Critical Analysis : “The Global Financial Crisis” by Kevin Rudd

This is an Assignment for POL 820 Public Policy :  Theory & Application. Master of Politics & Public Policy Macquarie University.

by : Andri Rusta

Preamble

 

This essay discusses the role of government as indicated by Kevin Rudd MP, the current Prime Minister of Australia, in an essay that appeared in February 2009 edition of The Monthly. Rudd argues that the shortcoming of the neo-liberalist economic approach has resulted in the current global financial markets. He argues that governments must take on interventionist role in financial markets to restore properly-regulated markets and to rebuild national and international demand.  He warns against the notion of the all-providing state and the abandonment of the open competitive market.

Rudd’s remedies of regulation of world financial markets to overcome the current global financial crisis seem to be cumulative rather than innovative. These remedies seem to build based on the lengthy Australian experience of government oversight of the Australian financial system. Since colonial times, Australian governments have regulated local financial businesses, particularly banks, one way or another. For this reason, this essay has a brief history of how Australian governments have intervened in the operations of local financial institutions.

 

Background

Rudd’s essay is an extension of the views he expressed in his maiden speech on 11 November 1998 in the House of Representatives, updated to take into the current global financial crisis.  In this speech, he said “I believe unapologetically in an active role for government. I believe that this activist role should have as its foremost guiding principle a commitment to equality of opportunity that is real rather than rhetorical.  It is a principle that should permeate all that we do in education and health. I also believe that governments must actively look after those who, through no fault of their own, cannot look after themselves. I believe that governments must regulate markets.”(Rudd, 1998)

This essay covers a number of areas. Rudd claims (Rudd, 2009) that neo-liberalism policies have failed because of the assumption that all stakeholders in unregulated financial-markets have access to all available information. Therefore these stakeholders are in the best position to estimate the best price for assets. If, under these circumstances, markets are fully efficient, it follows that asset-prices should not probable; however such occur, the markets will self-correct and there is no need for government intervention.

Rudd makes the point (4) that the challenge for present-day social democrats is the redevelopment of the role of the state and of social democracy as a comprehensive philosophical framework for the future. He points out that this framework will have to go beyond the economics of Keynes set out in the latter’s 1936 book The General Theory of Employment, Interest and Money. This is because there are current-day economic issues, such as globalisation, not contemporary with Keynes’ observations. To this framework, Rudd adds that social justice is an essential part. He says (5) that social-democratic governments should continue “to encourage the market to innovate, create investment and to productivity growth within an effective regulatory framework that manages risk, corrects market failures, funds and provides public goods, and pursues social equity objectives”.

To remedy the current global financial difficulty crisis, Rudd identifies three principles (6): the effective regulation of national markets; the effective global regulation of global markets; national governments work together to deliver both.  National governments must develop similar regulatory frameworks so that capital will not be directed towards nations with the weakest regulation.  As well, the governance structure of the International Monetary Fund (IMF) should be reformed to reflect contemporary national economic powers. Moreover, the IMF’s prudential analysis powers should be increased as well as enhancing its early-warning system for identifying weaknesses in financial markets.

Rudd concludes (8) by saying that social democrats, through the creative use of government powers, can be effective in the current global financial crisis. The neo-liberalist philosophy is unable to respond to the crisis issues.  Perhaps unconsciously echoing Bentham, government properly developed and managed is for the common good of society, taking into account individual freedoms and social justice, an activity for the many, not for the few.

 

Discussion

Rudd’s essay presumes that the reader is familiar with the two political philosophical concepts, “neo-liberalism” and “social democracy”.  He does not define these terms but instead focuses on describing the impacts of both concepts – the former critically, the latter favourably.  The essay also presumes that the reader is aware of the causes of the current global financial crisis. In that respect, the essay has a political philosophical thrust instead of an economics thesis. Rudd overlooks that even under neo-liberalist economics, the financial crisis would happen as the demand for credit exceeds the supply. Likewise Keynesian economics, as favoured by social democrats, argues that the same premise would lead to the same outcome.  However, both disagree about the remedies to minimise the impact of the crisis.

The neo-liberalist approach, influenced by neoclassical economic theory, would argue that the economy would remedy itself as the demand for and the supply of credit work their way towards a new equilibrium. This approach has its foundation in what is now called a microeconomic approach where (1) People act rationally among outcomes that can be identified and associated with a value (2) Individuals maximses satisfaction and businesses maximise profits (3) all buyers and sellers act independently on the basis of full and relevant information (Starr, 1997). A public-sector role in influencing the selling or buyer the credit, both by regulation or by active market participation, will distort the market and lead to productivity distortions. This approach is silent about what length of time is required for a dis-equilibrium market to return to equilibrium in supply and demand. This is understandable as each dis-equilibrium market has its own peculiar dynamics in supply and demand.

