travel around the countryside. New Government regulations required participation in a lottery and it was literally the luck of the draw if you were allowed to buy a car.

I looked into her eyes and saw a steely determination to change her world. If she couldn’t have the opportunities we have in Australia then her daughter surely would.  And while she wouldn’t have dared to say so in unambiguous terms, there was a tacit understanding that she envied the Australian lifestyle with all its freedoms and opportunities.

Australia is a modern liberal state. It embraces and promotes the three foundation principles of modern liberalism:  liberty, equality and opportunity.

All three form something of a Holy Trinity.  Like the Trinity they are separate but inseparable.  They enhance but also restrain each other.  They go to the heart of what distinguishes a liberal from a libertarian or a liberal from a socialist.

Liberty

Tonight we come together at a time when the world has been shaken yet again by the unfolding events in the Middle East.  The protests that started in Tunisia have shown how quickly old orders can crumble.

We have commenced this New Year in a way that may mark 2011 as one of the most momentous years of this Century.   Sparked by the actions of just a few, we are witnessing events motivated by those most human of all desires – freedom and opportunity.  That is freedom from repressive and tyrannical regimes, freedom to choose who governs, and the opportunity to escape poverty and make a better life.

I doubt that few could fail to have been moved by the words of protesters in Egypt who spoke of feeling free for the first time, or the excitement of citizens in Tobruk and Benghazi, precariously taking control of their own futures.

It is too early to know whether the ideals that motivated so many to fill the streets of their cities and towns will be fulfilled.  They will face the challenges of those who seek to replace autocracy with theocracy.  There will undoubtedly be pressure to place order and stability above all else.  But what we can say is that the popular movements in the Middle East have demonstrated that the desire for basic human rights, for democracy, is something genuinely universal, not limited by faith, race or creed.  In those famous revolutionary words, they want “life, liberty and the pursuit of happiness”.

The last 500 years of civilisation has been marked by the struggle for liberty.  While initially a European movement, I have always believed that democratic liberalism is a force that knows no national or regional boundaries.  The success of democracies in India, Korea, Japan, Taiwan and increasingly Indonesia and Malaysia, prove wrong those who argue that liberalism is a western creation not universally suited to all cultures or circumstances.  It gives me cause for hope as we try to predict the future in places like Egypt, Libya and even, one day, China.

I have reflected on some of these issues in previous speeches I have given, particularly my address to the Grattan Institute in Melbourne: In Defence of Liberty.  Much of my focus in those remarks was about liberty and freedom.  But they are of course only part of the liberal story.

Equality

When we talk of concepts of liberty or freedom we most usually associate those ideas with the possession and exercise of universal rights – such as freedom of conscience, movement, speech and the right to choose our own governments.  We also reflect on the proper relationship between the individual and the State.  We seek to define those areas of personal autonomy and individual endeavour which are limited only by the necessity to respect the equal rights of others – not fettered by bureaucracy or intrusive government.

Our concept of equality is simple: each of us is born equal in terms of our humanity and our right to be respected as an individual.

Our commitment to equality means that we find repugnant discrimination based on race or religion and I have spoken about these issues the last time I had the opportunity to address the Sydney Institute in my speech, In Defence of God.

However sexism remains a threat to opportunity in modern society.

In a week in which we mark the 100th anniversary of International Women’s Day, we must ask ourselves as legislators and leaders: are we building a world where our sisters and daughters have the very same opportunities, the very same risks and the very same rewards as our brothers and sons?

Teddy Roosevelt, the Republican President at the beginning of the 20th century, was a remarkable man.  He was far ahead of his time in so many areas including women’s rights.

More than 130 years ago he wrote in support of complete equality for men and women in relation to marriage and argued forcefully that women should not take the surname of their husband  He was a strong supporter of equal pay – as he wrote in his 1913 autobiography:

“Women should have free access to every field of labor… and when their work is as valuable as that of a man it should be paid as highly.”

Equality for women has been very much part of the liberal tradition, and in many ways the work of John Stuart Mill and his partner, Harriet Taylor, was the fountainhead of modern feminism.

More than a century on, we can reflect on how much has been achieved.  But it remains the case for so many women around the world, the opportunities that women have the right to expect remain elusive, and the boys club, exclusive.

Even in a first world country like Australia, there is much still to be done.  As an ambassador for the White Ribbon Foundation, I know that too many women continue to suffer the most heinous aspects of discrimination – domestic violence and exploitation.

And in the workplace, women continue to lag in terms of equal pay and opportunity.

