Monday, March 13, 2017

Abused public servants help bring Turnbull down

There's no clearer sign that the Turnbull government is in deep political trouble than the never-ending saga of the Centrelink robo-debt stuff-up.

A well-functioning government would have closed down the controversy more than a month ago. If the relevant senior or junior minister hadn't had the wit to do it himself, the Prime Minister would have told him to.

Instead, the controversy's been allowed to roll on, while the junior minister, Alan Tudge, and more particularly the man allowing himself to be described as general manager of Centrelink, Hank Jongen, have repeatedly denied that there's any problem with the automated debt recovery system that's been making life miserable for many Centrelink "customers", including many who, in truth, owe the government nothing.

To broaden the focus, this is the story of how a highly class-conscious government – which sides with the well-off "lifters" against the less fortunate "leaners" – has come adrift from political reality and is using and abusing its public servants to prosecute its war on those unfortunate enough to need to deal with Centrelink.

Its lifters-class sympathies have included the public service among the leaners-class, meaning it's been at war with its public servants, while using them to harass presumed welfare cheats.

Its class consciousness has blinded it to such simple truths as that, while you can always bully the top public servants into covering for you, when you mistreat the servants they stop warning you about the hazards you face and, ultimately, indulge in schadenfreude when you fall over the cliff.

As a class, public servants are not held in high esteem by the public. That's why the government has thought it safe to mistreat them, while also allowing the quality of service provided to the public to decline and using public servants to get tough with the many thousands of leaners imagined by the lifters to be ripping off the system.

Trouble is, when you oblige the public servants to deliver bad service to the public – phones that go unanswered, long waiting times, websites and phones that keep dropping out (not you, Tax Office) – or treat the public unreasonably, the punters blame the government.

As they should. Centrelink and Tax Office "customers" have votes, and their family and friends have votes, too. That counts treble when the "customers" are on the age pension.

First proof the government's at war with its public servants is that its determination to limit public service wages means it's failed to reach enterprise bargains with up to three-quarters of its staff.

One of the first acts of the Abbott government, like the Howard government before it, was to sack a bunch of department heads.

Nothing could be better calculated to make the remaining department heads fear for their jobs should they do anything to annoy the government.

Is it any wonder that when the bureaucrat really responsible for Centrelink, Human Services Department secretary Kathryn Campbell, who'd been refusing to speak to the media for weeks, had no choice but to front a Senate committee, she was full of denials and obfuscation?

No boss enjoys receiving frank and fearless advice, but only the dumb ones take steps to ensure they're surrounded by yes-persons.

The other way ministers limit the ability of their departments to pass on unwelcome advice is to interpose a bunch of young punks and political wannabes between them and their senior bureaucrats.

Successive governments' desire to avoid confronting unpleasant truths has prompted them to fill their departments with armies of public relations people – people who'd be of greater service to the public if they got behind a counter or answered a few phones.

It turns out that Jongen, the man who's happy to leave the public with the impression he's the general manager of Centrelink, has no responsibility for running it. He's just the department's "official spokesman".

He's the chief spin doctor – meaning when he knowingly misleads the public he can do so with a clear conscience. That's what he's paid to do. Apparently, the department has more than 30 people with "general manager" in their title.

The government's contempt for its public servants is reflected in the repeated rounds of "efficiency dividends" it imposes on its agencies.

These far exceed the improvements in labour productivity the private sector's able to achieve, and have become a euphemism for annual rounds of forced redundancies.

The public service union's claim that the 5000 jobs lost do much to explain the poor quality of Centrelink's service, as well as the government's mindless rush to use robots instead of humans, isn't hard to believe.
Read more >>

Saturday, March 11, 2017

The low down on our concerns about investment

Governments and economists have been worried for ages about investment. First we had too much, then we didn't have enough. But what is "investment"? What's so special about it and why are we likely to be living with less of it in future?

The first trap is that the word "investment" is used to mean two quite separate – though related - things.

People say they've invested in some shares in a bank or invested in some government bonds. This is financial investment in financial assets – a piece of paper (or, these days, an entry in an electronic ledger) that records the owner's legal claim on the finances of the particular company or government.

Companies and governments originally issue these securities to raise money from the public. Mostly, however, people buy the securities second-hand (in the "secondary market") from someone who no longer wants to own them.

What do the original issuers use the money they raise for? Mainly to invest in – to build or buy – tangible or physical assets, such as equipment, buildings and structures in the case of businesses, and buildings (schools, hospitals, police stations), roads, bridges, rail and power lines and so forth in the case of governments.

This is the "investment" economists keep on about – investment in the building of new (not second-hand) physical assets.

Households invest in new housing; businesses invest in new equipment, buildings and mines, and governments invest in new infrastructure (see above).

Economists divide the spending done by households and governments into two categories: on consumption and on new physical investment.

Both kinds of spending add to "economic activity" – the production and consumption of goods and services, the value of which is measured by gross domestic product. Our participation in this economic activity allows us to earn an income and use it to meet our physical needs for food, clothing, shelter and all the rest.

But here's the trick: although all spending, whether on consumption or investment, generates income and employment at the time it's done, spending on investment goods does something extra: it increases our ability to produce more goods and services and, thus, generate more income and employment.

In econospeak, both consumption and investment spending add to demand, but investment spending also adds to supply – our capacity to produce more goods and services in the future. (The future service produced by new housing, by the way, is accommodation – shelter – for many years to come.)

