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  • Australia’s system of representative democracy is controlled by the major political parties, who bend it to their own purposes, leading to widespread voter dissatisfaction. Managing editor David Donovan considers Australia’s party political duopoly.

    James Madison, the fourth US President


    Like most democracies in the world, Australia has what is known as a “representative democracy”. According to Carmen Lawrence, this form of Government was not even considered a true form of democracy in the early days of the United States republic. Lawrence, a former WA Premier and Federal cabinet minister, who went on to become the national president of the Labor Party within six months of making these statements, explained the difference between direct democracy and representative democracy at a public lecture at the University of WA in August 2003:

    “As we contemplate the health of our democracies, we should be reminded that the evolution of modern representative democracies was accompanied by a “powerful distrust of the people”, of the poor, the poorly educated and women, who were initially excluded altogether and had to fight to gain suffrage. This distrust – and the practical difficulties of operating direct democracies in large populations and territories – was one of the reasons that representative government gained favour over more direct, Athenian forms of democracy.”


    James Madison, one of the US founding fathers, said US citizens could not be trusted to identify the “permanent and aggregate interests of the community” [1]. This was a task best left to elected representatives chosen by the people, he said, not the people themselves. Thomas Jefferson described this system as an “elective democracy”. [2]
    It is now widely agreed that representative democracy is a valid form of democracy, but only where elected representatives truly represent the interests of those who elect them. Where other interests take precedence – their own, or another person’s or entity’s – then the system becomes what is called a “thin democracy”. [3]
    In this century in Australia, political parties have had the most impact on our system of democracy. Indeed, as far back as 1941, E.E. Schnattschneider asserted that

    “…modern democracy is unthinkable save in terms of political parties”. [4]


    Dalton and Wattenberg suggest political parties are valuable assets, providing structure and coherence to the system:

    “Political parties have created political identities, framed electoral choices, recruited candidates, organised elections, defined the structure of legislative politics and determined the outputs of government.” [5]


    However, because political parties are central to the way our system works, almost all aspiring Australian politicians must join a major political party and gain pre-selection to achieve a seat in Parliament. This directly leads to the situation where, for most politicians, their primary loyalties lie not with their constituents, but instead to a corporate entity — the political party.


    Leading political journalist Michelle Grattan expressed the situation well when she said:

    “…it’s no good assaulting the TV set, we know how the system works, the importance of unity and the strength of political aspiration. In politics, even the best of men and women would usually sell their grandmother for the chance of office….once you’re on the ladder it becomes harder to be outspoken.” [6]


    Despite their virtual duopoly in Parliament, political parties cannot even remotely claim to be representative of the wider community or its interests. In 2006, for instance, the Australian Bureau of Statistics put the total party membership in Australia at just 1.3 per cent of the adult population and falling. [7]
    And according to Lawrence, political parties routinely put forward candidates that are not reflective of the wider society, leading to public mistrust:

    “What kind of representation is it where the candidates are not even remotely typical of the wider society, even using crude indicators such as age, gender, income and occupation? Voters need to feel that their representatives – at least in aggregate – can understand their circumstances and have sufficient identity with them to press their interests. The greater the distance of representatives from electors, the greater the mistrust. These weaknesses begin with the political parties who determine who will be presented to the community for election and who govern the behaviour of their members in law making.” [8]


    It is clear that political parties do exercise powerful control over elected representatives and the way they vote. Academic John Power points to “the problem caused by rigid party discipline” [9].
    Carmen Lawrence deplored the control exercised by the Executive and the party room:

    “While most MPs…are conscientious, they are largely unable to influence the legislative or policy agenda except behind the closed doors of the party rooms. Even then, there is often little room to manoeuvre because decisions have already been made by the Executive. Matters which deserve free and open consideration are often submerged because of anxiety about dissent. The media feeds this paranoia by portraying even the most minor disagreements as tests of leadership or signs of party disintegration.” [10]


    Power also identified Executive Control of the legislative process as a weakness in the Australian democratic system. [11]
    To sum up, there is no doubt that representative democracy has provided a degree of stability to our system. However, this stability does nothing to allay the general feeling of dissatisfaction in our society that we are being poorly served by our party political representatives. Australians see our system as dysfunctional because party politics is aggressive, obstructionist and undemocratic, and leads to generally poor standards of governance. People should feel unease about our system, as it is indeed deeply flawed — and the flaws all stem from the stranglehold held over our democracy by an unrepresentative party political duopoly. Creative Commons Licence
    This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License

