AUSTRALIA

In terms of the laws relating to candidacy procedures, there have been no changes to the law during the period under review, and the process remains open, transparent and in line with international best practice. Indeed, the Australian Electoral Commission is prominent in advising a wide range of newly emerging democracies about international best practice procedures in terms of all aspects of election management.

Legal frameworks exist to ensure that candidates have equal access to the mass media, and the media organizations themselves try to ensure that approximate equal coverage is accorded to candidates by basing this coverage on the party vote at the previous election.
An ongoing subject of debate is the ability of parties in government to engage in de facto election campaigns throughout their tenure in government by means of government-funded advertising under the guise of information provision. There have been some moves made recently at both the federal and state levels to legislatively or otherwise curtail such advertising, but concerns over inappropriate government advertising persist.
One (relatively small) specific matter in relation to the issue of government advertising emerged during the period of the evaluation. Federal government signage installed outside of schools in 2009 to advertise government funding of school building projects were found by the AEC to be in breach of the Commonwealth Electoral Act 1918. They were deemed to constitute election advertising, since they appeared outside schools which also act as polling stations during state and federal elections. However, the federal government has since taken steps to comply with the Act.

Voting and registration rights for citizens are legally protected and these rights are consistently enforced by the courts, at the highest levels. One exception is the right to vote for prisoners. Since 2006 there has been a ban on any prisoner voting who is under a full-time sentence for an Australian offense. In 2007 the legislation banning prisoners with any full-time prison sentence from voting was struck down by a majority in the High Court, in a test case. The High Court opted instead to re-impose a previous law which banned any prisoner with a sentence of three or more years from voting.

This decision by the High Court has prompted further debate about changing the law on the enfranchisement of prisoners, but to date the ban on any prisoner with a sentence of three years or more remains in force.

A second issue to do with voting and registration concerns the close of rolls. In 2004 legislation was introduced which closed the rolls the day the election was announced. It was argued that this measure disenfranchised many eligible voters who would otherwise have used the seven day period of grace after the announcement of the election to enroll. In 2010, the Electoral and Referendum Amendment (Close of Rolls and Other Measures) Bill 2010 was passed, which re-introduced a seven day period after the issue of the election writs during which voters can update their enrollment.

The funding of political parties in Australia is an area of considerable complexity and conflict, as it is in many other countries. The position is further complicated in Australia by the existence of different laws at the federal level, and within each of the six states and two territories. Nonetheless, there are important common features of the jurisdictions. Public funding for state and federal election campaigns is provided to every candidate securing at least 4% of the first preference vote, and by its nature this is a transparent source of funding. For private funding, there are no limits on the value of donations, but candidates and parties must adhere to reasonably stringent disclosure rules. The AEC rigorously monitors and enforces disclosure requirements and there may be substantial penalties (including imprisonment) for failing to comply with the requirements. While there are no limits on donations, the federal government passed legislation in February 2010, the Tax Laws Amendment (Political Contributions and Gifts) Act 2008, which abolished tax deductions for donations to political parties and independent candidates and members. The new law also limits existing provisions that allow tax deductions for gifts and contributions by businesses to political parties and independent candidates and members. This was an election commitment by the Labor Party in the 2007 federal election.
At the state and territory level, two major reviews were established in the Australian Capital Territory (ACT) and in New South Wales in 2009. In the ACT the Standing Committee on Justice and Community Safety began an inquiry into campaign finance reform and will report in mid-2010. In New South Wales, debates on reform of the funding system have included a more robust and transparent disclosure scheme; limits on election spending by political parties; contribution limits by individuals (with an exemption for membership fees); the stricter regulation of fund-raisers; and enhanced accountability of government advertising. So far, these discussions are ongoing.

The mass media in Australia enjoys a high level of freedom, and a series of High Court cases in the 1990s further entrenched media freedom within the legal framework. One included a case in 1991 when the High Court struck down an attempt by the then Labor government to restrict political advertising on television. The political culture is also conducive to a high level of media freedom and the media itself is strongly independent of political influence.
The publicly owned broadcaster is also independent, although it is accountable to a board of directors appointed by the government.
One threat to media freedom comes from anti-terrorism laws, and in particular the Anti-Terrorism Act 2005, which was introduced after the 7/7 bombings in London. The government concluded that existing legislation would not have been able to protect the Australian public from a similar terrorist event. The legislation allowed for, among other things, control orders to restrict freedom of speech by individuals and the freedom of the media to publish their views. Despite several attempts, the implications of the legislation for media freedom have not yet been tested in court.
A further potential threat concerns the government’s proposal to introduce an internet filter. While ostensibly intended to simply block material that is already unlawful in Australia when transmitted in other (electronic and non-electronic) forms, concerns have been raised that it will stifle legitimate public and political debate, for example about euthanasia and abortion. Moreover, the identities of blocked web sites will not be disclosed under the proposed legislation, creating the potential for illegitimate political interference with decisions over blocked content.