It's this special characteristic of investment in physical capital (but also, in "human capital" – the education and training of our workforce) that explains economists' obsession with "investment".

Four main factors contribute to economic activity, and hence to increasing it: using more hours of labour, investing in more physical capital (including infrastructure), investing in more human capital (education and training) and improving productivity – through better machines, economies of scale, better ways of organising work, and so on.

Now we've got all that clear, what's been happening lately to new physical investment spending?

Well, households have been investing in a lot more housing, particularly in Melbourne and Sydney, though this looks like easing back before long.

Governments – state more than federal – have increased their investment in infrastructure, though many would say they should be doing more, and some (like me) would say the investment they are doing could be in much more useful stuff than it is.

Which brings us to the main thing preoccupying economists, business investment spending.

According to a report by Jim Minifie and colleagues at the Grattan Institute, Australia's investment has been "exceptionally strong".

"Since 2005, the capital stock [aka the stock of physical capital at a point in time] per person has grown by a third. Even excluding mining, capital per person has growth by more than 15 per cent. By contrast, in both the US and Britain the capital stock per person grew by just 7 per cent," Minifie said.

"Strong investment has helped to increase output per person in Australia by 10 per cent between 2005 and 2015, compared to 6 per cent in the US and just 4 per cent in Britain."

But – there had to be a but – we're now experiencing the biggest ever five-year fall in mining investment as a share of GDP.

"And non-mining business investment has fallen from 12 per cent to 9 per cent of GDP, lower than at any point in the 50 years from 1960 to 2010."

This, of course, is what's been worrying economists: the failure of non-mining investment to grow strongly as the mining investment boom ends. Latest figures do show growth in the non-mining states of NSW and Victoria, however.

What factors encourage greater investment? Textbooks tell us lower interest rates – lowering the "cost of (financial) capital" – helps, but the Reserve Bank believes that, while its manipulation of interest rates has a big effect on the behaviour of households, it doesn't have much effect on businesses.

Minifie says the Turnbull government's proposed cut in the rate of company tax would probably attract more investment by foreigners, but it "would also reduce national income [the bit Australians get to keep] for years and would hit the budget". Oh.

But the biggest direct effect on businesses' investment spending is how much spare production capacity they've got and how fast they're expecting the demand for their products to grow beyond their present capacity.

My guess is that many firms still have a fair bit of spare capacity and that many aren't confident of strong growth in the future.

Minifie reminds us, however, that there are good reasons business doesn't need to invest as much as it used to. The cost of capital goods – particularly computerised equipment – has fallen, and service industries, which make up an ever-growing share of the economy, don't need as much physical capital as goods-producing industries do.
Read more >>

Wednesday, March 8, 2017

Politicians have worked hard to make house prices so high

It has cost the budget a lot of money to make the prices of homes as hard to afford as they now are.

If this shocks or puzzles you, it's intended to. It shows the economics of house prices is more complicated than most people realise. And than can be deduced from the things politicians on both sides say and do in the name of improving home affordability.

The surprising truth is that most of the things pollies – state as well as federal – do in the name of making housing more affordable actually make it less affordable – as well as having a significant cost to their budgets.

It's not surprising that most politicians, not being economists, don't know much about the economics of house prices. But the same can't be said of their Treasury advisers.

So we're left wondering whether our politicians pursue their counterproductive solutions in ignorance of their econocrats' knowledge, or whether the pollies fully understand they're making things worse for first home buyers, but don't care because they also know the punters won't realise they've been conned.

Why do such a thing? Because the pollies know – thanks to their econocrats' advice – that the actual beneficiaries of the things they do in the name of improving affordability are people who already own a home.

And that's a much larger group of voters than the group of would-be home owners.

Scott Morrison advises that the budget in May will have a "housing affordability package" at its centre. Fine. We'll see then how much it does to help or hinder first home buyers.

This is a tacit admission that home affordability has become too hot politically for the government to get away with merely repeating that the obvious solution is to increase the supply of new homes – which just happens to be the primary responsibility of the states, not the feds.

It's true that house prices rise when the demand for them grows faster than their supply is growing. But to imply that the problem can be solved simply by building more homes is to reveal your ignorance of how the housing market works.

Homes aren't a simple consumer good to be bought and soon used up. They're a long-lived asset, one that delivers a flow of service over many years – shelter – while retaining – and, everyone hopes, increasing – their resale value.

This means there's a huge stock of existing homes, the number of which is increased only a per cent or two by each year's building of new homes.

It means, too, that the demand for home ownership is driven not just by people's desire to own the home they live in, but also by their desire to invest in an asset whose value is expected to appreciate.

But if you already own a home, why stop at one? Why not invest in a few of them – especially if such investments are made more attractive by tax breaks such as negative gearing and the 50 per cent discount on the tax on capital gains?

Homes – units as well as houses – come in all shapes and sizes. Not to mention widely differing locations.

One thing this means is that merely building a lot more houses on the outskirts of the city will do little to satisfy the demand of people fighting over the limited supply of homes close to the centre of the city (where most of the good jobs are).

Sensible thinking about housing affordability is plagued by the "fallacy of composition" – the misplaced assumption that what works for the individual must work for everyone.

Take the Victorian government's decision to help first home buyers by reducing or removing the stamp duty they pay.

The individual couple hears this and thinks this will make it easier to afford a first home. Sorry, it won't. Why not? