Poor process, poor policy, poor politics..

For anyone who, like me, still clings to the notion that ‘good policy is good politics’, especially if based on ‘good process’, this federal election would have been a particular disappointment. ‘Good’ policies — ones that stand a good chance of making the community better off — were few and far between, with good process rarely apparent.

I believe this played a significant role (alongside various other problems) in the Coalition’s monumental defeat. With a leader who, to put it kindly, lacked charisma, and plenty of seats needing to be won back, the Coalition required a strong policy agenda, one that could persuade the public that a change of Government was warranted. It did not have one.

Many Coalition policies appeared to have been made ‘on the run’ in a reactive rather than proactive way. And without being burdened by much consultation or analysis. They can be grouped under the headings ‘me too!’ or ‘gotcha!’.

In the first category, mainly spending policies, the Coalition either added more money to what Labor was handing out, or fiddled with the detail. This made it hard for the public to distinguish it’s offerings from those of Labor; who, let’s face it, is widely acknowledged as the champion of big spending. So it was easy for Labor to sow seeds of doubt about the Coalition’s commitment. Such doubts would have been reinforced by how late policies appeared and how little effort was put into selling them. Moreover, those front benchers who might have been expected to perform that critical role — and been better at it than the leader — were largely missing in action.

Where real policy differences with Labor existed, they were mainly in the ‘gotcha’ category: intended to exploit Labor’s blindspots or ideological commitments. Fair enough. But at least two of the more politically significant of these — the sacking of Albo’s 41,000 public service recruits and ending work from home — had clearly not been thought through. They required backtracking that left egg on the Coalition’s collective face and made it impossible to convince the electorate that it would be better at policymaking than Labor.

Dutton and Hume diminished the Opposition’s perceived policy credentials further by explaining that the reason for the WFH turnaround was that “we’ve listened to what people say.” That would translate in many minds as, ‘we did not bother to listen beforehand’.

On the ‘sacking of Canberra’ the Coalition got the numbers wrong, again and again. Their errors and mis-steps made it hard to credibly deny that front-line services would be affected, making it not just an issue for Canberra but for the rest of the country too. Eventually asserting, on the back foot, that there would be no forced redundancies, made the infeasibility of the policy even more evident. In any case, ‘natural attrition’ or ‘voluntary redundancies’ are rarely the best way to go — too slow in the first case, too costly in the second, as well as dumbing down the workforce.

It would have been immediately apparent to anyone with knowledge of the public sector that both of these initiatives were bound for trouble. Listening first would have avoided the traps that caused such grief later. In the case of the 41,000, the lack of preparation was no doubt due to the urgent need to come up with savings to cover newly increased spending proposals. But desperation is not a good look for an Opposition trying to win support.

The Coalition’s controversial nuclear policy had elements of both ‘me too’ and ‘gotcha’ about it. It was pretty much an add-on to the Government’s own energy policy, and committed to the same net zero target. But that very target, the global viability of which is now seriously in doubt, made it look problematic in the time frame. That’s apart from the issue of cost, always a focal point for Government attack, but not well handled.

As many have said, as the election approached what the Coalition really stood for became harder to discern from its grab-bag of policy announcements. The exact opposite to Abbott’s winning mantra. In the end, all that Dutton was left with was his petrol price ‘gotcha’ and endless photo opportunities at the bowser. Hardly a good policy, and politically outweighed by not going along with Labor’s (equally opportunistic) tax cut. Better to have held back on some of the extra spending instead.

‘Policy on the run’ is not conducive to building public trust in the policymaker. In uncertain times, the electorate can’t be blamed for sticking with the devil it knew.

GARY BANKS

Policy challenges of our own making

Following an online interview with Joe Kelly of The Australian, that paper published a front-page story by Kelly on 4 March titled ‘Our nation stuck in reverse’. My remarks were also used by the paper for an op ed under the heading ‘IR, energy bungling put brakes on growth’.

These can be googled and read elsewhere. I thought I’d just add here some content that got left out, but still seems worth saying.

The article details the dimensions of policy failure in two key areas of our economy: energy and industrial relations. Once upon a time, our strong comparative advantage in low-cost, reliable energy helped offset the self-imposed disadvantage of our centrally prescriptive and costly system of workplace regulation. But policy actions over the past decade have seen us forfeit the former while exacerbating the latter. This is bad not only for industry competitiveness, but also for economic growth and the living standards of Australians.

