Reform must not be captured by politics

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This was published 6 years ago

Reform must not be captured by politics

Updated

Productivity is an abstract noun, but there is nothing hard to grasp about the benefits of the productivity-boosting reforms undertaken by the Commonwealth and the states during the 1990s.

Building on the microeconomic reforms of the previous decade, which had exposed businesses to international competition and driven down the cost of basic goods and services for households, National Competition Policy subjected public enterprises and utilities to similar bracing pressures. As a result of the agreements struck between former prime minister Paul Keating and the state premiers in 1995, businesses and households were rewarded with lower costs for basics such as milk, freight, gas and – until new challenges came along and we failed to meet them – electricity.

Treasurer Scott Morrison has grasped that the moment of reckoning has arrived.

Treasurer Scott Morrison has grasped that the moment of reckoning has arrived.Credit: Alex Ellinghausen

Perhaps most important, improved productivity delivered a significant national growth dividend, and, with that, higher incomes and living standards for most Australians. The benefits of these reforms have now run down – indeed, they spluttered out years ago, but the sugar-hit of the resources boom allowed us to ignore it and carry on consuming, like the lotus eaters of antiquity.

To his credit, Treasurer Scott Morrison has grasped that the moment of reckoning has arrived, and that our future income and living standards, as well as good jobs for our kids, depend on "shifting the dial" – the title of the report from the Productivity Commission he released yesterday. The title could not be more apt. The report advances a range of provocative ideas for getting value out of doing things smarter in our hospitals, in our schools and universities, and elsewhere across the economy.

On health and education, it wisely suggests the interests of patients and students, rather than of those who deliver these services, should be at the centre of reform. It supports a small-scale "managed care" model for keeping people out of hospital, and wants those who do go there to receive more transparent information about hospital performance. In education, there are good ideas for improving teacher quality – including importing them into the classroom from the broader workforce where the need exists – while in universities the Commission thinks students need the protection of consumer law to guarantee they get the education they pay for.

And that's the easy stuff. Among the sacred cows the Commission wishes to herd onto the killing floor is the cosy protected monopoly enjoyed by pharmacists, and the river of gold flowing into state government coffers, known as stamp duty, which it wants replaced with a residential land tax. Even more politically Quixotic is the suggestion a clear and explicit carbon price would be the most economically efficient way of reducing greenhouse gas emissions.

Most of what "Shifting the Dial" recommends is good, and much of it is do-able. The trick will be, first, to take the broader community along on the journey – a real challenge in a time of renewed populism, and an electorate that is leery of political promise-making.

And second, state and federal leaders will need to rediscover the bipartisan spirit that prevailed in the 1980s and '90s, at least where rational economic policy was concerned. It will help if, as with the reforms of 20 years ago, the renewed agenda has the right financial incentives for the states to play ball. Even so, with five of the six state premiers due to go to the polls in the next 18 months, there is a danger they will choose to play politics.

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