Saturday, August 29, 2015
Australia is seen to have so many economic problems at present that the participants at the summit from business, union and community peak bodies got to four of them before later remembering one I would have had at the top of my list. As someone thought to write into the final statement, "unconstrained climate change would have serious environmental, economic and social impacts on Australia".
Oh yes, that probably could be a bother, couldn't it? Glad we remembered to pop it in.
The problems that got more considered attention were: lifting productivity growth and workforce participation, tax reform, sustainable retirement incomes policy and, of course, "fiscal policy for a growing economy".
On fiscal policy – the budget – the participants began by acknowledging that "governments have a key role to play in providing or funding public services, a social security safety net and economic and social infrastructure essential for economic growth".
Here's an important point of agreement: "All expenditure programs, including direct expenditures and tax concessions, should be subject to rigorous evaluation to ensure efficiency and effectiveness over time."
To date, the Abbott government has insisted on excluding tax concessions.
Government income-support payments should be appropriately targeted to those who most need them, we're told, but also this: "Gaps in the basic social safety net should be closed, such as improving the adequacy of income support for unemployed people and affordable housing for people on the lowest incomes, and services to people with a disability."
Plus this: "People on low incomes or who are otherwise vulnerable should be protected from the impacts of fiscal reform."
See how much more reasonable business people become when you bring them face-to-face with the unions and welfare organisations?
The participants' list of things governments should do says they should "rigorously monitor the effectiveness of all expenditure programs, including tax and direct concessions, and make findings public".
You might think that, no matter how bad our budgetary system is, it couldn't be as bad as the Americans'. That's probably true, but in one respect they beat us hollow: Congress is diligent in monitoring the effectiveness of spending programs and making the results public.
Our taxpayers would save a lot of money if only ministers and their department heads were more willing to check how well their programs were achieving their stated objectives and then let us in on the secret.
So far, the summiteers' statement of principles is all very sensible, but what about Tony Abbott's "budget emergency" – do we have one or don't we?
We don't, but we will if we're not careful.
"While we currently have low public debt levels by international standards, expenditure in a number of key areas is rising rapidly, owing largely to population ageing in areas like pensions and age care, and rising health costs for all," the final statement says.
"Weaknesses are emerging in our public revenue base. These have been papered over temporarily by income tax bracket creep at the Commonwealth level and a surge in housing stamp-duty revenues in some states, but neither is a sustainable source of public revenue . . .
"If current policy settings persist, federal and state governments are likely to post substantial deficits for many years to come."
Just so. Which brings us to our present impasse on the budget. In 2014 the government allowed us to see the harsh recommendations of its commission of audit only a week or so before its first budget, which implemented a version of them.
The public reacted in amazed horror, partly because they involved breaking a lot of election promises, but mainly because they were seen as unfair to low and middle income earners. Not surprisingly, the Senate declined to pass many of the worst measures.
Abbott's standing in the opinion polls has never recovered from the unpopularity of that first budget, even though he used his second to backtrack on many of his stalled measures and to buy a bit of approval from couples needing childcare and from small business.
Joe Hockey used some dodgy assumptions to claim the budget was still on track to return to surplus in 2020, but few at the summit believed him. With 2016's a pre-election budget, it's hard to foresee a renewed effort to get things heading in the right direction.
But this is where the summiteers' good idea comes in. Partly in response to comments at the summit by Dr Martin Parkinson, the former Treasury secretary, Peter Harris, of the Productivity Commission, and Professor Peter Whiteford, of the Australian National University, the peak bodies got together and came up with a plan to return the budget to "structural balance" within 10 years.
The idea is to separate significant structural reform of the budget from the annual budgeting process conducted by Treasury and Finance. A new assemblage of peak bodies would be given two years to develop a plan to get the budget back to balance over the following eight years.
On the spending side, the new outfit would focus on the biggest and fastest-growing programs, such as health, where inefficiencies were identified and removed while protecting their adequacy and fairness. (Any medico will tell you there's plenty of wasteful spending in health.)
On the revenue side, reforms would focus on tax concessions that were no longer "fit for purpose".
Such a process would be more public, would produce more "buy in" by key interest groups, would impose greater pressure on vested interests to make concessions for the greater good and, if done well, would do more to help voters see the need for reform and the measures proposed.
Well worth a try.