Australia has a high degree of concentration of media ownership, with the ownership of national and state newspapers being divided mainly between two companies, Rupert Murdoch’s News Corporation, and the John Fairfax Group. There is slightly more diversity in the electronic media, with the government funding two bodies, the Australian Broadcasting Corporation and the Special Broadcasting Service, to provide a balance to the main commercial outlets. There are also three main commercial companies.
Government oversight of the ownership of broadcasting on television and radio is enshrined in the Broadcasting Services Act 1992. There has been no significant change in this legislation, despite discussion of possible changes by both the 1996-2007 Liberal-National government and the 2007 Labor government.

Access to government information is largely regulated by freedom of information (FOI) legislation. The first legislation was passed in the federal Freedom of Information Act 1982, with all states and territories passing similar legislation shortly thereafter. FOI legislation contains a considerable number of exemptions. The Labor government elected in 2007 campaigned on a platform to update the legislation and to increase the amount of government information available to the public. The first stage of the reform agenda was the Freedom of Information (Removal of Conclusive Certificates and Other Measures) Act 2009 and the Freedom of Information (Fees and Charges) Amendment Regulation 2009, which reduced or made free of charges applications for some government information.
The second stage of the reform of FOI was the creation of the Australian Government Office of the Information Commissioner; in 2010 the former Commonwealth ombudsman John McMillan was appointed to the position. He was charged with overseeing the federal government’s new FOI laws.
The enactment of new FOI laws has been seen as an important precursor to the development of a comprehensive” government 2.0” agenda, which aims to develop more open access to government, stronger public participation and scrutiny of government decisions, as well as to provide more information and thereby improve legitimacy for government decision-making.

Although Australia is the only major established democracy which does not have a bill of rights, civil rights are protected through a significant body of legislation, and by the Constitution which contains certain implied rights which are subject to interpretation by the High Court. The Labor government elected in 2007 initiated a National Human Rights Consultation to canvass views about the protection of human rights in Australia. The preliminary report was presented to the government in September 2009; the government has not yet formally responded.
While Australia’s record of protecting human rights is internationally regarded as strong, criticisms have been voiced about the treatment of the Indigenous population and about the civil rights of asylum seekers.
Although the government and opposition both apologized to the “stolen generation” – Indigenous children who were taken from their parents in the 1950s and 1960s and fostered by white families – in February 2008, many Indigenous leaders regarded this as an insufficient acknowledgement of responsibility and demanded financial compensation. Further controversy followed the government’s decision in 2007 to intervene in many Northern Territory aboriginal townships, following allegations of the abuse of children, and the widespread use of alcohol and pornography in the townships. The Northern Territory National Emergency Response Act was passed in 2007, which allowed for direct intervention and classified the measures in the Act as exempt from the Racial Discrimination Act 1975. The Northern Territory National Emergency Response Act and five other associated acts restricted the availability of alcohol and pornography in the affected communities, acquired the land by the Commonwealth and suspended the Native Title Act 1993. The legislation also quarantined welfare benefits from recipients believed to have abused, or to be at risk of abusing, their children.
Many Indigenous leaders regarded these measures as an infringement of civil rights, and disproportionate to the problem they were designed to address.
Since 1992, Australia has operated a system of mandatory detection for asylum seekers while their cases are processed offshore. This policy was withdrawn in July 2008, and mandatory detention now applies only to those considered a security or health threat, and excludes children. In April 2010, the government suspended the processing of all new asylum claims for people from Sri Lanka and Afghanistan, following information that a large number of people from those countries were in transit to Australia and would claim asylum.

