We're moving away from big banks

AUSTRALIAN borrowers are dumping their banks to get a better interest rate. A record 35 per cent of all housing loans written in 2011-12 saw borrowers refinance existing mortgages with a new lender, rather than buy or build new property.

Bureau of Statistics figures show all the growth in new lending to owner-occupiers in the past year was in refinancing. Every week, the banks and other lenders refinance $1 billion of existing loans at better interest rates, as borrowers freed from exit fees vote with their feet.

In the year to June, lending to refinance loans swelled by $7.3 billion or 17 per cent from a year ago, and by 30 per cent from two years ago. By contrast, lending to buy existing real estate fell by almost $1 billion, while lending for new construction rose just $24 million.

Australian Prudential Regulation Authority (APRA) data shows the big four banks have been the losers. This year their market share shrank slightly as growth in their stock of home lending was far outpaced by the smaller Australian banks and wholesale lenders.

But the big four remain dominant. At June 30 they held 86 per cent of all the banks' housing loans, up from 75 per cent four years earlier, before they were allowed to swallow their two biggest rivals.

But in the first half of 2012, the smaller banks won 24 per cent of the growth in the stock of home loans. And the banks collectively saw new lending shrink, with all the growth going to non-bank lenders.

The data suggests Treasurer Wayne Swan's campaign to get unhappy borrowers to vote with their feet has been enough to make the big banks take notice.

A spokesman for Mr Swan said the figures show the government's reforms have stirred competition in banking, to the benefit of mortgage holders.

"People are taking advantage of our ban on mortgage exit fees," he said. "This has put more power in the hands of Australian families: they can walk down the street to another lender if their current bank isn't looking after them."

Victoria, New South Wales and Western Australia have been the main battlegrounds. In Victoria and WA, 37 per cent of home loans in 2011-12 were for refinancing, and in NSW and South Australia, 36 per cent.

The bureau figures report the new loans written each month, and they show all the growth this year has gone to non-bank wholesale lenders. In trend terms, between December and June, monthly lending by banks shrank by $224 million or 2 per cent, but wholesale lenders lifted lending by $69 million or 27 per cent.

Excluding refinancing, seasonally adjusted new lending rose 2 per cent in June, suggesting the Reserve Bank's interest rate cuts have injected life into the market, as intended. The growth went mostly to finance new construction, rather than existing real estate.

The APRA figures show that even though new lending fell in 2011-12, the stock of money we owe the banks in housing loans grew by $83 billion or 8 per cent. Smaller banks gained $10 billion of that, with Macquarie Bank more than doubling its lending to $3.8 billion, and the Bendigo and Adelaide Bank's lending up by $3.4 billion or 16.5 per cent.

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Inequality fell under Swan, but it wasn't his doing

WAYNE Swan tells us his source of inspiration is Bruce Springsteen, and his anthems for the working-class battlers of America. It's a new way to try to persuade us that Labor's goal is to make Australia a more equal place and the Liberals' goal to make it a more unequal one.

It might work, because this is an issue on which Labor has a good story to tell. While John Howard in his first eight years as PM was sensitive to the needs of the "battlers", he lost office largely because he lost that focus as he went on. Swan as Treasurer has done nothing dramatic to make Australians more equal. But he has persistently pushed his "Labor values" into virtually every reform, every fiscal package, to nudge the outcomes in that direction.

It's gone surprisingly unnoticed, except by those on high incomes, who have found themselves excluded from virtually every initiative Labor has taken to "ease the burden on struggling Australian families". That has fuelled the perception among some of them that Swan is a class warrior, and his bid to recruit Springsteen to the cause only intensifies that.

To take a few examples:

. All of Labor's handouts to families were targeted to lower and middle-class households, and left out those on incomes above $150,000. High-income earners have lost their tax rebates for private health insurance, and those on more than $300,000 have had their superannuation tax breaks pruned.

. Making employers lift their superannuation contributions from 9 per cent to 12 per cent could make workers better off, unless employers recoup the cost from lower wage rises.

. Pensioners, including the disabled, won big pension rises in 2009 from the Harmer review although, typically, the unemployed were excluded.

. The big bipartisan tax cuts from the 2007 election went everywhere, but Labor's tax cuts since have gone to the lower half of income earners. The latest lot cut tax by $10 a week for workers on $25,000 a year, but just 5? a week for those earning $80,000 or more.