The social democratic approach, using Keynesian economic theory, argues a top-down approach to market dis-equilibrium. This approach (Binder, 2008) argues that active public-sector decisions by public sector. Including monetary policies by a national central bank and government fiscal policies, are required. The decisions of individuals and businesses can lead to outcomes where the economy operates below its potential output and growth. During economic downturns, demand may be less than supply leading to high unemployment and the lost of productivity.  In some situations, there is no automatic mechanism to return to the former levels of output and employment.  Keynes argued that the solution was for national governments to develop policies to stimulate demand by reducing interest rates and government investment in infrastructure. This investment would compound leading to an increase economic activity and reducing employment.  It should mentioned that Keynes indicated that once the former levels of unemployment and productivity have been achieved, the public sector should withdraw from this degree of participation.

Cameron (Cameron, 2004)) argues that the ALP governments of both Hawke and Paul Keating governments pursued economic neo-liberalist policies that stressed competition, the privatisation of government businesses (for example QANTAS,  the Commonwealth Bank, the Defence Service Homes mortgage portfolio), the reform of national financial markets, floating of the currency, and reductions in trade protection.  But this claim overlooks that both governments carried ideological “baggage” over from the time of the Whitlam ALP government. During that government’s term of office, there had been an economic decline characterised by adverse balance-of-payments figures and high unemployment, inflation and bank interest rates.

The Hawke and Paul Keating governments had to demonstrate their economic and financial acumen to the electorate and to the business community at-large.  In that respect, to say that these government abandoned the ALP’s social democracy platforms is to overlook that these governments faced difficult financial circumstances. The overriding issue was the collapse in Australia’s balance of payments and the rise in its foreign debt (Kelly, 2008).  The problem was that strong domestic economic growth was encouraging a level of imports which Australia was unable to finance through its exports. Australia was importing more that it was exporting. As well, external borrowings had been going towards local consumption and not towards capital development.  If this situation continued, the standard of living for Australians would be reduced.  These governments tackled this problem by freeing up the financial markets, by an apparent reduction in labour costs and by balancing the federal budgets (203).

Focus on the pursuit of neo-liberalist economic policies has overshadowed these governments’ social justice achievements. Social justice is not found in the neo-liberalist philosophy. However, social justice initiatives were introduced as a trade-off for the neo-liberalist economic policies. Compulsory portable superannuation as a form of future savings was introduced in lieu of a basic wage increase; it also had the advantage, as a form of future savings, of reducing the amounts required for aged pensions in the future. Industrial democracy - consultation with employees about proposed changes to the way they work - was introduced. Working hours were extended with the objective of improving productivity; the social justice trade-off was a greater holiday period over the Christmas-New Year break.

The Howard Liberal-National coalition government continued with the neo-liberalist economic policies.  More government businesses were privatised notably the sale of Telstra and the taxation system was reorganised with the introduction of the goods and Services Tax.  As well, there were attempts to deregulate the labour market.  However what distinguishes the introduction of these neo-liberalist policies from those of the preceding governments is there were no new social justice policies.  More importantly, while the Hawke and Paul Keating governments had acted out of economic necessity, the Howard government was pursuing a political economic ideology which Howard had embraced as early as the mid-1970s when he was Treasurer in the Fraser Liberal-Country coalition government. This philosophy proposes a reduction of government in the market, privatisation of government businesses, a free market economy, lower direct taxation and higher indirect taxation, and a reduction in the size of the welfare state.

In some respects, the Rudd proposal is a return to the social liberalism philosophies of the pre-Whitlam government modified by the acceptance of the way the prevailing market operates.  The pre-Whitlam era political philosophies for both sides of Australian politics stemmed from John Stuart Mill (Boucher and Sharpe, 2008), a contemporary of the earlier-mentioned Bentham. Some of federal Australia’s founding fathers such as Deakin and Higgins followed these philosophies. In both colonial and federal politics, between them, these men achieved the nationalisation of water rights and state-aid for irrigation (Deakin 1886), an attempt to force businesses to pay fair wages by setting conditions for tariff protection (Deakin 1906), government investment in businesses and voting rights for women (Higgins 1894), the inclusion in the federal constitution of the guarantee of religious freedom and of the right of the new federal government to arbitrate in some industrial disputes (Higgins 1899) and the “Harvester Judgement” (Higgins 1908).  The overarching rationale was that the rights of individuals could enshrine unjustifiable inequities and inhibit society’s vulnerable to develop their talents to the best of their abilities.  A major role of government was the protection the vulnerable against these inequities.

Michael Keating (Keating, 2004) observes that since the first permanent European settlement, Australians have had a reliance on government.  Since the various colonies achieved self-government, their electorates have looked to their democratically-elected governments to provide direction to the perceived common good.  For such reasons, it should not be a surprise that the world’s first social democratic governments appeared in Australia (Queensland 1899, Commonwealth 1904).  Similarly, the world’s first pro-environment parliamentary representatives would be elected in Australia (Tasmania 1983).  Likewise, it should not be a surprise that Australian expect their governments to provide common-good services (for examples transportation, security, health) which the private sector will not or cannot provide.

With regards to the Rudd proposal for government involvement in Australia’ financial market, as the case study demonstrates, already this is happening.  To date, it would seem that most Australians have been unaware of this level of detail.  For some time, this involvement has allowed the federal government to supervise the availability of credit which, in turn, impacts on national economic activity.  The financial market’s acceptance of this intervention is counter-balanced by government “protection” of the local banking industry.