When it comes to (real) reform, we know what should be done, and we know what could be done. But actually getting it done is another matter.

On leaving the Productivity Commission back in 2012, I compiled a list of reforms from its past inquiries that still warranted implementing (‘The To Do List’). There were quite a lot. Five years later, the Commission produced an updated list under the title ‘Shifting the Dial’. This had over 20 recommendations as I recall. The Commission observed last year, when doing its latest productivity review, that little had been accomplished. I’d go further and say that if the Dial has shifted at all, it’s shifted in the wrong direction.

So why the failure to achieve reforms that are generally recognised as beneficial? The age-old problem of course is that inevitably they will be opposed by interests who benefit from the status quo. That hasn’t stopped reform in the past, but it seems to be a show-stopper these days.

Blaming the Senate doesn’t cut it in my view. Sure the cross bench is bigger and more assertive. But that just means there’s a need for more effort in making the case and getting the public on board. Instead, the opposite seems to have occurred.

For example, in the case of IR, it was all too obvious that the previous Government’s private hand-holding sessions with the ACTU and BCA would not do the job. At least not if the Government wanted real reform.

The new media and a more political public service have been rightly implicated in the increased politicisation of policy and reform. But having seen what capable, reform-minded leaders can achieve in challenging conditions, I can’t help but think that it has been their absence (from both sides of politics) that has been the critical factor.

If leadership is key, it should not be impossible to turn things around. It’s not as though there isn’t enough material for an ambitious leader to draw on.

A propos, the Productivity Commission’s latest five yearly ‘to do list’ is currently being reviewed by Treasury. and soon due for release. The Treasurer has said it could ‘kick start a conversation’ with the public about reform. That should be encouraging. However his further observation that only a few of the Commission’s 70 or so recommendations aligned with his Government’s objectives is less so. It suggests that the Government’s interests and priorities lie elsewhere.

Redistribution is clearly at the top of the list. That was true also of the Whitlam Government just on 50 years ago. Whitlam understood, however, that to be sustainable, an ambitious socialist program of redistribution needed to be underpinned by a vibrant economy. It’s just that he failed to deliver — in part because of inherent tensions between the way the two objectives were pursued.

It’s hard not to feel that what we are embarked on currently is a case of history repeating itself.

Remarks for the 'Whitlam Era' book launch (National Press Club, Canberra)

Being asked to write a chapter about Whitlam’s ‘assault on protection’ for a book commemorating the 50th anniversary of his Government, was an offer I could not refuse (in a good way). Labor’s historic victory on the 2nd of Dec ‘72 (my 23rd birthday) and Whitlam’s bold moves against The Tariff the following year not only had major implications for Australia’s economy and society, they had a big influence on my own life and career.

I had arrived in Canberra earlier that year to pursue post'-graduate study at ANU, on the advice of Brian Brogan, one of the lecturers in my Honours Year at Monash University (and a key player later in the Tariff reforms). Having been ‘conscripted’ in my second year, the desire to further postpone National Service was, I confess, a prime motivator. (I wonder how many young blokes like me ended up doing more study than otherwise thanks to Conscription?) Fortunately the Draft Board not only accepted my application, but considered two years a reasonable period to complete a Masters Degree. This allowed me to do it part-time concurrently with a full-time junior research position at the Tariff Board, which at that time was striving to build up its modelling capabilities.

Whitlam’s win at the end of the year brought an end to National Service — the best birthday present I have ever received! It also saw the Tariff Board move (literally) to the centre of Government and acquire a new lease of life as the Industries Assistance Commission (IAC). So I avoided having to don khaki, and was so taken with the transformed organisation I had fallen into, that I ended up devoting much of my working life to it and its successors.

Whitlam’s bold initiatives

I begin my chapter in the book by observing that there are few better examples of Whitlam’s idiosyncratic approach to policy-making than his efforts to bring much needed institutional transparency to industry protection policy in Australia by creating the IAC, while at the same time progressing in secret this country’s largest single reduction in import tariffs.