No economist has tried to piece it all together, so we don't know how much of a difference it has made. The latest income distribution data from the Bureau of Statistics is for 2009-10, and won't be updated for another year. And in any case, so many other factors affect income distribution that its data can't tell us what impact government policies have had.

For example, the distribution of wages and salaries has become far more unequal as we have moved away from national wage fixing and industry awards to enterprise bargaining and individual contracts. That was what was meant to happen, but the size of the shift is startling.

Bureau of Statistics figures show that in the three years to August 2011, average wages for full-time workers at the bottom fell by $4 a week, or 0.6 per cent. Those in the middle had an average wage rise of $36 a week or 3.4 per cent, while those at the top had an average rise of $206 a week, or 10.3 per cent. These changes swamp anything the government has done.

The wage share of national income has fallen and the profit share has risen, so that returns to investors now account for a far bigger share of income. This boosted the share of income going to high-income earners in the boom years, and has shrunk it since the GFC bust.

Moreover, Swan's concern for working families specifically excludes the unemployed. Even in opposition, when he wrote a book, Postcodes, on the inequity of Australia's income distribution, he ignored the ugly fact that we pay the unemployed a benefit below the poverty line. Now in office, this Springsteen fan ignores them still, expecting them to live on $35 a day.

But Labor has kept intervening in small ways to favour working battlers, and it is false to pretend otherwise as The Australian did last Thursday when it ran across its front page a supposed expose.

"Inequality has grown on working-class warrior's watch", its headline ran. "Income inequality has increased slightly on Wayne Swan's watch", its story began. Yet the figures it cited showed the opposite.

It reported that inequality had increased over a 10-year period (which 10 years was not clear). Yes, the bureau data shows inequality did rise between 1995-96 and 2007-08, but that was under the Howard government. Swan became Treasurer only at the end of 2007. His first budget took effect in 2008-09. The Australian chose to blame Swan for the growth of inequality under Howard.

Its story eventually quoted the data for what happened under Swan's watch. The share of income going to the top 20 per cent of earners "rose to 47.6 per cent in 2007-08 before easing back to 46.7 per cent in 2009-10". Inequality in fact fell on Swan's watch.

But that wasn't primarily due to him. The GFC cost investors a heap of money, and investors tend to be in the top 20 per cent of income earners. Let's get real.

What is remarkable in all this is that, in small ways, Swan has quietly put income equality back on Australia's political agenda. It's nothing dramatic. Probably all Labor has done has been to moderate the growing inequality of wage and investment income.

But if you believe in equality of opportunity, it is a step forward. Those doing well in the markets don't need more help from government. It should focus on helping those who need it.

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Where the bloody hell are we? Probably overseas

WHERE the bloody hell are you? If you're an Australian on holidays, probably in Bali. Maybe in Auckland. Perhaps on the Inca trail in South America, or lying on a beach in Thailand, or sitting at a cafe in Berlin or London. Wherever it is, you're probably not here.

Australians made a record 8 million overseas trips in the year to June, 80 per cent of them as tourists or to visit friends and family. In just five years, the Bureau of Statistics reports, the numbers of trips we make overseas has swelled by almost 3 million or 57 per cent while the number of foreign visitors coming here has risen just 340,000 or 6 per cent. We made more than a million trips to New Zealand, took almost a million holidays in Indonesia, paid more than 800,000 visits to the US, and 600,000 to Thailand. On top of that, we made 1.23 million trips to Europe mostly to the continent, not Britain more than a million trips to other Asian destinations, 603,000 to South Pacific islands, and more than half a million trips to other places from India to Latin America, Africa and the Middle East.

With the high dollar now giving Australians almost double the buying power overseas that they had a decade ago, an annual trip overseas is becoming part of the lifestyle of millions of people who would once have holidayed at home.

It's not hard to see why the Queensland economy is hurting. In a decade, excluding spending by students, Australians' spending on overseas travel has swollen by $14.7 billion or 144 per cent, while foreign tourists' spending here has gone backwards, shrinking by $154 million.

Queensland has been the big loser. Last year, compared to five years earlier, 114,000 fewer foreign visitors spent most of their time in Queensland, whereas 306,000 more spent most of their time in Victoria, and 120,000 more focused their time on WA.