The Rudd proposal that the Australian experience should be taken up globally overlooks the socio-political experiences of other nations.  As Rudd warns, the failure of all nations to have similar regulated financial markets remains a threat to global finance.  But some nations do not share Australians expectation that governments should interfere for the common good.  For one, the United States of America has a cultural expectation of minimal government involvement in all spheres of social activity.  Similarly, unlike Australia, some nations such as Indonesia have a cultural expectation that with political power comes overt political patronage that, within an industry, favour one business against another.

 

History – Australia’s financial system

There have been strong relationships between Australian federal governments and the national financial industry. In 1817 Governor Macquarie gave a charter (which he did not have the power to issue) to form Australia’s first bank.  Macquarie identified that the thirty-year old colony required a banking business that would extend credit in order to promote the settlement’s growth.  A bank would overcome concern in London over Macquarie’s expenditure on public works.  As well, the new bank had authority to issue its own currency notes.

This bank soon had competition.  The various colonial governments issued charters authorising the establishment of other banks.  These banks took deposits (which were their liabilities) and reloaned the money by discounting bills of exchange (which became assets).  The bank would issue its own currency notes using these assets as security.  There was no central bank.  Each colonial bank stood or fell on its own credit.  As long as its assets were believed to be sound, its currency notes would be accepted.  In financially favourable conditions, these banks could expand rapidly by the issue of currency notes.  However, when there was financial unease, and the currency notes were presented back for the bank to honour, banks could fail if they did not have the assets to honour their issued currency notes.

In the nineteenth century, this occurred frequently. There were bank collapses in almost every decade.  The climax came in 1893 after the failure of fraudulent land banks in Victoria triggered a nationwide run on colonial banks.  In the space of six weeks, twelve banks closed. These banks had accounted for two-thirds of the total banking assets in Australia. This late nineteenth century crisis increased pressure for the formation of a central bank. The constitution of the newly-formed Commonwealth of Australia gave the new government powers for banking, the incorporation of banks, the issue of paper money and insurance (these powers did not extend to State banking and insurance businesses).

In 1912, the Fisher’s federal ALP government established the Commonwealth Bank of Australia (CBA). The Fisher government favoured bank nationalisation and unlike the state government-owned saving bank businesses, the CBA had both savings and trading bank business. Private-sector Australian banks continued to provide trading bank business.

From 1920, the bank on took the role of central banker to the government providing advice to the government on economic issues as well as the issue of Australian currency notes. In 1931, as a response to the Great Depression, the bank’s board refused to expand credit unless the Scullin ALP government cut pensions which the government refused to do. This led to the fall of the government, and to demands from ALP for reform of the bank and more direct government control over monetary policy.

During World War 2, the Curtin ALP government gave the CBA almost all central banking powers. In 1945, the Chifley ALP government formalised the CBA’s powers in regards to monetary and banking policy, and exchange control. These powers were used by the Chifley government to expand the Australian economy immediately after the war.  Interestingly, the Menzies Liberal-Country coalition government did not interfere with these powers.  The major change was that private-sector trading banks could handle saving business. 

However, in 1959, the Menzies government reorganised the CBA’s central bank and bank-business responsibilities.  The newly-established Reserve Bank of Australia took over the central bank and the currency-note printing responsibilities.  The RBA took on the responsibility of being the banks’ bank wherein the RBA could insist that all banks under federal government oversight had to deposit a ratio of their financial deposits in currency and government-issued bonds.  The RBA could adjust the ratio at any time.  Under the Hawke ALP government, this banking supervision and regulation responsibility was transferred to the newly-created Australian Prudential Regulation Authority (APRA).  This is a statutory body that APRA oversees the business of the banking industry, mutual-benefit credit societies, friendly societies, the insurance and reinsurance industries as well as the superannuation industry.

As a general rule, irrespective of political complexion, all Australian governments have supported Australian-owned banks.  It ensures that Australia’s banks remain in Australian ownership and easy for the government to control.  Even though the Hawke government, as part of its freeing up of Australian financial markets, permitted the entry of foreign-owned banks, the extensive Australia-wide branch system of Australian-owned banks ensures that the newcomers will not be a threat to the local banks.  As well, the “Four Pillars” policy, introduced by Hawke government in 1990 and endorsed by the Howard Liberal-National coalition government in 1997 is viewed as creating a competitive market between the Australian banks.  As well, the Rudd ALP government recently guaranteed savings bank deposits.  Australia’s four major banks are considered to be in the top eleven banks in the world with regards to credit-worthiness.  As Yeates (2009, 5) observes, Australia and Canada – another nation with a highly regulated banking industry – are the only OECD nations that have not used taxpayer funds to keep their savings and trading banks afloat.

 

 

Conclusion

In his House of Representations’ maiden speech, Rudd said “We are all the product of our own experiences and the ideas with which we have been confronted….I believe unapologetically in an active role for government.  I believe that this activist role should have as its foremost guiding principle a commitment to equality of opportunity that is real rather than rhetorical.  It is a principle that should permeate all that we do in education and health.  I also believe that governments must actively look after those who, through no fault of their own, cannot look after themselves.  I believe that governments must regulate markets.” Rudd concedes that his childhood experiences have shaped his experiences (Murphy). Nevertheless he is a member of the broader Australian community which has the expectation of government involvement in the people’s day-to-day lives and in the markets.