Whitlam ‘owned’ these dramatic and somewhat contradictory initiatives. Neither would have happened without him. Indeed an unloved Tariff Board could well have been abolished if Jim Cairns had had his way. That said, Gough didn’t dream up these reforms by himself. They were the product of a few remarkable individuals who had gained his trust: Alf Rattigan, Fred Gruen and ‘Nugget’ Coombs. All three were from outside mainstream government, which may partly explain Whitlam’s trust in them. He was perhaps understandably suspicious of the bureaucrats he’d inherited from the long-lived Coalition Government, many of whom were aligned with the McEwenist orthodoxy that Whitlam sought to destroy.

The replacement of the Tariff Board had been foreshadowed before the Election — though only in broad terms — but the 25 per cent tariff cut came as a bolt out of the blue. It was a classic instance of Whitlam’s ‘crash through or crash’ approach. The Tariff Cut was accordingly far from copybook policy-making. It is doubtful that it could have got up if it had been, given the prevailing attitudes to protection, including within his own party.

How things turned out

While the IAC gained respect and influence over time, the Tariff Cut lost much of its initial support during the economic downturn that followed the Oil Crisis a year later. The global shock could not have been anticipated. Nevertheless, it’s hard to disagree with Paul Kelly’s assessment of the 25% Tariff Cut as ‘political suicide’.

The economics are another matter. With the benefit of hindsight it is clear that the impacts on unemployment were greatly overstated (opportunistically in many cases) and longer run efficiency gains underestimated. Moreover the commonly expressed view that Whitlam’s Tariff Cut was responsible for an enduring resurgence in protection is hard to sustain. Rather, in retrospect this looks more like the product of the Fraser Government itself and how it chose to respond to special pleading from powerful industry interests. Fraser was no free trader. It is hard to imagine that there could have been greater liberalisation had the Tariff Cut not taken place. Indeed there would likely have been less.

The Hawke Government proved from the outset more amenable to protection reform. However in not venturing to undertake another ‘across the board’ liberalisation until its second term, it had learnt some important lessons about building support in advance, ‘hastening slowly’ in implementation and making special arrangements for ‘difficult’ industries like PMV and TCF. That said, Hawke had it easier than Whitlam in a number of respects, not least the lesser resistance within his own party.

Lessons for policy makers today?

Are there more general lessons from Whitlam’s ‘bold reforms’ that remain relevant today? One that has proven timeless (and borne out internationally) is the need to secure a ‘mandate’, particularly for changes that are radical and controversial. If not sought before an election - the case for the Tariff Cut - approval needs to be gained after it. That requires not only a good case, but also appearance of positive results (or at least not negative ones). Whitlam had a good case for his Tariff Cut, even if he did not use all of it. Where he fell down was in relation to the results, or at least how these were portrayed and perceived.

Are we seeing a replay?

While preparing these remarks it struck me that the Albanese Government’s recent IR legislation, passed in a hurry before Christmas, had a number of things in common with Whitlam’s tariff initiative. Like the Tariff Cut, key features of the ‘Secure jobs, better pay’ initiative involve changes that are both radical and lacking in an electoral mandate. Such a mandate remains elusive a couple of months later (by this time the Tariff Cut had gained much support). Moreover, in contrast to the Tariff Cut, the economic case is weak, despite the legislation’s title. The new ‘multi-employer bargaining’ powers for unions have been especially criticised, including by the Productivity Commission (descendant of the IAC) for their potentially detrimental impacts on jobs, productivity, inflation and ultimately real wages.

Whether Albanese’s bold initiative hurts his Government electorally will hinge on the outcomes in practice and how these are perceived. But it is relevant that Whitlam’s demise cannot be attributed to the Tariff Cut alone. Rather it reflected a broader loss of public trust resulting from the continuation of policy ‘surprises’, among which the Loans Affair was clearly the last straw. Whether the Albanese Government is destined to suffer a similar fate, therefore, may hinge — among other ‘events’ — on its own subsequent actions. That the unprecedented and controversial price controls for gas and coal came out of left field (literally?) with no real consultation or even a regulation impact statement to support them is not a good start! It gives meaning to the PM’s announcement, on the steps of Whitlam’s home no less, that “you aint seen nothing yet!”. If so, the policy area where further surprise moves would be most damaging is taxation, especially if it means reneging on election promises that few will have forgotten.

A 4-day week for the VPS?

Much of the reaction to the recent proposal that Victoria’s public servants be granted a four day week, with no diminution in pay, ignores the reality that on average they are probably doing little more than four days real work anyway.