Victoria has been the big winner, and its run continued in 2011-12. Last year the state hosted 1.27 million foreign visitors (including students, who account for almost half of all spending by foreign visitors), up from 756,500 a decade earlier. It accounted for more than 75 per cent of the growth in visitor numbers, in line with trends since the middle of last decade.

In a decade, visitors to Australia from China have more than trebled, from 172,000 in 2001-02 to 583,000 in 2011-12. In recent months, China has overtaken Britain to become Australia's second biggest source of visitors, after New Zealand. In the past decade, China and New Zealand each account for roughly a third of the net growth in visitor numbers.

Visitors from India (including students) have also trebled, providing our third biggest growth market, with Malaysia fourth. The only other countries to generate any significant increase in tourism to Australia over the decade are Indonesia, France, the US and the United Arab Emirates.

But visitors from Japan almost halved in the same decade, from 659,000 to 344,500, as the rising dollar and word of mouth from poor travel experiences sent Japanese tourists elsewhere, especially to China. Visitors from Britain also fell by 30,000 over the decade, thanks to the high dollar.

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Melbourne's bustling fringe - 1000 newbies a week

MELBOURNE'S outer suburban fringe is growing at its fastest pace in decades, adding almost 1000 people a week, as greater Melbourne is swelling with almost a quarter of Australia's population growth.

New estimates by the Bureau of Statistics report that, in the past decade, the five areas experiencing the biggest growth in Australia were all outer suburbs of Melbourne.

South Morang grew from a fringe of 6667 people in 2001 to a large suburb of 38,895 by 2011. In one decade, it added the entire populations of Carlton, Fitzroy and Collingwood.

Point Cook was a close second; it began the decade with 2092 people and ended with 33,393, almost as many as South Yarra and Toorak combined. In the west, Caroline Springs added 21,400 people. In the south-west, Tarneit grew from 1427 to 22,473, while in the north, Craigieburn and Mickleham together doubled from 16,647 people to 35,807.

All told, the bureau estimates greater Melbourne grew by a massive 647,164 people in a decade, its population rising 18.6 per cent to 4.17 million in mid-2011.

In the sheer scale of growth, no other Australian city came close. Sydney grew by 477,645 people or 11.6 per cent to just over 4.6 million.

If both cities continued growing at this pace, Melbourne would overtake Sydney by 2028 to reclaim the title of Australia's biggest city for the first time since 1901.

Perth and Brisbane both grew faster than Melbourne Perth growing by 26 per cent to 1.83 million, and Brisbane by 25 per cent to 2.15 million.

The bureau has revised its figures after the census found its estimate of Australia's population was roughly 300,000 too high.

The rapid growth of foreign students coming to Australia to study, interstate and overseas tourists, and service industries more broadly, has been the key to Melbourne's rapid growth. The bureau estimates 60 per cent of the state's population growth came from overseas migration, and just 40 per cent from natural increase.

No other city since the 1960s has experienced growth on this scale, or the strain it has placed on services: from public transport to hospitals, electricity and road space. Those growth strains are widely seen as a key reason for the unexpected defeat of the Brumby government in 2010.

While most foreign students settle in the city and inner suburbs, the city's population growth has been overwhelmingly on the outer fringe. The census found three rings: rapid population growth in the inner suburbs, modest growth (or even decline) in the middle and outer-middle suburbs, and booming growth on the urban fringe.

The 11 innermost councils Melbourne, Maribyrnong, Moonee Valley, Moreland, Darebin, Yarra, Boroondara, Stonnington, Glen Eira, Port Phillip and Bayside added 167,500 people over the decade.

Seven outer fringe councils Wyndham (Werribee), Melton, Brimbank, Hume (Craigieburn), Whittlesea, Casey (Berwick/Cranbourne), and Cardinia (Pakenham) added almost 350,000 people between them.

There was less growth in the middle. The population in Keilor, Wantirna, Endeavour Hills and Frankston shrank.

Regional Victoria saw rapid growth around Geelong, Ballarat and Bendigo and in towns along the coast or the Murray River. The Barwon region added 29,285 people, more than 5000 of them in Torquay alone. But that growth was offset by widespread population losses inland, especially in an arc from the Western District through the Wimmera and Mallee to the irrigation areas in northern Victoria.