I want to focus on one manifestation of the unequal opportunities faced by women and that’s what is happening in the boardrooms of Australian companies.

The fact that just over 11% of board members of ASX 200 companies are female is simply disgraceful.  In fact, 84 of those 200 companies have no female board members at all.  In the next band of ASX companies – 201 to 300, the organisation Women on Boards estimates that the percentage is even lower at 4.3%.

Women hold just 2% of Chief Executive positions and 5.9% of Executive line management positions – a number that has shamefully declined rather than improved over recent years.

This is a problem that is not unique to Australia, although we perform very poorly when compared with almost all OECD countries.

Just last month, Lord Davies’ report, Women on Boards, was presented to David Cameron’s government. The report found participation levels in the United Kingdom were similar to that in Australia and highlighted that at the current rate of change it will take 70 years to achieve gender balanced boardrooms in the UK.

In addition to the obvious equity and opportunity imperatives, Lord Davies has provided us with compelling economic arguments as to why gender imbalance must end.  His report brings together research which shows that companies with greater gender balance on their boards actually perform better on a range of economic measures.

That raises the issue of adequate corporate governance. It is an almost indisputable fact that companies that draw experience and expertise from the entire population rather than just the 49% who are men, will outperform their competitors.

In fact research by Catalyst identified by Lord Davies suggests that companies “with more women on their boards were found to outperform their rivals with a 42% higher return on sales,66% higher return on invested capital and 53%higher return on equity.”

I do want to recognise that there has been some very recent progress in Australia.  The corporate governance guidelines on diversity released by the ASX last year have focused the minds of many listed companies on this issue.  I also acknowledge that by mid June 2010 women comprised 27% of new Board appointments – up from 5% the year before.

However, these trends will not get us anywhere near a balance in our boardrooms.

Faced with what I would describe as a cultural impasse and a systemic failure, it is not surprising that we now have a debate about whether national governments should set targets or quotas.

Lord Davies has argued for a 25% target and, whilst rejecting quotas in the short term, has noted that if a voluntary approach fails then the UK government must “reserve the right to introduce more prescriptive alternatives.”

There are many that are reluctant to embrace gender quotas. My view is that quotas must be a last resort. However after arguing the case for better corporate governance and gender equity for more than a decade, with little success, we are now fast approaching the last resort.

Some people argue that we should have only merit based appointments. I agree in principle but the prevailing corporate culture in Australia is blinding people to merit. Are there really only 176 females worthy of appointment to the 1,600 directorships in the ASX 200? Are there really only four women in Australia capable of being a CEO of Australia’s 200 leading companies?

Such is the depth and severity of the problem that there is an overwhelming case for the Australian government to set a target for gender balance for the boards of publicly listed companies.

My own view is that this should initially be a target of 30% female representation to be achieved by 2015.

I suggest 30% is a realistic target.  It would require around 300 additional female appointments at a time when Women on Boards has 2,500 qualified women on their register who are prepared to serve.  I also note research conducted by McKinsey’s and cited in Lord Davies report which found that 30% provides the critical mass needed for cultural change to occur within the organisation.

If corporate Australia fails to meet voluntary targets, then I believe that a 30% mandatory quota should be enacted and enforced.  I don’t propose this course lightly. As Shadow Treasurer I am always reluctant to impose more regulation on business. However, just as in other areas of government action and regulation, the Australian government in my view has a responsibility to step in if a systemic corporate or market failure is evident.

The failure of companies to address gender inequality should be considered as nothing less than such a systemic failure.  It must be addressed if women are to receive the same opportunities that men currently enjoy in modern Australia.

Opportunity

Not all of us are endowed with exceptional ability or talent. Not all of us have the same strength or energy, aspiration or industriousness – and indeed not all of us are born equal with equal wealth or family support.  However we are entitled to the equal respect of our fellows and the right to be treated equally before the law.

For a liberal, that does not mean that each and every person will or should expect to achieve similar things – some will achieve great riches, others will shine on the sporting field or in the arts, while others will find happiness with limited material means.   We reject the view that equality of outcome is the same as equality of opportunity.

The concept of opportunity helps us define both the role of government and society in allowing individuals to reach their full potential.

For those on the left of politics, this often means attempting to enforce uniformity on what life should be expected to deliver.  The social democrat will argue that the State has a central role in determining outcomes and will seek to redistribute wealth through higher taxes and higher welfare.

For the libertarian, the government has a very limited role.  They would argue that we are born equal and whatever comes next is entirely up to us.