At present Australia, like the rest of the world, is confronted with economic uncertainty as the result of the failure of global financial markets.  Australians expect proactive government action to re-activate the local financial markets.  A lack of credit leads to unemployment which, in turns, brings its own social ills as well as an increase in government expenditure of welfare pensions and services. Of the two economic theories discussed, neo-liberalism and Keynesian, the latter has the better record of success when applied in times of credit shortages.

To achieve credit market equilibrium, neo-liberalism economics relies on Adam Smith’s oft-misunderstood “invisible hand”.  But this means that the divide between society’s haves and haves-not will be worsened as the market seeks this equilibrium.  However, Keynesian economics relies on government intervention to quickly restore equilibrium leading to more production and better productivity.  Such intervention is in step with Bentham’s view that government properly developed and managed is for the common good of society, taking into account individual freedoms and social justice, an activity for the many, not for the few.

References & Bibliography

BINDER, A. S. (2008) Keynesian Economics.  The Concise Encyclopedia of Economics. Liberty Fund, Inc.

 

BOUCHER, G. & SHARPE, M. (2008) Re-founding Australia and getting it right this time. The Time Will Suit them : Postmodern conservatism in Australia. Crows Nest NSW, Allen & Unwin.

 

CAMERON, C. (2004) How the Federal Parliamentary Labor Party Lost Its Way. Labour History, 86.

 

HUGHES, O. H. (2003) The Role of Government. Public Management and Administration : An Introduction. Basingstoke, Palgrave Macmillan.

 

KEATING, M. (2004) Introduction: Are markets on tap or on top? Who Rules? How government retains control of a privatised economy. Sydney, Federation Press.

 

KELLY, P. (2008) The End of Certainty – power, politics and business in Australia, Crows Nest, N.S.W, Allen & Unwin.

 

MURPHY, K. (2008) Rudd Pays tribute to his hero Whitlam. Fairfax Digital.

 

RUDD, K. (1998) First Speech To Parliament - 11/11/1998. Canberra, House of Representatives Web Administrator.

 

RUDD, K. (2009) The Global Financial Crisis. The Monthly. February 2009 ed.

 

STARR, R. M. (1997) General equilibrium theory: an introduction, Cambridge University Press.

 

SYKES, T. (1998) Australia`s banking history. Australian Broadcasting Corporation.

 

YEATES, C. (2009) Why the Four Pillars’ flaws are strengths. The Sydney Morning Herald Weekend Business. Sydney.

The Future of Public Broadcasting

note :

this is an essay assignment for POL 856 Politics Communication Policy Master of Politics & Public Policy Macquarie University.

THE FUTURE OF PUBLIC BROADCASTING

by : ANDRI RUSTA

 

This essay discusses the role of public broadcasting in Australia. The essay outlines some of broadcasting policy change in Australian history. It will also explain brief technology change that will affect broadcasting in future. Finally, the essay proposes a preferred policy “solution’ for an appropriate relationship between public broadcasting and the public sphere in Australia.

 Introduction

For the purposes of this essay, most commonly available definitions of public broadcasting are based on American perceptions and experiences of this activity.  These definitions consider public broadcasting is a telecommunications activity that is fully or partially-funded by government and public subscriptions. This funding comes from “individuals through voluntary donations, a specific tax such as a television licence fee, or as direct funding by the state”. (2009c) However, in Australia, public broadcasting is more expansive. As the Encyclopaedia Britannica (EB) points out “Australian broadcasting comprises four sectors: the national sector, the public sector, the commercial sector, and the Special Broadcasting Service.”  As the EB definition is more in keeping with the Australian perceptions and experiences, this essay follows this definition. (Broadcasting, 2009)

Meanwhile, public debate uses Jurgen Habermas definitions which is “a discursive space in which individuals and groups congregate to discuss matters of mutual interest and, where possible, to reach a common judgment." (Habermas, 2004) In other words, public sphere is an area in social life where private people join together to form a “public”. In such an area, people can identify and discuss about their social problems and from that discussion influence political action. He conceptualises the public sphere as that realm of social life where the exchange of information and views of questions of common concern can take place so that public opinion can be form. Public sphere concept relates to politics, economic, social and cultures of society as oppose to the ‘private sphere’ or domestic life. Since the scale of modern society does not allow for more than a relatively small number of citizens to be physically co-present, the mass media, particularly television, have become the main institutions of the public debate.

The public sphere exists, in other words, in the active reasoning of the public. It is through such discourse that public opinion is generated, which in turn shapes the policies of the state and the development of society as a whole. The political public sphere constitutes a discourse, where people in their role as citizens have access to what be called societal dialogues. This place and the condition s for communication within it are essential for democracy.