Political liberty is strongly protected by the courts. As in most other Western countries, the main challenge to political liberty has come from anti-terrorist legislation. The Anti-Terrorism Act 2005 allows for a variety of measures, including detention for up to 14 days, and restrictions on the movement, activities and contact of persons subject to “control orders,” whether or not those persons had been accused or convicted of any offense. In addition, the legislation makes illegal any act of sedition, such as urging the overthrow of the government by violence or force, and outlaws any organization that advocates the use of violence or force for to that end. One of the main criticisms of the legislation is that it lacks sufficient judicial oversight.
Freedom of political expression is generally respected, but is not unrestricted. The design and administration of defamation laws in particular are regarded by some to hamper political liberties, because they in practice act to protect governments, companies and powerful people from scrutiny.

Australia has developed a substantial body of anti-discrimination legislation, covering sex, race, ethnicity, marital status, pregnancy and disability. The body charged with overseeing this legislation, the Australian Human Rights Commission (previously the Human Rights and Equal Opportunity Commission) is a statutory body. With the exception of the Disability Discrimination and Other Human Rights Legislation Amendment Act 2009, there have been no significant changes in the legislation overseen by the Commission, or in the functions or operation of the Commission, during the period under review.
The Discrimination and Other Human Rights Legislation Amendment Act 2009 amended earlier anti-disability discrimination legislation passed on 1992, to ensure that someone accompanied by a caregiver, assistant or aid, is not discriminated against.

During the review period, there has been no change in the strong judicial oversight of executive decisions at the Commonwealth level and at the level of the six states and two territories.
Jurisdictional uncertainty between the federal and state governments continues to be an issue. The most recent example of this uncertainty concerns a new resource tax on mining proposed by the federal government in 2010, which some legal experts believe may be unconstitutional because mineral resources are owned by the states.

There is a strong tradition of independent judicial review of executive decisions. This has stemmed from the evolution of the administrative law which has spawned an administrative courts process, by which complainants may seek a review of executive action.

The High Court is the final court of appeal for all federal and state courts. While the Constitution lays out various rules for the positions of High Court judges, such as tenure and retirement, there are no guidelines for their appointment, other than they will be appointed by the head of state, the Governor General. Prior to 1979, the appointment of High Court justices was largely a matter for the federal government, with little or no consultation with the states and territories. The High Court Act 1979 introduced the requirement for consultation between the chief law officers in the states, the attorneys general, and the federal Attorney General. While the system is still intransparent, it does appear that there are opportunities for the states to nominate candidates for a vacant position. From the perspective of the public, the appointment process is secret and names are rarely canvassed publicly when a vacancy occurs.

A variety of bodies have been established by the federal and state governments to investigate corruption by politicians and public officials. Many of these bodies have the powers of royal commissions, which means they can compel witnesses to appear and to answer questions.

Public procurement systems are not always transparent, especially at the state government level, and “commercial-in-confidence” is often cited as the reason for non-disclosure of details of contracts with private sector firms. Audit process are, however, quite rigorous, so that concerns about propriety in public procurement tend to focus on issues of wastefulness and on furthering political party interests ahead of the broader community’s interests, rather than on personal gain.

The economic policies that successive governments have followed, both Liberal and Labor, have involved extensive microeconomic reform and have provided a strong base for economic growth during the past 15 years. While growth was adversely impacted by the global economic downturn in late 2008, the economy still grew by 1.2% during the 2008 – 2009 financial year, the highest growth rate of any OECD country. The January 2010 unemployment rate of 5.3% was lower than that of any major advanced economy, with the exception of Japan, and remained below 6% throughout the global financial crisis. High commodity prices have been an important contributor to this economic performance, not least because they helped place the Australian government in a strong fiscal position at the onset of the economic downturn, allowing a sizeable fiscal expansion without creating excessive government debt. Nonetheless, policy settings have clearly contributed to Australia’s economic performance, which includes not squandering the opportunities created by the resources boom.

The review period spans much of the new Labor government’s first term in office after 11 years of Liberal-National government. However, notwithstanding considerable rhetoric to the contrary, economic policy changes other than the large fiscal stimulus in 2008 and 2009 have been far from drastic. The policy “architecture” has remained essentially unchanged, as have the core principles and practices of tax, welfare, enterprise and competition policy. The notable exception is labor market policy, where the most significant area of policy reform has been in industrial relations. Indeed, the election commitment of the Labor Party to abolish the unpopular “Work Choices” system introduced by the Howard government in 2006 was instrumental in bringing about the change of government in 2007.

