The announcement is, at best, a work-creation program for those in the security industry. At its worst, it adds to the regulations that hinder free flow in the economy. Contrary to the popular saying "you can't put a price on a life", we do it every day. The risk of danger is weighed against the cost of doing something to reduce the danger. We could cut the number of deaths in the workplace, currently standing at 125 this year, by employing many more workplace inspectors and applying tighter workplace regulations. We could reduce the number of rail deaths by employing more security people who would stop the foolish from climbing on the top of a train, only to be killed. We could reduce the number of people dying in their sleep, by putting more money into research and training to tackle Sudden Infant Death Syndrome.

And, of course, we could cut the road toll, which took 1193 lives last year, by employing more police and having more speed cameras. Are all the resources devoted to counter terrorism and raids preventing a sufficient number of terrorist events to justify the expenditure? In many situations, where industry costs are increased by government action, members of the Coalition complain and call for cost/benefit analyses and a cut in the red tape. But no one dares challenge the lift in the security alert. Its cost barely raises a question. So here are some of the direct costs. In 2001, before the September 11 attacks, the Australian Federal Police had 2851 officers, but by June this year it had more than doubled in size, to 6909 members. Of course, not all of these officers are engaged in counterterrorism work, but an additional $18 million has been provided this year for such work.

If the AFP has grown, the Australian Security Intelligence Organisation has ballooned. In 2001, it had 584 staff. Today, at 1904, it has more than tripled, and staff are about to enjoy the benefits of moving into their $680 million, specially built palace on the shores of Lake Burley Griffin. In August, Prime Minister Tony Abbott and Attorney-General George Brandis told us the government's counterterrorism package would cost $630 million. In addition, we will spend about half a billion dollars a year on the just-announced military commitment to Iraq. So, that is more than a billion dollars from a government that tells us we have a debt and deficit crisis. As economists are always keen to point out, every case of government spending has an opportunity cost – where else could the money have been spent?

Instead of more federal police deployed on counterterrorism work, we might have more state police preventing and tackling crime of any sort. Announcing the government's decision to accept the recommendation to lift the alert level, Mr Abbott and Senator Brandis told us, on the one hand, that life must go on as normal, while on the other we had to be increasingly vigilant, ever ready to spot a potential terrorist. We were also told by just retired ASIO head David Irvine that his organisation could do nothing to stop the lone wolf. In effect, if there is some nutter out there with a gun, who wants to walk into a crowded shopping mall, school or football final and kill people, ASIO has no prospect of stopping him. The best that can be done is to intercept him or her entering the venue. For that, we would need hordes of security people at all sorts of venues, not only costing us money, but probably causing much inconvenience. Only a lack of imagination limits the number of ways a home-grown terrorist might attack us.

I can think of actions not yet employed by any terrorists, on which I am not going to elaborate here, that could be used to kill large numbers of people. Preventing any such attack would be hugely expensive. It is impossible to calculate, but it is my guess that if all the extra resources going to the security agencies were put into workplace safety, or road safety, or preventative medicine, many more lives would be saved than will be saved by a further boost to ASIO and the security agencies. In arguing the case for lifting the alert level, Senator Brandis tried to tell us the intelligence agencies had made the decision with no foreknowledge of Cabinet's decision to commit Australian troops to Iraq. But if Mr Irvine and Co. were not able to work out what the government was about to announce, then we have no hope they will be able to work out what hotheads in Sydney or Melbourne are planning. That said, I doubt the Iraq commitment will make any difference to extremists' plans. With the alert level up, one issue is whether we will ever be able to get it back down.

DFAT has travel advisory warnings, which are usually wise after the fact, but at least change in both directions. (No-one warned about visiting the United States before September 11 and DFAT only told Australians to reconsider their plans to visit Indonesia after the first Bali bombing.) Australia has a well-developed system of fire alerts, where authorities assess how hot it is, how dry the fuel is, how strong the wind are blowing, et cetera. Unfortunately, there is no such clear-cut system for the security alerts. It seems the intelligence authorities know of Australians who have gone off to fight with terrorist organisations. The agencies' job is to monitor these people, and arrest them if there is evidence of wrongdoing. But this work is not helped by hyping up an ill-defined alert system.