More than 1000 people left rural areas around Mildura. Almost 1200, or one in six of the population, departed from around Kerang. More than 3000 left the Wimmera.

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The NDIS truth. No-one wants to pay for it.

JULIA Gillard scored a PR coup last week by outmanoeuvring the Coalition premiers to make it appear that they were blocking the goal of a national disability insurance scheme.

The reality was different. It would be more accurate to say that the PM moved the scheme's goalposts to favour her government then blasted the premiers for not kicking to where she had moved them.

It's an important issue that deserves more than superficial examination. In an era when the policy climate is hostile to big government initiatives and new spending, here is a big new initiative to fill what is widely seen as a gap in community services. No one is against the NDIS. Everyone wants to make it work.

The question is: how? The dispute between the Prime Minister and the premiers was not over the need for a scheme, but over who should pay for it or, to be exact, over who should pay for its "launch phase", the trials proposed in all states except Queensland (where the Newman government didn't want one).

With good reason, the states had assumed that the Commonwealth would pay the cost. What really happened last week was that Gillard refused to have any launch sites unless the states shared the cost. A day or two of bad headlines was enough to show Ted Baillieu and Barry O'Farrell that the political cost of holding out would outweigh the fiscal cost of giving in. So they gave in.

But that does not resolve the issue. As Baillieu points out, to roll out the full scheme will cost 20 to 30 times as much as these trials. The real issue is: who will pay for the full scheme. Baillieu and O'Farrell correctly suspect that the Commonwealth is using the issue of who funds the trials as the thin end of the wedge, to lock them into sharing the cost of the full rollout.

Hence their resistance last Wednesday. And the fact that they crumbled on Friday says more about how the media treats these issues than the merits of their case.

Let's go back to the start. In 2008, activists such as Bruce Bonyhady, of Yooralla, and Rhonda Galbally, of the National People with Disabilities and Carer Council, got the ear of Bill Shorten, then parliamentary secretary for disability and children's services, pointing out the gaps and shortfalls in the funding of services for the disabled. Shorten saw the moral imperative. He commissioned a taskforce headed by Ian Silk, CEO of Australian Super, which urged the government to investigate the feasibility of a national disability insurance scheme.

To give political cover against charges of big spending on welfare, the Rudd government commissioned the Productivity Commission to do the feasibility study. The commission's report last August set out a blueprint for the scheme, arguing that the patchwork of services for disabled people were "inequitable, underfunded, fragmented and inefficient, and give people with a disability little choice".

On funding, the report was unambiguous. "The Australian government (should) take responsibility for meeting the entire funding needs of the NDIS," it said. "This would provide certainty, clear lines of funding responsibility, avoid the inefficiencies of the Commonwealth-state 'blame game' . . . and reflect the Australian government's unique capacity to raise efficient and sustainable taxes of the magnitude required."

Despite inaccurate spin by Gillard and Jenny Macklin, the commission did not propose that the states share the funding, or make the absurd suggestion that the states return tax powers to Canberra. Rather, in line with its small government theology, it proposed that Canberra fund the $7.2 billion-a-year cost from spending cuts unspecified while the states cut stamp duties by the amount of disability spending taken over by Canberra.

That was the first problem. The obvious solution, proposed by many (now including the Liberal premiers), was to pay for the scheme by a Medicare-style levy. Instead, the commission proposed a tax cut, and a "magic asterisk": unspecified spending cuts. Officially, its report was warmly praised. Unofficially, its failure to spell out a source of funds meant it was doomed.

The Council of Australian Governments pledged to introduce the scheme. Federal and state ministers began meeting to discuss how it would work. But by COAG's April meeting, the commission's report was just "a good starting point"; Macklin got the states to agree that "design and implementation of (an NDIS) will be a shared responsibility of the Commonwealth and the states". She now depicts that as implying agreement by the states to share the bill; the states disagree.

The commission got two things right. The states do not have the fiscal means to meet their share of an expanded bill. And as we saw last week, to share responsibility is to open the sluice gates for endless buck passing. The best solution would be a referendum to return to the states the tax powers the constitution intended them to have. But that would require bipartisan political support; we don't do that here.

The Commission's preference for a Commonwealth takeover is the next best. But whatever it says, the Commonwealth has rejected that. So we now we have third best: shared responsibility and buck passing.