As George W Bush succinctly put it:

“On the one side there are those who want more government, regardless of the cost; on the other, those who want less government, regardless of the need.”

Liberals accept an important role for the State but only to the extent that government action is about providing a spring board for individual endeavour and fulfilment.

Used wisely, government has the means to help individuals achieve their own goals – ones which should not be defined or restricted by the State.  Used unwisely, the State can stifle individuality, enterprise and success.

In short, government for the liberal is about getting everyone to the starting line – while recognising, of course, that some will always run faster than others.

This approach to public policy has been at the heart of the Liberal Party since its creation.

In public policy terms we must constantly reflect on whether the actions of government are designed to assist individuals, or whether the hand of government reaches in a way that can actually stifle opportunity.

In a terrific speech in New York as Opposition Leader in 1975 Margaret Thatcher encapsulated our approach magnificently as she reflected on a Britain that was heading down the path of stagnation through State intervention:

“It’s not that our people are suddenly reverting to the ideals of laissez-faire.  Nor are they rejecting the social advances of recent decades.  It’s rather they are reviving a constructive interest in the noble ideals of personal responsibility.”

Personal responsibility is the cornerstone of opportunity. For without accountability for ones own failures, and occasionally and I know it’s hard to believe I’ve had a few, no risk is taken and no opportunity is created.

People often want the Government to mitigate risk but facilitate blue sky opportunity. People must know that the two principles often clash.

Enterprise often conflicts with business regulation.

Innovation is often hampered by mandated procedure.

Creativity is often constrained by expectations.

Individualism is often straight jacketed by tradition.

To quote Thatcher again from her New York speech:

“…we must build a society in which each citizen can build his full potential, both for his own benefit and for the benefit of the community as a whole, a society in which originality, skill energy and thrift are rewarded, in which we encourage rather than restrict the variety and richness of human nature.”

For me as a liberal, governments can best facilitate human endeavour through a targeted role for the state as a provider and as a protector.

First, as a provider, the very dignity of human kind demands that the State ensure that its citizens enjoy a basic quality of life.

This does involve the provision of an effective social security system.  It does require us to ensure that our citizens have access to affordable and quality health care.  It does mean that we have particular obligations to assist or protect the young, the old, and those with disabilities who need our support to lead dignified lives.

As part of its provider role Government can be constructive in getting people to that starting line I previously mentioned.

Most obviously, this is best achieved through a strong education system.  As Louis Pasteur said: “fortune favours the mind prepared”.  If we are to ensure equality of opportunity, nothing can be more central than quality educational opportunities be it through our school system or our universities, colleges and TAFEs.

Importantly, the opportunity to participate in education and learning is not something we should see through the prism of age – opportunities for those past their childhood and teenage years is essential in a world where the ‘school to retirement’ single career is fast declining.  These minds prepared are then open to the opportunities before them.

In its second role as a protector Government must deliver peace and order to our streets and our communities.

In commerce, government must ensure protection from exploitation by the very strong with opportunities to grow for the very weak.

Untrammelled freedom in the market place can perversely lead to the erosion of opportunity if monopolies are allowed to prevail.  Its why, for example, I have supported a root and branch review of the Trade Practices Act and also why I have argued for measures that will increase competition in the banking and financial services sector.

Consumer sovereignty is front and centre of opportunity. But consumer sovereignty is weakened when consumers have less money and therefore less power in their pockets. Consumer sovereignty is weakened by poor and inconsistent information. Consumer sovereignty is weakened when choice is limited to a handful of opportunities.

In economic policy this is most evident in regulation and taxation.  These are areas where the reform agenda is unfinished and where Australia can do more to unleash and liberate the full power of individuals and business and enterprise.

Small business in particular is the engine room of the Australian economy.  I know because I grew up in a small business. Many Australians believe that starting and growing your own business provides the greatest freedom and opportunity to succeed.

The role of government is to support the growth and success of the business sector through appropriate policy.  Business regulation should promote competition, lay down the rules of the game, and protect the interests of consumers, while still facilitating innovation and prosperity and reward for effort.

Unfortunately comparative studies like the World Bank and International Finance Corporation annual reviews have found that Australia ranks relatively poorly against its international peers when it comes to business regulation.

Too often as regulators we react to the latest scam or individual corporate failure with more prescriptive regulation.  There are very few advocates in the community for less regulation to balance the public debate.

In recent years and certainly since the Corporate Law Economic Reform Program, we have seen little movement in progressing the business regulatory and compliance environment towards world’s best practice.

