Glimpses of a micro reform program

Although the pop­u­lar choice in the 2007 elec­tions was an appar­ent­ly idea-lead leader, data-dri­ven elec­toral man­age­ment means we can expect no new gov­ern­ment to have an ‘over­ar­ch­ing nar­ra­tive’ from the out­set. Par­ties that make the fewest ‘mis­takes’ and least offend entrenched opin­ions in a fine­ly-bal­anced elec­torate win the lau­rel. Win­ners offer noth­ing that resem­bles a con­sid­ered idea and only icon­ic pledges—like the abo­li­tion of Work­choic­es or “Say­ing Sor­ry”, or “A com­put­er for every high-schooler”—in place of real programs. 

The triv­i­al­iza­tion of elec­toralplat­forms does­n’t mean, how­ev­er, that gov­ern­ment can be triv­ial espe­cial­ly when it comes to choos­ing how the Aus­tralian econ­o­my should devel­op. After decades of neglect, col­lec­tive deci­sions seem sore­ly need­ed in trans­port, water and telecom­mu­ni­ca­tions to improve nation­al infrastructure. 

Yet some­how those deci­sions have got to be res­cued from the messy, over-com­mit­tee’d, state-gov­ern­ment-log-rolling COAG bureau­cra­cy. They must be made in the pub­lic eye and not secret­ed away by would-be man­darins like Sen­a­tor Kim Carr who goes out of his way to cud­dle up to indus­tries like motor vehi­cles who have been a long-stand­ing drain on pub­lic resources (cur­rent­ly more than $1 bil­lion each year in tax sub­si­dies and tariffs).

While we wait for Sen­a­tor Carr to release the Bracks Report on more bil­lion-dol­lar-bribes to the glob­al motor vehi­cle indus­try, there have been two pub­li­ca­tions this week that point to some more ratio­nal approach­es to micro-reform

The first is a clear-eyed review of the impor­tance of resum­ing the micro reform agen­da and of mak­ing trans­par­ent deci­sions about what to spend and where by Dr Gary Banks, the Chair­man of the Pro­duc­tiv­i­ty Com­mis­sion. Over the years Gary Banks has made sev­er­al dozen for­mal speech­es on Aus­trali­a’s reg­u­la­to­ry agen­da, on fac­tors affect­ing the struc­ture of our econ­o­my (the aging of the pop­u­la­tion, the reg­u­la­to­ry bur­den on busi­ness, the cost of health ser­vices) and of our soci­ety (the aging of the pop­u­la­tion, again; gam­bling rev­enue and gam­bling addic­tion; equal­i­ty of oppor­tu­ni­ty for abo­rig­ines, access to afford­able hous­ing). Most of these speech­es deal with dif­fi­cult or sen­si­tive pol­i­cy envi­ron­ments where the Pro­duc­tiv­i­ty Com­mis­sion has been giv­en a man­date for review by gov­ern­ment. Invari­ably, they are good-humoured, insight­ful and easy to read. Also, since his agency is tasked with stand­ing back to review the way we make some impor­tant eco­nom­ic deci­sions, Gary Banks’ speech­es often put the chal­lenges of reg­u­la­tion in an his­tor­i­cal perspective.

His Col­in Clark Memo­r­i­al Lec­ture at the Uni­ver­si­ty of Queens­land this week, enti­tled “Indus­try Pol­i­cy for a Pro­duc­tive Aus­tralia”, is pos­si­bly a lit­tle more com­bat­ive than usu­al, deal­ing with the issues that are now at the top of the agen­da for indus­try pol­i­cy. The Aus­tralian news­pa­per report­ed it as like­ly to ‘anger’ gov­ern­ment. If so, the anger would be mis­placed because Banks has posed the ques­tions that every Aus­tralian busi­ness and house­hold has to ask about micro-pol­i­cy. What guar­an­tee is there that the bil­lions we spend on assis­tance to any indus­try (or ‘inno­va­tion’) will ben­e­fit the whole econ­o­my and not just the Min­is­ter’s mates? This is far from an aca­d­e­m­ic ques­tion, since Sen­a­tor Carr is soon to tell us what he plans to spend and how on a vision of ‘inno­va­tion’ that more than like­ly (to judge from his own hints) will come from the ben­e­fi­cia­ries of the sub­si­dies. The recent record of politi­cians in hand­ing out mon­ey to Toy­ota in a secre­tive way with­out even a request much less a need, gives every rea­son to be pessimistic.

The sec­ond report this week con­cern­ing the man­age­ment of an emerg­ing micro-reform agen­da is “The Archi­tec­ture of Aus­trali­a’s Tax and Trans­fer Sys­tem”, pub­lished by the Trea­sury as a con­tri­bu­tion to a promised review of our com­plex sys­tem of direct and indi­rect tax­es and the social and sec­tor trans­fers they fund.

This review could be a major con­trib­u­tor to the emerg­ing ‘nar­ra­tive’. It is antecedent to the Pro­duc­tiv­i­ty Com­mis­sion’s con­cern with the dis­tri­b­u­tion of assis­tance because tax reforms poten­tial­ly alter the size of rev­enues returned as sub­si­dies to ind­sutry (or tax sub­si­dies when tax­es are fore­gone). But many of the same ques­tions of the effi­cien­cy of the tax trans­fer sys­tem and the ben­e­fits for the econ­o­my-as-a-whole of the trans­fers effect­ed arise at this ‘high­er’ lev­el enquiry, too. Of course, the assis­tance to indus­try from the cus­toms tar­iff is due not to the tax trans­fer (which ben­e­fits gov­ern­ment) but to the impo­si­tion of high­er prices on con­sumers. The Pro­duc­tiv­i­ty Com­mis­sion esti­mates the net ben­e­fits at about $1.4 bil­lion but it costs con­sumers more than $9 bil­lion (in unnec­es­sar­i­ly high prices) to deliv­er that ben­e­fit (see page 282 of the Trea­sury Report). 

In the micro-reg­u­la­tion of our economy—by def­i­n­i­tion the reg­u­la­tions that affect the dis­tri­b­u­tion and re-dis­tri­b­u­tion of resources in the hands of indi­vid­u­als—it’s OK for the gov­ern­men­t’s nar­ra­tive to emerge. But it is essen­tial that the gov­ern­ment gath­ers evi­dence and makes plans in a care­ful and, above all, trans­par­ent way and bases it’s deci­sions on detailed evi­dence that it lays before us. Because in micro-reform they’re play­ing with our stakes.

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