Recent policy concerned with improving economic outcomes has also focused on improving the education system, addressing the challenge of an aging population, tackling environmental issues and increasing the supply of skilled labor. Education policy has been a specific focus of successive governments, and the Labor government elected in 2007 has been no exception. Since 2008 the government has increased funding for preschool education, introduced measures to ensure more transparency in the reporting of results and greater accountability of schools to parents, encouraged higher participation rates in higher education and increased funding for Indigenous education and special needs groups. The major problem with all of these measures has been the availability of funding, and a related problem has been entrenched opposition to many of the measures from teachers’ unions.

A significant barrier to an integrated economic policy is the federal structure of government, and the duplication of many services and regulatory functions between the federal government and the governments of the six states and territories. The federal system of government has proved a particular barrier in achieving effective management of water resources, and federalism has also proved a barrier in achieving cooperation across the jurisdictions in order to achieve reform of many of the social services, most notably health. The roots of the problem lie in the lack of any revenue-raising powers among the states, who are dependent on the goods and services tax revenue, which was introduced by the Liberal government in 2000.

In the period up until late 2008, Australia experienced strong employment growth and declining unemployment, to a significant extent attributable to the boom in the resources sector. The period of rapid growth faltered in late 2008 and early 2009. Following substantial monetary and fiscal stimulii, and as demand for resources picked up from the emerging economies, employment growth returned in mid-2009. Unlike many other OECD countries, the downturn had a relatively modest impact on unemployment, causing it to rise by less than two percentage points.

Macroeconomic factors have been the primary drivers of Australia’s performance in keeping unemployment rates from growing, but labor market policies have also played roles, both positive and negative, in affecting unemployment and employment. A long-standing concern of many analysts has been constraints on employment growth due to inflexibility and high minimum wages in the labor market, deriving from the industrial relations system. Such a concern has seen a series of reforms over the last two decades attempting to improve flexibility and in general remove encumberances to employment. However, the “Work Choices” reforms implemented in 2006 were regarded by many in the community as undermining employment conditions and wages to an intolerable extent. The incoming Labor government had promised to unwind the Work Choices reforms, and by January 2010 had largely completed implementation of its industrial relations policy. The measures taken by the Labor government retain many of the features of the Work Choices system, including the unified national system, the minimum wage setting function of an independent agency, and the commitment to simplifying the multitude of industrial and occupational “awards.” Major changes from the Work Choices system include the partial restoration of trade union powers, increased restraints on “unfair dismissal,” greater rights of employees to collective bargaining (as opposed to individual agreements), the elimination of “Australian Workplace Agreements” (a specific form of individual agreements that allowed wages to be set below the minimum specified in an award), and provisions for regular (4-yearly) review (including the updating of award pay and conditions). A set of 10 “national employment standards” has also been established. These apply to all employees and cover key conditions such as maximum weekly hours of work, sick and vacation leave entitlements and rights to redundancy pay. The changes in the review period have marginally reduced labor market flexibility and may have mild negative effects on the level of employment, but broadly speaking the industrial relations system remains conducive to employment growth.

Recent changes to labor market policies focused on the supply side of the market have included reforming the decentralized system of job search assistance, a step which has incorporated additional resources for disadvantaged job seekers; the introduction of a “Compact with Youth,” whereby young people are guaranteed a place in an education course; the introduction of employment incentives for persons on the Age Pension; and an increase in the child care subsidy from 30% to 50%. Tight welfare eligibility criteria and mandatory participation in active labor market programs by unemployment benefit recipients have also been preserved. However, high effective marginal tax rates for second earners in households and for many welfare recipients remain negative factors in increasing employment.

A recurring theme of commentary of the Australian labor market in recent years has been so-called skills shortages. One response to the perceived shortages in skilled labor has been to provide more employment incentives for groups of workers, such as is created for women with young children by the increase in the child care subsidy. In practice, however, immigration has remained the primary source of additional skilled labor.

Economic policy and regulatory settings are, broadly speaking, conducive to investment and innovation. However, claims of skill shortages, particularly in traditional trades, persist despite the economic downturn. Private sector research and development expenditures also remain low by developed country standards.