Tony Abbott says the Coalition would pay for it all by spending cuts. OK, Tony, what would you cut? Tell us that, and we will take you seriously. Until then, let the buyer beware.

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Men are better paid, but.... (from the ABS)

MEN are better paid, but women are better educated. Men dominate the top executive jobs, at least in business, while women do most of the unpaid work and care at home. Women live longer, and are less at risk of violence - but only because it is mostly about blokes hitting blokes.


A data round-up by the Bureau of Statistics offers a diverse picture of the differences between men and women. Overall, it seems you're still better off to be a man: men get paid more, but work less, when all the unpaid work is taken into account. Women are making up ground, but the pace of change is very uneven.

Take the broadest measure of income: hourly wages. In 2006, the median male in a non-managerial job earned 9 per cent more per hour than the median female. By 2010, the gap had shrunk to 8 per cent. At that rate, it will close in about 2040.

Or take an elite level measure: key executive managers in Top 200 companies. In 2002, 8.4 per cent of them were women; in 2010, 8.0 per cent were women. Almost half of the Top 200 have entirely male executives. Only six of them have a woman as the CEO, and 92 per cent of their directors are also male.

The public sector, by contrast, is changing rapidly. In nine years, the number of women in the Commonwealth's senior executive ranks have more than doubled. Women now make up 38 per cent of senior executives, 46 per cent of all lower level managers, and 31 per cent of judges and magistrates.

The basic social divisions remain. Men work twice as long as women in paid employment; women work twice as long as men in unpaid employment at home. One astonishing detail: of elderly parents with disabilities being cared for at home, 92 per cent have a daughter as primary carer, only 8 per cent are cared for by their sons.

Women are doing better than men in other areas. On average, they live four or five years longer than men, although the gap is closing. Young women are better educated than young men, and that gap is widening. And despite widespread perceptions, men are the main victims of crime (as well as the main perpetrators).

The bureau finds women are more likely to say they feel pressed for time, and are suffering from a high level of psychological stress. Yet they are less likely to suffer mental disorders than men and less likely to be disabled.

The crime stats show men are twice as likely to be victims of violence, and 50 per cent more likely to be robbed. But most victims of harassment are female, as are 85 per cent of all victims of sexual assault.

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Why on earth is Aboriginal employment shrinking?

ABORIGINAL employment rates have slumped in the past five years, despite unprecedented efforts by the public and private sectors to increase indigenous workforce participation.

The Bureau of Statistics estimates that just 46.4 per cent of adult Aborigines and Torres Strait Islanders had a job last year. That was a slight rise from 45.6 per cent in 2010 but well below the peak of 50.4 per cent in 2006.

The figures suggest that despite federal government intervention, numerous programs and private sector initiatives, indigenous participation in the workforce since 2006 has shrunk, not grown.

On these figures, for every 100 people added to the adult Aboriginal population in the past five years, only 22 had a job, while 78 were unemployed or outside the workforce.

Researchers have challenged the bureau's figures, which are complicated by the end of the Community Development Employment Program in remote communities. The program was essentially a work for the dole program, but the bureau counted those working on it as employed.

Australian National University economists Matthew Gray and Boyd Hunter have estimated that when CDEP participants are excluded, the bureau figures show that indigenous employment in non-CDEP jobs has been rising since 2006, especially among women.

But the bureau figures show a decline in employment rates among indigenous people in every state, every age group, and every type of location: big cities, regional areas and remote communities alike.

Even comparing three-year averages, the trends are the same. They suggest that indigenous workers, like other less skilled workers, have been the victims of the rise in unemployment and slowdown in jobs growth in Australia since the financial crisis began in 2008.

The Aboriginal leader Warren Mundine, the chief executive of GenerationOne, said the figures showed that existing policies were off track and should refocus on giving indigenous Australians clear pathways to jobs.

''I'm not surprised, to be honest,'' he said. ''This is why GenerationOne has been campaigning to end funding of training courses unless there's a guaranteed job at the end of them.

''We've got Aborigines out there with more certificates than a Harvard law professor but they don't have jobs. You've got to get people job ready first.

''The GenOne approach is to deal first with their lifestyle issues, health issues, family issues and their education issues, literacy and numeracy - then give them training with a promise of a job at the end.''