If we are to improve Australia’s productivity we must address each of the areas of business regulation in which we are uncompetitive, working from the bottom up. Our ultimate goal must be a business regulatory system which maximises opportunity and individual and national prosperity.

Equally important is Australia’s approach to tax.

A level of taxation which is too low will lead to the provision of inadequate public services.  A level of taxation which is too high will unnecessarily restrain the capacity of individuals to pursue opportunity and to achieve their full potential.

In the Coalition we are acutely aware that tax is other people’s money.  There is a strong moral obligation on government to ensure that the tax take is minimised and that the taxation system is fair and efficient.  This requires that the need for government provision of goods and services be fully justified in the national interest and that they be provided efficiently and at the lowest possible cost.

Fundamentally, that is why the Coalition is concerned about the Gillard-Swan tax agenda.  Instead of focusing on comprehensive reform we have seen a piece-meal approach which has been designed to meet the government’s failure to maintain fiscal discipline.  Bold reform has been replaced by the short-sighted tax grabs that we have seen applied to cars, alcohol, tobacco, the mining sector and now through the flood tax and the proposed carbon tax.  They are band aid measures that are a million miles from the broader taxation reform that the commissioning of the Henry Review was meant to herald.

The Coalition will continue to press for meaningful tax reform.  We remain absolutely committed to lower, simpler, fairer taxes.  As with regulatory reform, our ultimate goal is a taxation system which maximises opportunity and individual and national prosperity.

It is perhaps in the area of social welfare where the balance between legitimate government intervention and that which becomes excessive is a fine one.

How do we judge whether social security is providing a genuine safety net for those in need rather than a net of entanglement from which there is no escape. How can our $116 billion a year welfare system give Australians opportunity?

My greatest concern is to ensure that our welfare system does not create long term or inter-generational dependency for those able to participate in work.  A system that encourages reliance on welfare is an addiction that becomes difficult to escape.

The last Coalition government introduced significant reforms to a number of welfare payments to reduce welfare dependency.  I think particularly of the principles of mutual obligation that were implemented for those receiving some payments.

We sought also to address the problems faced by indigenous communities in northern Australia through the introduction of income management.

There is a strong case for further reform and I want to canvass two areas in this regard.

First, to reduce the potential for long term welfare dependency we need to evaluate the support structures available to those that have been on welfare for extended periods.

In this regard, we need to look at the provision of intensive case management for those that have been receiving payments like Newstart or, where appropriate, the Disability Support Pension, for extended periods.  Case managers could review ways in which individuals can improve their employment readiness and those factors in their personal lives that may be impinging on their job readiness and employment potential.

They should also have the capacity to consider the extension of income management – the control of welfare payments through quarantining and direct pay schemes – where they believe that it is warranted.  This is particularly important for families where children may be at risk from parental drug abuse, gambling or other lifestyle afflictions.

Second, I believe that there is a strong case for even better co-ordination between Centrelink and State welfare agencies.

You would think that in the vast, vast, vast array of words over many years at the Council of Australian Governments, State and Commonwealth bureaucrats could nut out a seemless relationship that puts people first. Sadly that has not occurred.

State community service and housing departments are at the frontline of child welfare and in assisting individuals who are struggling. Better co-ordination would allow welfare payments to be adjusted where that is in the best interests of the families concerned.

For example, if a State Department of Community Services identifies families in which welfare payments are being used to fund addictions like drinking or gambling, they should have the capacity – indeed the responsibility – to work with Centrelink to put in place income management arrangements for that family. For such a scheme to work effectively, it will be necessary to review privacy laws so that there can be a sharing of information between Commonwealth and State welfare agencies. There will also need to be political courage.

Ladies and gentlemen,

Australia can be proud of its achievements in providing opportunities for its citizens to succeed.

However, in a world that is increasingly competitive our future will depend on our ability to ensure that we remain a nation that genuinely promotes the ideals of freedom, equality and opportunity.

I am overwhelmingly optimistic about Australia’s prospects and I am genuinely excited about the opportunities that my children and their generation will have in the years ahead.  But I also know that nations do not succeed by accident – it is through a constant examination of what we can do better to allow individuals and businesses to flourish that will guarantee those opportunities that our citizens have as their birth right.

Maximising opportunity is both a practical policy and a moral responsibility.

We should never take opportunity for granted.  In parts of the world, as the Chinese lady at the beach proved to me over Christmas, opportunity is constrained and even, increasingly threatened.

So let us defend opportunity for to deny opportunity to any individual is to deny the essence of their being and that is an intolerable sin.