    Bibliography


    [1] James Madison, Federalist Paper Number 10, 1787, http://www.thirdworldtraveler.com/Democracy/Federalist10_TAR.html
    [2] Referred to by Carmen Lawrence, op cit.
    [3] Ibid
    [4] Ibid
    [5] Ibid
    [6] Michelle Grattan, ‘The struggling moderate Liberals are poised to lose two brave, loud voices’; Sydney Morning Herald, 30/5/2010, http://www.smh.com.au/opinion/politics/the-struggling-moderate-liberals-are-poised-to-lose-two-brave-loud-voices-20100529-wmbw.html
    [7] Norman Abjorensen, ‘The parties’ democratic deficit’, Inside Story, 10/2/2010, http://inside.org.au/the-parties-democratic-deficit/
    [8] Op Cit
    [9] John Power, Fiducial Governance: an Australian republic for the new millennium, ANU e-press, 2009, http://epress.anu.edu.au/apps/bookworm/view/Fiducial+Governance%3A+An+Australian+republic+for+the+new+millennium/257/ch02.xhtml
    [10] Op cit
    [11] Op Cit

     

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    Why investing in real estate is not like home buying

  • Down the ages, generations of 20-and 30-somethings reach a stage where they tire of the vagaries of the rental merry-go-round such as restrictions on decorating, owning a pet, and the inherent insecurity of year-to-year leases.

    Understandably, many long-term renters crave ownership of their own.

    That first home purchase represents the scaling of an enormous learning curve. We grapple with estate agents, mortgage brokers and banks. There are many months and even years scrimping to save a deposit and endless open for inspections.

    There’s usually a fair bit of disappointment along the way, as expectations are scaled down to reflect a budget’s limitations and the pain of being outbid on the dream home, often repeatedly.

    So you might assume that the home-buying veteran is sufficiently battle-hardened and clued-up to fearlessly buy an investment property.

    My experience says otherwise.

    Critical differences..

    The reality is, investing in real estate is a vastly different affair to buying a home.

    When you buy a home, you look for a property with the accommodation you need, in an area that you want to live in, within your budget.

    When buying a home, the only opinion that matters about its features, location or accommodation is your own.

    For an investment property, the equation is exactly the opposite.

    Property investment is about finding a property in high demand and short supply that will go up in value substantially over time.

    The only views that matter when assessing an investment property’s potential, features, location or accommodation is that of the market place, both now and in the future.  It’s this balance of market opinion and underlying demand which ultimately determines its investment performance, both in terms of income and capital growth.

    The smart investor never allows personal likes and dislikes to cloud their rational investment judgement.

    Questions you need to ask

    So before you start looking at properties, take my purpose test by asking yourself these four questions:

    • Why am I buying property?
    • Is my objective financial or personal?
    • What do I want this property to do for me? How will buying this property affect my financial situation, now and in the future?

    If your answers revolve around making financial gain, then buy the property which meets these core investment objectives.

    What meets the criteria?

    So which properties tend to be in high demand, short supply, go up in value and produce a solid income?

    Here’s my take.

    Over the investment cycle, demand for property is always highest and most consistent in the inner suburbs of our cities.

    Sure, there are spikes in demand and prices in outer suburbs and regional centres from time to time, such as that in those parts of Queensland and WA currently reaping the benefits of the mining boom; but simple logic dictates that demand is greatest and most consistent in our most populous suburbs, particularly in those areas in proximity to amenities such as public and private transport, schools and medical facilities, plentiful and diverse employment, parks and village-like retail strips.

    Turning to supply, we’re looking for scarcity value. In essence, that’s property that isn’t being built anymore.

    For houses this is Victorian, Edwardian and brick pairs dating from the 1930s and 1940s.

    For apartments, consider apartment blocks built between the 1920s and 1970s.

    Art Deco properties are always in demand.

    Be wary of properties where there is no scarcity of supply or some unique value such as many high-rise apartments in the CBD or Mc Mansions in the suburbs and on the city fringe. However, there are many quality developments with unique features which are exceptions.

    Locking out your emotions from the investment process is sometimes easier said and done, especially when so many marketing dollars are spent by vendors and developers that deliberately tug on our powerful nesting instincts.

    If needs be, an aspiring investor should seek out the help of an independent property investment advisor.

     

     

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