 

Constitutional & Legislative Authority

Radio broadcasting in Australia commenced on 13 August 1919 when Ernest Fisk made a demonstration transmission of the national anthem “God Save the King” from one building to another at Royal Society of New South Wales in Sydney. After that demonstration, between 1920 and 1929, there were twelve radio broadcasts. In 1929,  these ad hoc arrangements were formalised into the Australian Broadcasting Company (ABC), a consortium of local entertainment interests formed to supply radio programs to the Australian radio market (2007b). In 1956, following the commencement of regular television broadcasts from commercial companies, the ABC began regular television transmissions. Since 1978, with the establishment of the Special Broadcasting Service (SBS), Australia has had two national broadcasters, both part-financed through government revenue to overcome some of the public good aspects of free-to-air broadcasting. During the 1980s, “the ABC began satellite transmission, became incorporated, and restructured its radio and television services into separate divisions.” (2000).

Section 51 (v) of the Australian Constitution, which deals with `Postal, telegraphic, telephonic, and other like services`, provides the authority for the Australian government regulate broadcasting services within Australia. The Australian government’s first attempt to regulate telecommunications was the Wireless Telegraphy Act 1905 which provided the legislative authority to control the receipt and transmission of telegraphic messages. The legislation allowed the government to permit commercial enterprises to use this technology. The capacity to grant such permission took into account that commercial enterprises such as the local Marconi Company and shortly thereafter, the Australasian Wireless Limited (the local Telefunken agent) could access the latest developments in this emerging technology. Interestingly, in 1912, the Marconi Company would sue the Australian government for infringing its wireless telegraphy patent.

 The most problematic part of s51 (v) has been the words 'other like services'. The High Court has taken a flexible approach to interpreting this provision and has recognised that technology has changed since the constitution was written. In 1935, the High Court decided that the s51 (v) ‘other like services’ included the power to regulate radio broadcasting. Similarly, in 1965, the High Court found that television broadcasting also fell under the ambit of s51(v).

The first laws about broadcasting were established in the Wireless Telegraphy Act 1905, which gives the Australian government control to receive and transmit messages by wireless telegraphy. This Act allowed commercial enterprises to use the new technology with government permission. Under the Australian Broadcasting Act 1942, there was initiated “a dual broadcasting system with the ABC [Australian Broadcasting Commission] as a public utility providing an essential service for the whole country and commercial stations who basically as businesses attempting to make a profit...” (Thornley, 2001). In effect, the legislation formalised an arrangement of a duopoly of radio broadcast operators: the ABC, a government-funding statutory and commercial operators. Furthermore the ABC was given the power to decide when, and in what circumstances, political speeches should be broadcast. Directions from the Minister to broadcast, or refrain from broadcasting any matter, now had to be made in writing, and any exercise of the power had to be mentioned in the ABC's Annual Report. That power was used only in 1963 when the Postmaster General, on the advice of the Prime Minister, directed the ABC not to broadcast an interview with a former Prime Minister of France, Georges Bidault.

The Chifley Labor government established the Australian Broadcasting Control Board (ABCB) was established with the main roles of regulating broadcasting, radio communication and telecommunications as well as taking on a role of handing out licences as well (2008). In the 1970s, this authority was replaced by the Australian Broadcasting Authority (ABA).  In turn, this body was replaced by the Australian Communications and Media Authority (ACMA) whose main roles are to regulate broadcasting, radio communications, telecommunications, and to represent Australian interests in international communications matters. It also has a role in regulating internet content standards.

The Broadcasting Services Act 1992 sets out Australian government boundaries for the direct ownership, and the various forms of indirect ownership, of commercial Australian media. The major effect of this legislation is to prevent the common ownership of newspapers, television and radio broadcasting licences that serve the same broadcasting licence region. The purpose of the legislation is to encourage diversity in the ownership of the most influential forms of the commercial media: the daily press and free-to-air television and radio. Lau et al., (Lau et al., 2006) claim that the justification for the rules is that the effective functioning of a democracy requires a diverse ownership of the daily mass media to ensure that public life be reported in a fair and open manner. They have designated this arrangement “a Western style libertarian/social responsibility model”.

The ACMA exercises powers under the Broadcasting Services Act 1992 (in relation to broadcasting) and the Telecommunications Act 1997, the Telecommunications (Consumer Protection and Service Standards) Act 1999 and the Radiocommunications Act 1992 and other related legislation (in relation to telecommunications). The ACMA works with the communications industry to achieve active self-regulation by industry and companies, while ensuring compliance with licence conditions, codes and standards. Though the ACMA is funded through the federal budget, it also collects substantial revenue on behalf of the Australian government. Revenue is collected through telecommunications carrier and radiocommunications licence fees and charges, as well as through charges on telecommunications numbers. The ACMA also collects revenue from the allocation of spectrum.

 

The Australian experience

            The experiences gained by Australian governments from regulating wireless telegraphy operators seem to have been the basis for regulating operators of subsequent telecommunication broadcasters. The government would licence commercial operators to provide broadcasting services; not only would this provide revenue but it would permit the government to control content transmitted and content received. After lobbying by the nascent Australian radio industry in July 1924, the Bruce Nationalist-Country coalition government introduced a two-tiered system of radio licences:  'A' class licence radio broadcasters to be financed by listeners' licence fees imposed and collected by the government; and 'B' class licence radio broadcasters to be financed by advertising. This system was a combination of the UK system where the non-commercial British Broadcasting Company had a government-imposed monopoly and of the United States of America where only commercial enterprises provided broadcasting services.