Anyone who has spent time in a public service department will know that while some officers are generally very busy and work hard, many do not have enough to do. One could go further and argue that a fair bit of what is done is of little utility anyway (we are speaking of the ‘pen-pusher’ employees, not nurses, teachers, ambos, etc). The ‘make work’ phenomenon is alive and well in most bureaucracies. Moreover, a majority of Victorian public servants seem to be working mainly from home these days, and are likely to do so indefinitely for a good part of the week. Indeed this is becoming official government policy.

So formalising a four-day week, as long as there is flexibility in the arrangements, is unlikely to see any significant decline in aggregate output (which, it should be said, is notoriously difficult to measure). Productivity will undoubtedly rise. And the ‘wellbeing’ of employees and their families would likely increase with extra (formalised) leisure time. Moreover, some workers would probably take on another job on the day they have free, potentially alleviating current labour shortages in areas like hospitality and retail services.

Where the real problems arise is in any extension of this deal to other parts of government and the private sector, where most people actually put in a full five days’ work. There would be pressure for parity that would be hard for a government to resist. And because the Government obviously could not use the above logic to defend a targeted approach, it would be wiser to ‘not go there’ and simply stick with the public service’s relatively unproductive five day week.

Living in a glass house on trade policy?

With fewer meetings and no travel during the WuFlu pandemic, it has been a bit harder to resist sticking my nose into some of the current policy debates. Some thoughts on the cliche ‘not wasting the crisis’, appeared in an article in the Australian, and as an Op Ed in the Australian Financial Review on Monday 4 May (see publications section). Plus I even found myself writing a letter to the editor on that hoary old trade policy topic, ‘anti-dumping’.

What prompted the last was a report in the Fin about Indonesia’s successful WTO action against Australia’s imposition of anti-dumping duties on imported copy paper (AFR, May 18). Coming at the same time as China’s much criticised 80 per cent anti-dumping duty on our barley exporters, I was curious to see how our own anti-dumping and countervailing subsidy regime stacked up these days.

Australia has always been a relatively active user of this trade safeguard measure. It is allowed (but not required) by the WTO where it can be shown conclusively that exporters are ‘dumping’ their products on foreign markets at prices below the ‘normal value’ in their own. Its origins lie in the concern of industrial countries at the creation of the multilateral trading system last century, that significant reductions in trade barriers could see some exporters unfairly undercutting local suppliers. While it has passionate adherents among certain import-competing industries, the economics profession has generally been skeptical of any economic rationale for such action, except to the extent that it may enable greater liberalisation than might otherwise occur. (See my publication, The anti-dumping experience of a GATT-fearing nation.)

Similarly, the Productivity Commission, in a major public inquiry back in 2010, was critical of the system for its lack of transparency, disregard for costs imposed on downstream user industries and consumers, and the excessive duration of measures in force. Among other things, it recommended the inclusion of a ‘public interest’ test, as found in other countries, as well as time limits on measures, and better appeal processes. Governments have disregarded these proposals, instead loosening further the criteria for imposing duties.

Revisiting the regime, I found a system still lacking in transparency (just try finding the duty margins for example!) or real independence (it resides within the Department of Industry) in which the devil lies in arcane administrative detail. And since the current, more ‘permissive’ regime has been introduced, anti-dumping and countervailing duty actions have trebled on an annual basis, making us one of the world’s biggest exploiters of this WTO ‘safeguard’.

Australia’s steel and aluminium industries have been the main beneficiaries (and among its most vocal supporters), accounting for two-thirds of 81 anti-dumping/countervailing measures currently in force. The countries copping most of the penalty duties comprise six of our Asian trading partners, with China alone accounting for one-third of measures.

As in the past, anti-dumping actions have often been taken on the same products against multiple countries, which would seem to tell us more about the competitiveness of Australian producers than the fairness of foreign exporters.

It may well be that China has fiddled the numbers on barley, as anti-dumping lends itself to such games. And the timing of its action, along with other sanctions against Australia, seems more than coincidental. But Australia would be more credible in this trade dispute (and others to come) if our own anti-dumping system were above reproach. It isn’t.

The PC’s Executive Remuneration Inquiry: quibbles concerning the Fels ‘memoir’

In his recent autobiography Tough Customer and a related article in the Financial Review (AFR, 1 Sept. 2019), my friend Allan Fels provides a lively account of the backdrop to the Productivity Commission’s high-profile Executive Remuneration inquiry. A decade has passed since then and memories can sometimes deceive. But for the record, since Allan makes reference to matters of some significance that involved me, I feel I should give my own two bob’s worth. (I did not have an opportunity prior to publication.)