As part of steps taken to address skills shortages, the government established in 2008 Skills Australia, an independent statutory body providing advice to the government on Australia’s current, emerging and future workforce skills needs and workforce development needs. In order to improve the supply of workers with skills in demand, the federal government has reviewed and modified skilled immigration policy several times during the period under review. Most recently, in February 2010, the government revoked the wide-ranging list of 106 occupations given priority under the skilled migration program and announced a list focusing on high-value professions and trades, to be developed and reviewed annually by Skills Australia. Other changes made to skilled immigration policy, not involving Skills Australia, have included giving greater priority to employer-sponsored applicants and tightening visa requirements for temporary skilled workers, such as increasing the minimum rate of pay.

Successive governments have sought to introduce policies at various times to encourage innovation and to increase investment in business and industry. The most comprehensive plan of recent years was Backing Australia’s Ability, a five-year program introduced by the Liberal government in 2001. The program established a cabinet subcommittee, chaired by the prime minister, to oversee the allocation of a five-year budget of AUD 2.9 billion. Most of the funds were allocated to infrastructure (particularly in the IT area), competitive research grants (primarily in the universities), and to a program supporting investment in research and development. A range of tax changes were also introduced in order to increase incentives for individuals and small businesses to increase their investment in research and development. The Labor government elected in 2007 has maintained the policy emphasis on innovation. The new government hosted the Australia 2020 Summit in February 2008, which brought together 1,000 prominent Australians to discuss ten major areas of policy innovation. Much of the subsequent report, “Responding to the Australia 2020 Summit,” dealt with the importance of innovation in increasing productivity and economic growth.

The Labor government also established a Review of the National Innovation System in January 2008 in order to prepare a green paper to canvass possible policy options. The subsequent report, “Venturous Australia - Building Strength in Innovation,” was published in 2009. To date, the government has not formally responded to the report.

If we consider the changes made to the tax system during the review period alone, then the operation of the system has in fact changed very little. The tax system is broadly successful in achieving goals of competitiveness and sufficient public revenues, but is less successful in achieving equity goals. In recent years, the income tax system has become slightly progressive, and other taxes, such as the GST, are mostly regressive. Tax concessions, such as those granted for capital gains, also tend to favor wealthier persons.

In 2008, the newly elected Labor government established a committee, chaired by Secretary to the Treasury Ken Henry, ”to examine Australia’s tax and transfer system, including state taxes, and make recommendations to position Australia to deal with the demographic, social, economic and environmental challenges of the 21st century.” Described as the most fundamental review of the tax system to be undertaken in Australia in half a century, the final report was delivered to the government in December 2009 and made public, along with the government’s response, on May 2, 2010. The committee made 138 recommendations, many of them involving substantial changes to the tax and transfer system. At the time of this writing, the government has committed to adopting only a small number of these recommendations, but it has not ruled out adopting more in future. Recommendations adopted include the replacement of mining royalties (levied at a fixed rate per unit of product extracted) with an additional 40% tax on profits in excess of the long-term government bond rate; lowering the company tax rate from 30% to 28%; more generous depreciation allowances for small businesses; and simplifying income tax reporting requirements for individual taxpayers.

The government has indicated that further reforms to the tax and transfer system are planned for its second term, should it be re-elected, describing the reforms already adopted as the first steps in a 10-year agenda. The full agenda has not been articulated, but the stated guiding principles are promoting economic prosperity and ensuring this prosperity is fairly distributed.

Despite the periodic high budget deficits observed for federal and state governments, fiscal policies in Australia are sustainable. Australia was not immune to the recent global economic downturn, with the federal government budget balance moving from a surplus of $21 billion in 2007– 2008 to a $30 billion deficit in 2008 – 2009 and a $54 billion deficit (4.5% of GDP) in 2009 – 2010. The budget turn-around can be attributed in part to fiscal stimulus measures taken in 2008 and 2009, but mostly to a large fall in tax receipts, particularly from company taxes. The budget is forecast to return to surplus in 2012 – 2013, and net federal government debt is projected to peak at 6% of GDP in 2011 – 2012.

Fiscal sustainability has also been enhanced by the establishment of a scheme to fund future public sector employee superannuation (pension) liabilities. Established under the Future Fund Act 2006, the fund is independently managed and aims to have AUD 140 billion of funds under management by 2020.

An ongoing issue for fiscal sustainability at the state level is the vertical fiscal imbalance that exists between the federal and state governments. The inability of state governments to raise sufficient revenue to meet expenditure requirements and their consequent reliance on block grants from the federal government creates acrimony and instability, and arguably sub-optimal public provision of goods and services in areas such as health, education and transport.