In the 1920s, Australian society and culture were influenced by the United Kingdom, ‘the Mother Country’. In 1926, the United Kingdom government nationalised radio by buying out the British Broadcasting Company (BBC). The Australian government did not follow this example but encouraged the 'A' class stations to amalgamate in order to maximize efficiencies and maintain standards.  However in 1932, the Lyons United Australia government followed the United Kingdom precedent by taking control of the ‘A’-class broadcasters, forming the ABC funded by the government.  The resulting formation was influenced by the British model developed under the first BBC Director-General, John Reith who considered that broadcasting as a ‘public service’ which should act as a ‘cultural, moral and educative force for the improvement of knowledge, taste and manners’ (Scannell and Cardiff, 1991). The ABC’s initial programs included “the first children’s session, sports program, British Wireless news, weather, stock exchange and shipping news, women’s session, and music” (2009a).

Following the Reith model, even though the ABC was government funded, there was no overt attempt by governments to influence the content of ABC programs. Nevertheless there was some difference of opinion between the governments and the ABC on material broadcast. Early in March 1942, the ABC began broadcasting a Department of Information/ABC series entitled The Jap As He Really Is. After continued protests it was discontinued. In its 1942-43 Report, the ABC referred to its 'difference of opinion' with certain Government departments on the manner in which some types of propaganda should be handled, using that series as an example, and said 'serious loss to the war-time effectiveness of our national stations would result from any undermining' of public confidence in the ABC's 'impartiality and integrity'.

The introduction in 1956 of television into Australia followed the earlier model of the introduction of radio.  There were two operator categories: commercial and the government-funded ABC. The commercial operators were permitted to transmit regularly before the ABC commenced transmissions.  In the Sydney and Melbourne licence regions, local print media corporations were either the owners of or significant shareholders in the commercial operators. These print media corporations were known for their conservative leanings and strong support for the Menzies Liberal-Country coalition government. These local print media corporations had the financial resources as well as access to personnel experienced in visual communications media.

In 1967, at the instigation of the Holt Liberal-Country coalition government, the ABCB began an overall review of broadcasting services. In 1972, the McMahon Liberal-Country coalition government accepted its report which recognised that the duopoly model of ABC and commercial telecommunications providers was no longer the appropriate broadcasting model to provide for the broadcasting needs of all Australians. The report recommended “A new type of service, comprising FM stations to be known as Public Broadcasting Station, which would be conducted on a non-profit basis, to cater for the needs of educational, religious, professional, musical and other like interests, but which would be available to the general public” (Thornley, 2001).

This report was the first official recognition to the need for special-interest not-for-profit public broadcasting. Although the report did not clearly explain that public broadcasting should be self-funded, self-management, it was the beginning of initial idea of public broadcasting establishment. Under this arrangement, on 15 December 1974, 2MBS FM became Australia's first fully licensed FM radio station operated by the Music Broadcasting Society of New South Wales Co-Operative Limited. This radio station provided on-air music content mainly from the Western classical and related traditions while the remainder was made up of jazz, blues, and non-mainstream and experimental contemporary music.  Up to this time, this on-air content was provided solely by the ABC. In 1976, the ABC commenced FM transmissions of similar on-air music content.

The Special Broadcasting Service (SBS) came about in unusual circumstances.  In 1975, the Whitlam Labour government was concerned that minority communities might require details of the new Medibank health care scheme in their own languages.  This led to the establishment of two ethnic radio stations, one in Sydney and one in Melbourne. These started broadcasting in June 1975, respectively with pre-recorded messages in seven and eight foreign languages. The following year, the Fraser Liberal-Country coalition government created the Consultative Committee on Ethnic Broadcasting. Following the recommendation of this and subsequent committees, the Broadcasting and Television Act 1942 was amended to establish the Special Broadcasting Service which took on the responsibility for the two ethnic radio stations. In 1979, SBS commenced television transmissions.

In the past fifteen years, there has been speculation that the ABC and SBS, as corporate bodies, would be combined. Operational efficiencies have been cited as the rationale. The Productivity Commission (2000) observed that the roles of each government-funded broadcaster are different to the other and different to commercial broadcasters. The main objective for the ABC is “to…provide...Australian innovative and comprehensive broadcasting services of a high standard ...consisting of national, commercial and community sectors and, without limiting the generality of the foregoing..”. The main objective for SBS is identified as “...provide multilingual and multicultural radio and television services that inform, educate and entertain all Australians and, in doing so, reflect Australia`s multicultural society”.

In 1992 the Keating Labor Government asked the ABA to conduct a trial of community television using the vacant sixth television channel (UHF 31 in capital cities). Community television services have been provided on a trial basis since 1994 under the open narrowcast 'class licence'. These licences are issued on the condition that they are used only for community and educational non-profit purposes. Currently, these class licences are held in Melbourne, Brisbane, Lismore and Adelaide. In 2002, the legislation was changed to introduce new community television licences and in 2004 the ABA (to be replaced by the ACMA) issued the first licences for community television stations in Sydney, Perth, Melbourne and Brisbane.

