Wednesday, October 28, 2015

We need more agile thinking about "reform"

What do we want of our government? What should it to do for us? It's clear from his recent observations that our new Prime Minister is thinking hard about these things. Good. But we – the governed – should be thinking about them, too.

Malcolm Turnbull says his government's goal will be to set Australia up "to remain and be secure as a high-wage, generous-social-welfare-net, first-world country".

Speaking in Parliament, he said that "the business of government is to get things done. Australians expect us, their elected representatives, to deliver practical, commonsense policy that will improve economic security and general wellbeing".

The coming election, he told interviewers, will be fought primarily "on economic management and competing visions for Australia".

The fact is, Turnbull's predecessor wasn't much interested in the stuff of economics.

So it's not surprising that Turnbull has arrived at a time of great frustration – and expectation – among those business people, economists and media commentators who see the economy growing only slowly and have convinced themselves that major "reform" – especially changes to taxation – is the only thing that will secure our future.

There's no denying that the economy isn't performing particularly well at present, that it needs to be continuously and carefully managed and that, with the world continually changing around us, there's often a need to change the way we regulate particular aspects of the economy.

But we need to use the government's new start to think through something more basic: how do economic concerns fit with all our other concerns?

We've been living in a period where the people with the loudest voices want economic concerns to be paramount. What we need most is faster economic growth, because that's the way we keep increasing our material standard of living.

The implications of all this extra economic activity for the environment, for the distribution of income between rich and poor, for the adequacy of the help given to the disadvantaged, are things we can't afford to worry too much about.

This may be the attitude of some powerful people, but I doubt if it's what most of us want. So if Turnbull wants to be a successful, long-lasting leader of the nation, he'll need to be on about a lot more than changing the tax system in ways that suit big business.

He'll need a "competing vision for Australia" that's a lot broader than good economic management. He needs to remember that "economic security" is about more than having more money than you had last year. And "general wellbeing" covers a lot more than income and jobs.

What do we want of our government? There is much Turnbull could do to improve our "general wellbeing" that doesn't involve what's normally classed as economic reform.

For instance, he'll do a lot to protect our general wellbeing if he resists pressure from commercial interests to reduce penalty wage rates and increase shopping hours and thereby avoids making it much harder for many husbands and wives to socialise with their children – let alone relatives and friends – at the weekend.

How exactly does weakening the weekend leave us better off? Is it OK if avoiding work on the weekend remains possible for the well-paid but not the poorly paid?

Our efforts to reduce domestic violence – which probably need to be greater – can't be classed as economic reform, but would do much to improve the daily lives of many wives and children.

Right now Turnbull is being urged by business people and economists to make the economy more efficient with "reforms" that would do so at the expense of widening the gap between high and low income-earners.

But there are plenty of changes Turnbull could make that raise productivity and participation in the labour force while actually benefiting the less well-off.

It's so commonplace that economists have stopped noticing it, but by far the greatest source of inefficiency in our economy is our high rate of unemployment and underemployment. All those people willing to work but unable to find suitable employment.

Most of the unemployed are unskilled. Many are early school-leavers with inadequate literacy and numeracy. This at a time when technological change is reducing job opportunities for the unskilled but increasing demand for the well-educated.

For decades we've been allowing kids with learning difficulties to get through school unassisted, to live a life in and out of employment, on and off the dole.

The Gonski funding changes could have done much to reduce this problem, but they're dismissed as an expensive social welfare measure we can't afford, rather than an economic reform that could pay big dividends.

It's a similar story with the national disability insurance scheme, where the Productivity Commission itself estimates that its proper implementation could make a significant contribution to economic growth.

Professor Allan Fels has argued that better assistance to people with serious mental illness could greatly benefit the economy by getting more of them off the disability pension and into jobs.

Better public transport could not only reduce the long commuting times faced by people in outer suburbs, but also make our big cities more productive.

Turnbull will be a great prime minister if he's smart enough to see that there's more to improving the lives of Australians than giving tax cuts to the well-off.