 Allan recounts how late one February evening in 2009, Kevin Rudd called to ask him to run an inquiry into the problem of excessive executive remuneration ‘using the PC’ for research. Although it became clear that this would necessitate a formal PC inquiry, the PM’s office apparently said he could still lead it. Allan quotes me in the book as pointing out that under the Productivity Commission’s enabling legislation the Chairman ‘was officially the chair of any PC inquiry’ – which is correct. However, he then implies that I agreed that we would effectively co-lead the inquiry. He notes that this was because the inquiry ‘was a bit unusual – the media had already started calling it the Fels Inquiry’.

 There is in fact nothing in the statute preventing a temporary Associate Commissioner such as Allan being delegated by the Chair to lead (‘preside on’) an inquiry. While this would be unprecedented, as a practical matter most inquiry ‘Divisions’ are not in fact led by the Chair but by one of the incumbent Commissioners. However, for various reasons, not least the significance and sensitivity of this particular inquiry, I chose to preside myself (as I had done for various other inquiries). I also appointed my fellow Commissioner Robert Fitzgerald to expand the ranks of the Division. So Allan’s role in a formal sense was a subordinate one.

 Might I nevertheless have given him license to act as de facto leader of the inquiry, as he implies?

 To have done so would have run counter to my purpose in choosing to preside on it. As I recall, I faced no pressure externally to give Allan special status. And I would have been alert to risks for the inquiry (and the Commission itself) in taking such an unconventional course.

 Did we, as Allan further claims,  ‘work out a rather elaborate protocol by which we would both speak at events relating to the inquiry’?

 It is normal practice for inquiry members to divide up the task of making presentations at ‘events’, although key ones are normally the preserve of the Chair or Presiding Commissioner, as was the case here. My primary concern was to ensure that any dealings with the public, and more particularly with the media, occurred with my knowledge and consent. If there was anything resembling a ‘protocol’ it was a verbal agreement to that effect. (Which is not to suggest that it was always observed!)

 I’ve gone to the trouble of making these clarifications because I feel strongly that the credibility and thus influence of the Commission, then and now, depends on the integrity of its processes and its capacity to take an independent view. In my experience, Associate Commissioner appointments make a valuable contribution to inquiries, not only by bringing relevant expertise and experience, but also as a foil to the potential for insider ‘group think’. However, individuals may be chosen by a government for this special role for a variety of reasons, including prior knowledge of their views on the matter at hand. There is accordingly the potential for an appointee to be perceived by stakeholders as having a less than open mind, which can undermine trust and participation. That is why the statute requires the Chair to be consulted in advance about such appointments, and ultimately to have the final say on recommendations.

 Hence my sensitivity about what otherwise may seem a trivial matter!

 [As a footnote, the AFR article attributes the ‘two strikes’ rule relating to shareholder ‘say on pay’ to Allan, and readers of his book would be forgiven for drawing the same conclusion. In fact, the idea of introducing such a rule was first raised early in the inquiry by one of Australia’s foremost company directors, in a private meeting with the Commission in Sydney.

 As a second footnote, while some journalists may indeed have ‘started calling it the Fels inquiry’ when it was first announced by Treasurer Swan, it soon became known for what it was – an inquiry by the Productivity Commission.]

Policy on the Run: where is it taking us? (Presentation to Minerals Council Conference - 6 September 2017)

 I gave one of the ‘keynotes’ at this Minerals Industry conference, held during the annual ‘minerals week’ events in Canberra.  

The theme of my presentation was – yet again -- how poor policy process over the past decade has produced a string of poor policy outcomes, with no real end in sight. (I am starting to find my recounting of this a bit like Groundhog Day, except that each time things seem to have altered for the worse.) 

Giving the table from my Outlook talk (see below) another outing – supplemented by the RET and Gas Bans -- I noted thatundisputed first prize for ‘policy on the run’ was the Bank Levy. It appeared so fast, with so little process, that it took everyone by surprise (even, as I understand it, some officials in the Treasury). Against the usual tests for a ‘good’ tax, it strikes out not just on efficiency and equity, but even effectiveness. And the face-saving notion that it might nevertheless be justified as an implicit charge for government ‘guarantees’ does not hold water. If anything, it is likely to increase the risks to taxpayers (small as they may still be). 