Cable and satellite television services became available in 1992. After the initial broadcaster failed financially, two broadcasters which entered the national market later became the dominant broadcasters. Subsequently, four minor broadcasters entered the national market.

 

ABC and SBS role

Section 6 of Australian Broadcasting Corporation Act 1983, commonly referred to as “the ABC charter”, provides the ABC`s function and role. As earlier indicated, one of the functions of the ABC is to broadcast programs that contribute to a sense of national identity, inform and entertain. The ABC must also transmit its programs to countries outside Australia; this program could be news, current affairs, entertainment and cultural enrichment. With the broadcasting to other countries, there is the expectation that such programs will “encourage awareness of Australia and international understanding of Australian attitudes on world affairs” (1983). The ABC also has a role in the production and broadcasting of musical, dramatic and other performing arts in Australia.

From above description, ABC has a key role in the provision and the broadcasting of Australian content. The ABC`s 2007 Annual Report published the total hours of television and radio broadcasting for each genres and there are some interesting result. The highest number of hours – 1900 – for single genre broadcasting is children`s programming: interestingly 1400 hours or 73 per cent were imported children`s programs. The next highest are news and current affairs genres which are recorded 1500 hours with 100 percent genuine Australian content. In 2007, film broadcasted by the ABC were all imported, while the broadcasting of Australian program drama totalled only around ten hours (October 2008). The ABC broadcast around 60 per cent local content television program and rest were imported program. A major contributing factor to the use of imported program is the significant cost differences between Australian-produced and overseas-sourced television programming. As an illustration, programs in the genres of adult drama, drama and documentary programs were dominated by imported program which cost less ten per cent cost of comparative Australian content.

It is believed that without government funding to produce Australian content, the amount of Australian content would be significantly lower. However, in New Directions for the Arts 2007, the Australian government committed to amending the ABC charter to mandate similar minimum levels of Australian drama on ABC and free-to-air television networks. This would provide standard that all broadcast providers must broadcast an annual minimum transmission quota of 55 per cent Australian content between 6 AM and midnight. This includes minimum amounts of first-release drama, documentary and children`s programs.

 

New Technology

The introduction of digital broadcasting is one of many changes occurring in the technologies of media, communications and information services. It will change the way of encoding the signals which carry programs from land-based transmitters. By using digital broadcasting, it is expected the new technology will offer more services, better technical quality together with greater scope for audience interaction. Earlier technological transitions such as analogue to digital, digital video disks replacing video cassettes gave television viewers some influence over the timing of their viewing. Remote control simplified the process of choosing among the viewing options. But the transition to digital broadcasting requires broadcasters to invest heavily in new transmission and perhaps production equipment.

Digital broadcasting changes the way of encoding the information sent to audiences’ television and radio receivers, and represents a new system of transmission and reception. Technologies of transmitting and receiving information include wired and wireless systems. Wired systems use copper or coaxial cable to carry electronic signals, and optic fibre cables to carry light signals. Conventional broadcasting uses wireless transmissions of electronic signals which are received through aerials mounted on rooftops or motor vehicles or specific receivers, or incorporated within output devices, like portable Walkman radio/cassette players. Satellite broadcasts are received through dishes-aerials shaped like woks point at the satellite (Given, 1998) Audiences will be able to use this information to the sounds, images and interactive capabilities of any new services if they acquire new output or display devices. They still may be called television sets but all will be computers of a sort.

Computers store and process information digitally, and communicate with each other digitally. To connect to other computers on the internet, ‘modems’ either are attached to telephone lines or use a wireless access point to connect to other computers on the internet. Modems take the digital information from computers and convert into a form that can be transmitted along the copper lines which connect most homes to the telephone network.

The main motivation for technical improvements in television is to raise the quality of television pictures and sounds. Three elements of the television which can be upgraded are the resolution of the television image, the shape of the screen/image and the improvement of sound quality. Programs in High Definition Television also offers creative attractions-like image at a level of resolution previously only attainable on film; the post production flexibility of video at film-like resolutions; as well as enhanced or cheaper, special effects capabilities. Wide-screen formats are considered to offer a more natural frame for viewing by the human eye and more expansive visual possibilities.

But it may not be good news for audiences. To get this service, broadcast audiences must have new television and radios set that can receive digital broadcasts. Television viewers can buy decoders which receive digital TV signals, but customer will not get the benefits of any enhanced features, such as HDtv. Similarly, broadcasters will have to install new transmission equipment. This would be long-term investment. And finally, there is still debate about how closely the coverage of digital transmitters will replicate an analogue transmitter. There will be possibility that viewers who receive an analogue signal might not get a digital signal unless broadcasters use additional transmission sites.

