I have been asked what I think will come out of the Government’s coming Roundtable (variously called the Productivity Roundtable and the Economic Reform Roundtable). The short answer is not much; at least not in terms of reforms that would raise productivity growth and living standards - the ostensible rationale for holding it.
That is not a reflection on the utility of roundtables per se. The Productivity Commission made extensive use of them for its public inquiries and research studies during my time there and no doubt has continued to do so. They can be a useful means of collecting information and testing policy ideas, as well as learning from discussions among parties with different interests and perspectives. Depending on their ‘depth of focus’, they can promote a shared understanding of the issues and even (though less commonly) secure broad agreement about the best ways forward in the national interest.
This particular Roundtable has a number of features that are not conducive to such felicitous outcomes. For a start, the range of topics is open-ended, though with key areas like Industrial Relations unfortunately excluded. Even though the number of attendees is not large, this means there will be limited time to delve into specific issues, with the devil inevitably in the detail. Moreover, the Treasurer has indicated that he is seeking consensus, despite selecting participants from different interest groups with a history of agreeing on not much.
A number of the speakers are known to have views that accord with Labor’s own, however, particularly about renewable energy and the taxation of ‘wealth’. Two federal elections were lost on Labor’s tax policies in the past, which should be grounds for caution, even for a government with such a large majority. However, the blow-out in spending (‘investments’) on social services, renewable energy and the public sector generally, has raised the stakes. With the historically high public spending defended as necessary to meet high public expectations, Australia’s fiscal problem has been framed as primarily a revenue-deficiency one, not excessive (or poor) spending. That immediately rules out reforms (eg to the NDIS) that are much needed.
A positive feature this time, compared to the 2022 Summit — an event that we now know was largely about securing legitimacy for unheralded industrial relations ‘reforms’ — is the presence of the Productivity Commission. As observed previously, the Treasurer recently asked the Commission to undertake anew inquiries on five themes (‘pillars’) it had already reported to him on in 2023. The ‘five year productivity report’ was commissioned by the previous Government and (consequently?) largely ignored or downplayed by this one; or, in the case of IR and climate policy, derided for lack of ‘alignment’ with Labour values.
This time round, the terms of reference constrain what can be said about climate policy and, understandably, the Commission has not included IR as one of its priority areas for reform. By contrast, corporate taxation, which is only briefly mentioned in the five-year report, was signalled early on as a primary focus. I found this rather surprising, given the determination of Treasury in the past to keep the independent advisory body right away from federal tax matters. That the PC’s intention to address this sensitive area — and the radical proposals for ‘reform’ that it came up with — were received with such apparent equanimity by the Treasurer, is even more surprising, at least on the presumption that Treasury kept its traditional distance.
As an aside, I also found it interesting that the requirement for revenue neutrality — which is behind the redistributive nature of the proposed corporate tax changes — is not specifically mentioned in the Commission’s terms of reference or any other formal correspondence from the Treasurer, even if he had made his views plain in public utterances.
The Roundtable session devoted to tax policy is to be led by the current CEO of the Grattan Institute, which has long advocated changes to the taxation of wealth and property that Labor has itself previously supported (but the electorate has rebuffed). This has understandably struck observers as suggesting that the Roundtable may involve the sort of entrapment risk for tax that occurred for IR in the ‘summit’. This has of course been denied, with the PM intervening to declare that there will be no tax ‘reforms’ during this term beyond those taken to the election. It goes without saying that this would be a departure from previous experience. Time, as always, will tell.
As a brief comment on the quest for Net Zero, it is becoming more widely appreciated that Australia’s efforts at reducing emissions only matter in a substantive, as opposed to symbolic, sense if others play their part, and that this seems not to be happening for countries responsible for the bulk of global emissions. Some economists’ counter-argument that ‘taxing’ emissions is needed to correct an ‘externality’ nationally, regardless of what other countries do, defies both economic logic and common sense. Whatever actions we choose to take — even prohibitively high carbon taxes that serve to decimate industry — would have hardly any impact on global emissions, let alone on Australia’s actual climate. In cost-benefit terms, what we are doing is essentially all cost, no benefit. A pity this is unlikely to be raised at the Roundtable.