Mr Mundine said GenerationOne, a private sector non-profit group founded by the mining billionaire Andrew Forrest, had put 11,000 indigenous people into jobs and had pledges of 62,000 jobs from 330 companies.

''We're dealing with people who can't read and write, can't do maths,'' he said. ''They're not job ready. Quite frankly, a lot of money is being spent, for very little outcome.

''We could resolve the employment problem in a generation but to do that, governments have to focus on the real issues.''

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Hamer Hall is back, but at a cost...

THE centre was meant to cost $24 million and open in 1977. But that was before it emerged that it had to build it on the top of old river bed, on silt rich in acid, 40 metres above the bedrock and with workers whose union used the project ruthlessly as a pacesetter in pay and conditions.

The construction of Hamer Hall was not easy. From conception to opening took almost 40 years. It stopped and started as more problems were discovered with the site, relationships frayed, and costs blew out. Had its planners known at the outset what lay ahead, they would never have begun.

But as premier, Dick (later Sir Rupert) Hamer saw it as an act of faith in Victoria's future to build a concert hall and theatre by the Yarra, as the second stage of Melbourne's Arts Centre. Premier from 1972 to 1981, Hamer was the first leader of modern Victoria, a forward thinker who saw the arts as a vital activity to human society, and wanted Melbourne to have the best of them.

As the cost of the project kept escalating, eventually to $225 million, Hamer, as premier, treasurer and minister for the arts, kept finding the money to keep it on track. It was still unfinished when he resigned as premier in mid-1981, but his Labor opponents recognised his role in the project with two unusually generous gestures.

In 1982, as premier, John Cain invited Hamer, the political father of the project, to open the first half of it to be completed the concert hall. And 22 years later, after Sir Rupert's death at the age of 87, then-premier Steve Bracks decided to rename it Hamer Hall, as a lasting memory to a man who had changed the course of Victoria.

But Hamer Hall has many fathers and one mother. Its story began in 1942, when Sir Keith Murdoch father of Rupert, husband of Dame Elisabeth, then head of the Herald and Weekly Times group, and chairman of the National Gallery of Victoria asked a committee of trustees to draw up a 50-year plan to redevelop the gallery, then squeezed into the State Library on Swanston Street.

They decided the best option was to build a new gallery south of Princes Bridge, on the site of Wirth's Park, a popular entertainment area. Albert Dunstan was premier of a Country Party government; he had little interest in the arts or Melbourne, but agreed to reserve the land.

Then Melbourne's music-lovers wanted in on it. Margaret Sutherland, the spirited composer, led a committee that collected 40,000 signatures asking for not just an art gallery, but a "Combined Arts Centre": a 1000-seat theatre, lecture hall, recital studios and courtyard restaurant.

John Cain snr, as head of a Labor government, passed legislation in 1946 reserving Wirth's Park for a national gallery and cultural centre. But it was only when Henry Bolte led the Liberals to power in 1955 that talk gave way to action. Bolte, too, had no interest in the arts, but he wanted to show he would govern for all. He decided to build the National Gallery, and start planning the rest.

Architect Roy Grounds was commissioned to design the gallery at the southern end of the site, on solid rock that was once the cliff overlooking the deep Yarra gorge. There were rows over his design, but the building went up smoothly. When the gallery opened in 1968 to widespread acclaim, Bolte was ready for stage two.

However stage two was not ready for him. The design changed constantly to meet the needs of different users.

In 1966 the cost was put at $11.76 million, but a year later that rose to $27.5 million. Some bits were trimmed, and in March 1969 the premier unveiled a new $24.3 million design, to be built by 1976.

That too proved illusory. Soil testing revealed a site, in one consultant's words: "beyond belief . . . the site is underlaid by soft ground and Coode Island silt. Below the silt is gravel, which forms the old bed of the Yarra, and below that, the basalt rock." And the silt was so acidic it could corrode steel foundations.

Bolte left it to Hamer, Grounds, and Kenneth Myer, long-time chairman of the building committee, to find a solution.

Grounds finally decided to enclose the entire building in a vast underground tub, of concrete a metre thick, surrounded by a protective rubber membrane.

The tub sat in steel pylons reaching all the way down to the bedrock, with electric currents flowing down the pylons to neutralise the acid.

Work finally began in 1977 but not for long. Drillers digging a lift well hit an aquifer, which flooded the site. Norm Gallagher, as head of the Builders Labourers Federation, made the site an industrial relations nightmare.