 

The Future Policy Issues

The development of a policy option in the absence of political party platforms would be unrealistic. The Liberal and National parties appear to be silent preferring overarching principles that lack any substantive policies. The ALP’s 2007 National Platform and Constitution (2007a) observes that “the media, particularly broadcasting, are undergoing a process of major change, driven by digitisation, convergence of technology and the globalisation of broadcasting, communications and information technologies” and that the party  “remains strongly committed to longstanding national and public interest objectives”. The Australian Greens 2007 platform indicates that “all Australians should be able to access a variety of affordable telecommunications” and “the government should lead by example and embrace open source and open standards”.(2009b)

As earlier observed, Australian policy development for the development and regulation of broadcasting services has been cumulative. The initial policy was based on such services being available from the government sector and from commercial enterprises licensed by the government. However, there was a specific delineation between the government’s area of broadcasting responsibility and the commercial enterprise’s area of responsibility. This delineation was purely geographical: the former had responsibility for the service within the nation while the latter was licensed to take on the responsibility for the service coming into and emanating from the nation. For the government, a licensing system also provides a revenue source.

Although the technology for broadcast transmissions changed, policy development followed the precedent set earlier. The government permitted the availability of such services through its licensing system. The government had a revenue source, while at the same time, was not required to provide budgetary outlays for the investment capital to set up the infrastructure.

This arrangement changes with the establishment of the ABC.  But again, policy established in the United Kingdom is the precedent for the Australian experience in establishing and setting up the objectives of the government-funded broadcast service. But unlike both the United Kingdom and the United States of America, the Australian experience becomes an amalgam of both systems – a government-funded broadcaster and commercial enterprise broadcasters.

Apart from providing a revenue source from commercial enterprise broadcasters, the government can regulate the content of what is broadcast.  In this respect, Australian broadcasters follow specific government censorship guidelines which reflect “community standards”.  Likewise, content regulation also includes the amount of Australian-content programs to be broadcast. Similarly, recently, television broadcasters were directed to provide at least 30 minutes of local news coverage every day in their licence areas. It can be argued specific guidelines demonstrate the impact of the concern of the electorate about the content of broadcast programs. Such concerns can be expressed through the ballot box.

As earlier indicated, new broadcast technologies may be require new policies. The transmission of broadcast programs through the internet will bring new challenges. The ACMA is responsible for the management of internet safety issues. However the Australian constitution does not clearly provide either the states or the federal government power to censor online content, so internet censorship in Australia is a combination of various plans, laws, acts and policies. Nevertheless, earlier High Court cases indicate that the judiciary will consider that the ACMA has the power to control online content including broadcast programs.

The Australian experience of the combination of government-funded and licensed commercial broadcasters has worked well. By and large, this combination has satisfied the electorate’s demand for impartial news information and commentary, for entertainment and for minority groups to be represented in broadcasting.  The licensing system provides a revenue source for the government.  As well, the licensing system allows the government impose licence conditions which, to date, have been responses to issues from the electorate about what, or what is not, broadcast.

 

Conclusion

The Australian government has made decisions to introduce digital television and digital radio. Future, broadcasting policy will be affected by current government policies and decisions. Government policies about broadband and content limitations, managed through a statutory authority, are influenced by the electorate. As well, government initiatives are preparing broadcasters and audiences alike for broadcasting. In future, broadcasting will be transmitted digitally to audiences, individual members of which will choose what will be watched and the broadcasters, operating within government regulator`s directions, will broadcast programs that respond to the interests of audiences.

 

 

 

Reference

 

 

 

 

(1983) Australian Broadcasting Corporation Act. Canberra.

 

(2000) Broadcasting. Canberra, Productivity Commission.

 

(2007a) 2007 ALP National Platform Chapter 16.

 

(2007b) History of ABC in the 1930s. ABC Online Home.

 

(2008) Australian Broadcasting Control Board. Wikipedia Foundation.

 

(2009a) History of ABC Radio. ABC.

 

(2009b) Policy F3: Media and Communications. The Australian Greens Party.

 

(2009c) Public Broadcasting. Wikimedia Foundation, Inc.

 

(October 2008) ABC and SBS: Towards a digital future. Canberra, Department of Broadband, Communications and the Digital Economy.

 

BROADCASTING (2009) Broadcasting operations » The state of broadcasting in selected countries » Australia. Encyclopædia Britannica.

 

GIVEN, J. (1998) The Death of Broadcasting? Media`s Digital Future, Sydney, University of New South Wales Press Ltd.

 

HABERMAS, J. (2004) Public Space and Political Public Sphere - the biographical roots of two motifs in my thought. Commemorative Lecture. Kyoto.

 

LAU, T., LOOK, K., ATKIN, D. & LIN, C. A. (2006) Cross Media Ownership: An Analysis of Regulations and Practices in Australia, Hong Kong, and Singapore. the annual meeting of the International Communication Association. Dresden International Congress Centre, Dresden, Germany.

 

SCANNELL, P. & CARDIFF, D. (1991) A Social History of British Broadcasting, vol. 1, 1922-1939: Serving the Nation, London, Wiley-Blackwell.

 

THORNLEY, P. (2001) Australian government broadcasting policy: continuity and change leading to the development of public/community broadcasting. Ejournalist, Volume 1, Number 2, 2001, 13.