Australia’s health care system, compared to other OECD countries, has a respectable record of providing high-quality health care to much of the population at a relatively low cost. However, the system comprises a complex mixture of public and private funding and provision that is rife with inefficiency, perverse incentives and significant inequality in access to some medical services, such as non-emergency surgery and dental care. Indigenous health outcomes are particularly poor. The most recent attempt by policymakers to address this issue was the establishment, following a summit between the federal and state governments in March 2008, of the National Indigenous Health Equality Council, which is tasked with overseeing the operation of various initiatives.

Total health care expenditure is relatively low, but as is the case in most developed countries, rising costs to government resulting from an aging population and the development of new diagnostic tools and treatments pose significant challenges. The government has sought to anticipate these additional costs in several ways. First, in the 2008 – 2009 budget, the federal government established the Health and Hospital Fund to fund capital investment in infrastructure. Second, the federal government’s 2007 election commitment was to provide more funding to the public hospital system, which is currently administered by the states and territories. There have been extensive negotiations concerning the control of hospitals, which in April 2010 resulted in a tentative agreement that the states would transfer control of public hospitals to the Commonwealth, in return for a higher level of funding.

A further initiative in health policy in the review period was an agreement reached by the Council of Australian Governments (COAG, the forum for cooperative action by the Commonwealth, state and territory governments) for a Preventative Health National Partnership to support a range of nutrition, physical activity, obesity and smoking initiatives. The federal government has agreed to contribute funding of AUD 872 million to the initiative over six years.

During the review period, a renewed and heightened focus on poverty and social exclusion has accompanied the election in November 2007 of the Labor government. The government created a Social Inclusion Unit (SIU) within the Department of Prime Minister and Cabinet that is to report to the Deputy Prime Minister. The government has correspondingly developed a social inclusion agenda and implemented various policies and programs targeting disadvantaged children, people living in socioeconomically disadvantaged areas, people with disability, the homeless and Indigenous people. However, there has been little new policy action of substance. In the specific area of homelessness, the government released a white paper, The Road Home, in December 2008 which outlined a plan for reducing homelessness in Australia by 2020, with specific goals to halve overall homelessness, and provide accommodation to all rough sleepers who seek it. The program provides an additional AUD 1.2 billion in funding over four years to address homelessness. In September 2008, the government established the Office for Youth, within the Department of Education, Employment and Workplace Relations, to ensure better coordination of youth policy across government.

Government family policy in recent years has tended towards a part-time employment ideal for women with dependent children. Since the Labor government was elected in November 2007, somewhat greater emphasis has been placed on promoting the employment of mothers, mainly via an increase in child care subsidies. Part-time employment nonetheless remains the dominant form of employment for women with dependent children, whether partnered or single.

A constant theme in public discussion is that the quantity of available child care facilities is not adequate, at least in some regions. Research shows the total stock of facilities is sufficient, but it also shows that availability and cost of child care are key factors influencing mothers’ – in particular single mothers’ – labor market participation decisions, and that many women do not believe they have access to satisfactory care at a reasonable price. The private sector provides slightly more than half of the available facilities, although many of the private sector providers are small businesses operating in a manner similar to community-sector and local government centers.

In 2009, a Senate Committee recommended a fundamental review of child care provision, including the establishment of a statutory body, to provide advice on child care policy. The government has not yet responded to this recommendation.


In May 2009, the federal government announced the introduction of a government-funded paid parental leave (PPL) scheme to commence on January 1, 2011, which is to promote mothers’ employment participation and improve care of young children. A government inquiry in 2007 found that around 54% of female employees and 50% of male employees had access to some form of PPL. The government scheme will therefore considerably expand access to PPL in the community. The legislation to enact the scheme passed the House of Representatives on June 1, 2010, and is expected to be passed by the Senate.

Australia has two explicit pension pillars, the public age pension system and private employment-related pensions. Funded through general taxation revenue, the age pension is means-tested and is therefore effective as a social safety net designed to reduce poverty. Currently, the age pension is still the dominant source of income for retirees, but over time the balance will shift to the private pension system, which was only introduced on a wide scale in 1992, and has only had the current minimum 9% contribution rate since 2002. As a result, most retirees in the medium term future will only have been making significant contributions to their personal retirement accounts for part of their working lives.