Right up there in poor policy land, the combination of elevated state-based renewables targets and bans on gas production have uniquely succeeded in forcing electricity prices to unprecedented highs and reliability to unprecedented lows. As noted previously, the present ‘wicked problem’ for policy is the creation of policy itself. It is a case of government failure, not market failure. We know from the Productivity Commission that the first phase of the price lift-off (pre-2012) was in large part related to network costs responding to regulatory signals; the second phase is attributable to (a) a RET-induced surge in intermittent renewable capacity, (b) the consequent retirement and non-replacement of large scale coal-fired base load capacity, and (c) high gas prices underpinned by a policy-induced shortage of domestic supply.  

As things stand, the resulting energy policy ‘trilemma’ seems insoluble under the existing national abatement target. Given ongoing bipartisan attachment to it, one of the other two policy goals will have to give way -- either reliability or affordability or (as now) both. Part of the explanation for the position we find ourselves in is that for several years governments have encouraged the electorate to believe that, despite the relative fossil-fuel intensity of our economy, we could cut emissions at negligible cost and regardless of the instrument used. (Indeed official government modeling largely assumed the costs away.) Some state governments are even persisting in this deception. 

Like Tolstoy’s famous observation about families in Anna Kerenina, each of the policy misadventures in the table has its own unhappy story. But there are also some broader themes.  

Generally even in cases where there was a good start to a policy development process, outcomes were spoiled by poor engagement with stakeholders and the wider public, and ultimately poor implementation. Spin and sloganeering are increasingly substituting for explanation.  

Along the way, we are seeing the language of public policy twisted into new forms. Tax hikes in the budget have become ‘saves’. And, wherever possible, taxes are referred to as ‘levies’ (like the Bank tax) or even, more coyly, ‘prices’ (carbon tax). We also found during the latest round of superannuation reforms (watch that space) that the word ‘retrospective’ no longer has the meaning long ascribed to it. And of course the very word ‘reform’ has departed from the dictionary definition of ‘change for the better’ to mean just ‘change’ – or even change for the worse. Fairness has become the dominant criterion, with its interpretation going well beyond the traditionally Aussie ‘fair go’. A fair reform today is one in which there can be no losers, even temporarily, unless they are at the upper end of the income distribution: a definition that would have ruled out every important structural reform of the past.  

Governments’ ability to hold the line in the face of political resistance is a pale shadow of what it was. For example, that GST reform was quickly raised and as quickly withdrawn on two separate occasions in the past few years (and under different PMs and Treasurers) is almost beyond parody.  

The line of a previous Treasurer that good policy is good politics, or at least can be made so via good process, has been perverted to the contrary proposition ‘good politics must be good policy’. And the new metric by which a government’s policy performance is judged has become the volume of legislation it is able to steer through the Parliament.  

How did it come to this? How might we extract ourselves? Each Groundhog Day weakens my confidence in seeking to answer the first question or even that doing so would help answer the second. Churchill famously spoke of the opportunities for reform afforded by a ‘good crisis’. But it would be better not to have to wait.

Melbourne Institute's Outlook Conference session on 'Policy in a post globalisation world'

I was one of the panelists for the wrap-up session of this (always excellent) conference. It focussed on the political difficulties of reform today and the rise of populism. Other panelists were Paul Kelly, Jennifer Westacott, Glyn Davis and Melbourne Institute Director Abigail Payne. The session was chaired by David Uren, who wrote an overview piece about the conference in The Australian on Tuesday 18 July.

In my remarks I agreed that reform is undoubtedly a more challenging proposition these days. The politics are tougher, the media less supportive, the public less trusting. And howls of protest  greet any initiative that has a hint of a loser.

But real reform has never been easy. Before giving up we need to ask if we have been trying hard enough. According to a major OECD study, success depends on solid preparation, extensive consultation and effective political selling. These have been lacking in more recent times. Underprepared policies are being foisted on an unprepared public. As a result there has been a succession of policy misfires and reversals in Europe and North America, and not least in Australia.

Take tax. A big ticket reform item like the GST was abruptly raised here and just as abruptly dropped, without explanation. Corporate tax reform has been heavily compromised. Personal income tax rates have been going the wrong way. And then we get a distortionary tax on selected banks literally out of left field.