But Hamer's dedication to the project never wavered, though he agreed to downsize the spire as a cost-saving measure. (Jeff Kennett as premier reinstated the original design). In her history of the Arts Centre, A Place Across the River, Vicki Fairfax writes that Hamer's role in the project was critical: "It is unlikely that without his sustained personal support, it would have had the form . . . it did."

A lover of classical music, Hamer also founded the Victorian College of the Arts and later chaired the Victorian State Opera. His hall is a fine tribute to a broad-minded, generous man who exemplified long-term thinking and tolerance.

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Construction inquiry. Why is building so expensive?

VICTORIAN Premier Ted Baillieu's campaign for an inquiry into construction costs and productivity has finally paid off. The Council of Australian Governments will appoint a panel to review the industry, with wide terms of reference, including workplace relations.

But in a significant shift, the review will be carried out by "three eminent independent people", as yet unnamed, rather than by the Productivity Commission. Unions opposed giving the commission the role, accusing it of bias.

Instead, the panel will be appointed by COAG so appointees will require bipartisan agreement from the Labor federal government and Liberal state governments and comprise people with "relevant legal, industry, workplace relations and economic expertise".

It will report back this time next year after examining:

. The changing market structure of the construction industry, including openness to foreign suppliers.

. The cost of compliance with regulations.

. The impact of taxes and other charges.

. The roles of skilled labour supply and shortages, industrial relations and project management.

Other issues such as allocation of risk, availability of finance, and new technology.

Mr Baillieu said he would have preferred a Productivity Commission inquiry but the terms of reference were satisfactory and its value would depend on who sat on the panel.

"We want to ensure that the three of them are experienced, and they are independent, and they don't have any vested interests," he said. Victoria would oppose unions having a representative on the inquiry.

The timetable envisages the panel being appointed next month, with a secretariat of Commonwealth and state officials set up by September. A discussion paper would be released by the end of the year, and a final report delivered by July 31 next year.

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Stevens thinks things are great, but in Victoria...

VICTORIAN business has sent out a mayday call, warning that the state's economy is deteriorating.

A new business survey reports that conditions have slid to their worst levels since 2009, and are expected to get worse in the coming year.

As Reserve Bank governor Glenn Stevens talked up the economy at a lunch in Sydney, the quarterly survey by the Victorian Employers Chamber of Commerce and Industry (VECCI) and the Commonwealth Bank found a very different message coming up from ground level, in Melbourne and regional towns alike.

The 300 or so employers surveyed said conditions were the worst since the global financial crisis. Sales, profits and business investment were all at their lowest level since March 2009. The only growth was in wages and labour costs, they reported.

Forecasts for 2012-13 were even bleaker. For Victoria, only 9 per cent forecast stronger growth in 2012-13, while 61 per cent tipped growth to weaken.

For Australia, they were only slightly less pessimistic: 13 per cent predicted the economy would improve while 51 per cent expected it to weaken.

VECCI chief executive Mark Stone was almost apologetic, suggesting the results might have been affected by "uncertainty due to global instability (and) . . . the introduction of the carbon tax on July 1". But he said it did reflect recent conditions and urged the federal and state governments to give a lead by:

. Lifting investment in productivity-enhancing infrastructure projects, such as the East-West Link.

. Reducing "unnecessary red tape stifling small business competitiveness".

. Helping more Victorian firms get into export markets.

The survey highlights the reality that Australia is a two-speed economy, growing mostly in the minersphere mining and industries dependent on it. Deloitte Access Economics forecast this week that in the next five years Victoria and the rest of the south-east would grow at barely half the pace of Queensland, Western Australia and the Northern Territory.

"The bulk of the evidence suggests Victoria's slowdown will be modest, with the dangers of its housing setback contained without wider damage," Deloitte said. It predicted that the state's economy would be rebooted by solid growth in consumer spending, sharply rising exports and a housing recovery from late 2013.

Others are less confident. BIS Shrapnel chief Frank Gelber has urged the state government to bump up infrastructure investment, to make it a driver of growth, rather than cut it as planned.

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We agree on most things, right?

THE winner in Saturday's byelection was the party that didn't stand. The Liberals stood back to watch as Labor and the Greens fractured the alliance that is the alternative to them, with neither winning a real victory.