The aging population has increased the anticipated pressures on the public age pension system. Responding to these pressures, the government indicated in its 2009 – 2010 budget that it would progressively increase the age of eligibility for the pension from 65 to 67 years by July 2023. The means-tested element of the age pension was also tightened for unearned income, but for employment earnings, this was relaxed to encourage employment participation of retirees. In order to address concerns regarding overall pension adequacy, the government increased the pension rate. The rate for single pensioners was increased even more, from 25% to 27.7% of average male earnings. A new pensioner cost of living index was also announced to preserve the real value of the age pension. In effect, these changes gave more money to fewer people, thus simultaneously enhancing the financial sustainability of the age pension while simultaneously improving its ability to prevent poverty. A further measure, announced in May 2010 as part of the government’s response to the Henry Tax Review, was the gradual increase in the minimum rate of pension contribution to 12% of gross earnings, scheduled to begin in 2012. This will likewise help improve future retirees’ incomes in retirement and the fiscal sustainability of the public pension. However, there is still some uncertainty about whether the proposed change will come into effect, and concerns have also been raised about potential adverse effects on low-wage employment.

Australia has maintained one of the largest postwar immigration programs of any established democracy, in proportion to its population size. Over one-fifth of the population is foreign-born. Successful integration of immigrants has been critical to the very functioning of Australian society and economy and has therefore been a policy priority for much of Australia’s history. In general, Australia continues to be highly successful in integrating immigrants. Increasingly, the most important contributor to this success has been a highly selective immigration policy, with migrants selected on the basis of their skills and English language ability representing a growing share of all immigrants.

Explicit integration efforts for immigrants primarily consist of encouraging them to take out citizenship, although in 2007 Australian residency requirements increased from two to four years before immigrants are eligible to take out citizenship. A citizenship test was also introduced in 2007 by which potential citizens have to demonstrate a basic understanding of Australian society, politics and culture, as well as basic English language skills. Immigrants are also encouraged to integrate into Australian society, but within the context of a policy of multiculturalism, first adopted in 1972, whereby immigrants retain their own language, culture and traditions.

A particular concern in recent years has been the large number of asylum seekers who have arrived, usually on boats from Southeast Asia. Mandatory detention was introduced for asylum seekers in the 1990s, and extended in 2001, so that detainees were excluded from the mainland, where they had certain legal rights of appeal. The incoming Labor government in 2007 abolished this so-called “Pacific Solution,” but retained mandatory detention, except for children and certain other groups deemed not to represent a security threat.

Direct responsibility for external security rests with the Australian Defence Force, which is numerically small in comparison with other Asian countries but technologically more sophisticated. External security policy is also contingent on cooperation principally with the United States, as well as with other countries in the region, most notably New Zealand, Singapore and Malaysia. There is a formal military agreement with the United States and New Zealand in the ANZUS Alliance, and with New Zealand in the Closer Defence Program.

One plank in the maintenance of external security is the forward deployment of personnel, in support of UN and other operations around the world, and in support of alliance partners. A significant proportion of the ADF have served in Afghanistan and before the withdrawal of defense personnel in 2009, in Iraq. There are also detachments in the Middle East, East Timor and the Solomon Islands.

While there are currently no credible external threats to Australian security, future planning for external security is encountering several challenges. One challenge is the decline in the availability of skilled personnel, partly because of the aging of the population, and partly because of competition for skills with the resources industry. A second challenge is funding for new equipment in order to maintain the technological advantage over potential adversaries. A related concern is the ongoing cost of overseas deployments, which erodes the funding available for new equipment.

Australia has not experienced a significant act of terrorism on its territory, although the 2002 Bali bombings in neighboring Indonesia killed more Australian citizens than any other nationality. There have been several failed plots involving Islamic extremists, most notably an attempt to bomb a major sporting event, and an attempt to storm a military base with automatic weapons. All resulted in long-term sentences for the defendants. Responsibility for internal security rests with the Australian Federal Police and the Australian Security Intelligence Organisation; the latter has no powers of arrest and relies on the police for support. Both rely on the criminal law for prosecutions, as well as on the Anti-Terrorism Act 2005, the last piece of legislation to be passed to combat terrorism. International organized crime that is not terrorism-related is investigated by the Australian Crime Commission, which was established by the Australian Crime Commission Act 2003, which amalgamated several bodies with similar remits.