Much public policy is being made on the run, when it needs more than ever to be well prepared and properly justified and explained. The table tells the story. As a consequence, too many policy and reform initiatives are failing the dual test for 'success' of (a) being likely to do good and (b) being accepted as such by the community. As noted both in David's article and at conference, if this doesn't change it is hard to be optimistic about Australia's future living standards. While the environment for reform is clearly more challenging, that is unlikely to change. The only way forward is for governments to lift their game.

Infrastructure Oration 2017

I gave the Infrastructure Oration 2017 on Thursday night -- an annual event run by Infrastructure Partnerships Australia in conjunction with their annual awards.

My intention was to focus on the economics of infrastructure policy, but with the energy imbroglio building I found myself preoccupied again with the political, or at least political economy, issues that are bedevilling public policy in that and other areas.

That an energy crisis induced by government regulation is being blamed on the private sector is a sign of the times I guess. But it is part of a pattern of poor policy development giving rise to unintended consequences from which nothing seems to be learned, leading to further rounds of poor policy. Such dysfunction is commonly attributed to the 24/7 media and the ‘toxic politics’ that greets any government policy initiative. But these are not going to change any time soon. In fact they could well get worse. The only way we can get back onto the policy high road, it seems to me, is for government to do what it can to improve its own performance in devising good public policy and ‘selling’ it effectively.  As noted also in my previous presentation below, there is plenty of scope to do better before we abandon hope!

My paper can be found HERE, and is listed with others in the ‘publications/speeches’ section of this website.

Of Lists Undone …

In stepping down as Chief Executive of ANZSOG, I have bought myself more time to spend thinking and writing about public policy -- with fewer constraints on what I can say.  (This is the first in a policy commentary series.)

An early opportunity came with an invitation from Greg Lindsay at the Centre for Independent Studies to speak at one of their ‘leadership lunches’. This took place on 2 March at their pleasant new premises on Macquarie Street.

The assignment was to revisit the ‘to do list’ of reforms I compiled in 2012 prior to leaving the Commission. This had been prompted by a remark by Glenn Stevens that if governments really wanted to do something about Australia’s failing productivity performance, there were many suggestions in Productivity Commission reports and they should simply ‘go get the list and do them’. My ‘to do list’ sought to make this a little easier.

However it came as no surprise to find that, five years later, very few items have been ticked off, even partially. There have been some isolated advances, such as the decision to finally stop throwing good money after bad at the assembly operations of foreign auto companies (amounting to over $30 billion dollars from Australian taxpayers in the past two decades alone). But these tended to be offset by counter examples (such as the procurement of those costly and untried homemade submarines – 12 for the price of 24). The real priorities on the productivity reform list, like workplace regulation and taxation, have stood still or gone backwards.

Meanwhile, a variety of policies introduced since then are candidates for future reform, including ever-rising renewable energy targets and subsidies: through which our governments have collectively managed to sabotage Australia’s comparative advantage in low cost, reliable energy – for negligible (or, properly assessed, negative) environmental benefit.

Most of my talk -- Of lists undone: too hard or not trying?--  explored why there has been so little real reform in this new century, and so much poor policy instead. I could think of only three possible reasons: (a) ‘institutional amnesia’ (the subject of Laura Tingle’s Quarterly Essay), (b) tougher politics or (c) weaker policy capability. While there have been signs of all three forces at work, the last of them in my view is the underlying problem. A loss of policy capability within government – Commonwealth and State -- is palpable and multidimensional. It has emerged over the past 10-15 years under a style of government mercilessly but accurately lampooned in The Hollowmen TV series. A ‘Washminster’ hybrid that is proving antithetical to properly-informed policy.

Yet, if this diagnosis is correct, there is hope. Unlike the adverse changes evident in our parliaments and media, changes which are arguably reflective of changes in society itself, the decline in capability is not irreversible. Unless it is turned around, however, we cannot tell whether reform has truly become ‘too hard’, as many now seem to assume.

Improvements to the policy-making system have become an essential pre-condition for improvements in policy itself. As a close observer of this system, I am accordingly proposing two further ‘to do lists’ that, with effective leadership, seem eminently achievable and would make a significant difference: one focussed on the bureaucracy, the other on Ministers and their offices.

I will elaborate in a forthcoming publication. (Meanwhile a video of my presentation is available HERE.)