Labor held the seat, and with it came the end of the era when the Greens could expect preferences to favour them. Yet at the end of counting on Saturday night, Labor's vote was down 2.3 per cent on first preferences, and 4.8 per cent on the two-party-preferred vote. Melbourne was a safe Labor seat for 100 years, yet on Saturday Labor won just a third of the vote.

The Greens' vote rose by 4 to 5 per cent on both measures, but they lost again in an election they had expected to win. The results confirmed that preferences are now working against them. Without preferences, the Greens will not win lower house seats in future. Without seats, they will lose momentum. Without momentum, they will revert to the fringes.

It was a weird result. As of Saturday night, only 66 per cent of the voters had cast a vote, and 8.5 per cent of those were informal. In 2010, 84 per cent of Melbourne's electors cast a formal vote; this time, it will be around 64 per cent. One can assume that most of the absent 20 per cent would have voted Liberal: so had the Liberals stood, Labor's vote would have been lower still.

The Liberals must have been left chuckling when NSW Right powerbroker Sam Dastyari attacked the Greens his government's partners as loopy extremists akin to One Nation. The only thing voters can conclude from that is that the Labor-Greens alliance is a mismatch of enemies, an unstable partnership bound to fail.

All three parties need to step back and take a look at how they relate to each other. The Liberals dominate the federal scene, but their lead is brittle when the polls show half their own supporters want Malcolm Turnbull to replace Tony Abbott as leader. And while Ted Baillieu may have no plausible rival, his own polls are worrying for a first-term government that should be on its honeymoon.

Baillieu has enemies to the left and right, but fewer friends than he deserves when his government is mostly making sensible decisions. A prime example is its decision to reopen New Street, one of Brighton's main roads, by installing relatively cheap boom gates. It rejected the two bad options: to leave a main road closed, as Labor did, or to put in an expensive underpass, as some locals wanted. You just wish it would apply the same common sense by revisiting its excessive TAFE cuts and scrapping its wasteful policy to put two security guards on every railway station.

But, of course, Labor and the Greens can't praise any decision by the Baillieu government, because we seem to have a new rule that oppositions must oppose virtually everything a government does. The only Gillard government policy that Abbott supports is to send soldiers to fight in Afghanistan.

My thesis is that Australia, and Victoria, cannot afford the degree of political partisanship we now have. The centre needs to be strengthened. In reality, most of us agree on most things. We need political structures that reflect that.

There will always be partisanship: politics is a contact sport. But we need to create a second avenue, in which big long-term issues are dealt with on a bipartisan (or all-party) basis, so that business has certainty about future policy frameworks and can plan investments accordingly.

Last week I wrote on the impasse on infrastructure investment. We want better roads and public transport, but, egged on by whoever is in opposition, we oppose every means of paying for them: higher taxes, higher debt or user charges such as road tolls.

Past governments dealt with this by handing such issues to all-party committees to resolve on the understanding that they suspend hostilities on the issue and work for a joint decision, rather than split on party lines. It offers oppositions a partial share of power, so that decisions with big consequences are made by weighing up long-term costs and benefits, not short-term political ones.

Climate change is another issue on which a bipartisan approach is needed. Whatever system we adopt to tackle it, it will work only if business can trust future governments to honour commitments made by the current one.

The Liberal Party supported a carbon price under John Howard, Brendan Nelson and Turnbull as leaders. Climate change requires a long-term bipartisan policy so business can invest with confidence that the goalposts will not be moved. Kevin Rudd wasted his opportunity by trying to use the issue to divide the Liberals, ultimately causing his own downfall.

Australia deserves better. We won't get it from Abbott, who is partisan to the core. We won't get it from Gillard or Rudd either. But we could get it from Baillieu and Daniel Andrews. They could show the next generation of Australian political leaders the benefits of taking some big, politically difficult issues out of partisan politics to get the decision right.

Where would the Greens fit into this? In Tasmania and the ACT, they are working well in coalition or partnership with Labor governments, and accept compromise as normal. In Victoria, they seem to stand alone. Should they be islands of purity, or build bridges to become part of the main game?

Their model should be Germany where the Green "realos" (realists) wrested control from the "fundis" (fundamentalists) to became part of the Schroeder government which transformed the country and form state governments with both sides. Compromise is not a dirty word.

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