Environmental policy in Australia has focused very much in recent years on climate change. Climate change has had particular consequences for Australia, producing longer, dryer summers, with associated droughts and bushfires. During the prolonged drought that affected most of eastern Australia between 2003 and 2009, much attention was directed towards water security. In order to preserve water in urban areas, legislation has been passed to mandate gray water recycling in new homes, impose restrictions on the use of water for washing cars and watering gardens, and several states have invested in desalination plants. The use of water for agriculture has been severely restricted, particularly for water-intensive industries such as cotton, rice, fruit and vegetables. An attempt to establish an authority to oversee water use on the Murray-Darling Basin was only partially successful, due to opposition from several of the states who feared reduced water licenses would impact on their water-dependent industries.

A federal Department of Climate Change was established in 2007, and charged with mitigating the effects of climate change. A report was commissioned from an economist, Ross Garnaut, and its 2008 report, The Garnaut Climate Change Review, recommended the introduction of an emissions-trading scheme that included transportation but not agriculture, and recommended that emissions permits should be sold competitively and not allocated free to carbon polluters. Following the release of a white paper in December 2008, the government proposed legislation to introduce a Carbon Pollution Reduction Scheme, a cap and trade system. The bill was defeated in the upper house, the Senate, in December 2009 and has not been reintroduced.

There has been mixed success in encouraging innovation in Australia. This is, in part, the consequence of a strong primary sector based on resources and agriculture; the industries most associated with innovation, such as pharmaceuticals and information technology, comprise a relatively small part of the economy. The mixed record of success in encouraging innovation is also a function of the fact that the responsibilities for innovation are divided between the federal government and the states, and the absence of any strong policy of coordination on innovation policy.

The Labor government elected in 2007 included in its policy platform a strong commitment to encouraging innovation. It established a Review of the National Innovation System in January 2008 and the committee’s report, Venturous Australia - Building Strength in Innovation, was published in 2009. The report recommended measures to increase human capital, enhance intellectual property rights, increase innovation in government, and it advocated the introduction of more comprehensive tax incentives to encourage greater investment in innovation. To date, the government has not formally responded to the report.

Australia’s education system is complex, with shared responsibilities between the states and the Commonwealth, and with funding coming mainly from the Commonwealth. During the period of the Liberal government between 1996 and 2007, there were substantial cuts to education funding, particularly in the universities, with some associated adverse effects on quality. While equity of access to high-quality education remained good at all education levels under the Liberal government, there was nonetheless some deterioration in this regard, in particular due to increased funding of private schools and growth in full (upfront) fee higher education courses.

The Labor government elected in 2007 has sought to reverse these trends. Emphasis was placed on: improving learning outcomes; implementing a national school curriculum; increasing school retention rates; and providing more funding for schools, vocational education and training, higher education and research.

In order to achieve these goals, the government has announced a number of funding initiatives in the review period, including increased resources to schools in socioeconomically disadvantaged areas, increased funding for vocational training in schools, funding for 711,000 training places targeting low-skilled jobseekers, AUD 2 billion for computers in schools, and a AUD14.7 billion program to construct new buildings in 9,500 schools across Australia (as part of the 2009 fiscal stimulus). In addition, an agreement reached with the States and Territories in October 2008, backed by AUD 970 million in additional funding over five years, to achieve universal access to a quality early childhood education program for all children in the year before school. These initiatives have not been without controversy, with claims of wastefulness in the school building program and failure to meet the election commitment of providing computers to every second school student in a timely manner.

To implement the national schools curriculum, the Australian Curriculum, Assessment and Reporting Authority (ACARA) was established. To date, discussions about the curriculum with stakeholders are ongoing. However, one important – and somewhat controversial – development on this front has been the introduction of the National Assessment Program – Literacy and Numeracy (NAPLAN), which commenced in Australian schools in 2008. Administered by ACARA, under the program, all students in Years 3, 5, 7 and 9 are assessed annually on the same days using national tests in Reading, Writing, Language Conventions (Spelling, Grammar and Punctuation) and Numeracy. ACARA is also responsible for a controversial website, myschool.edu.au, which provides NAPLAN test and other information about schools so as to allow parents to evaluate the performance of schools.

In the higher education sector, the federal government has abolished all full fee undergraduate courses at public universities for Australian students. It has also established two systems for assessing university performance, the Australian Universities Quality Agency and the Research Quality Framework, the later being abolished by the incoming Labor government in 2007 and replaced by the Excellence in Research for Australia program administered by the Australian Research Council, the first round of which will be completed in late 2010.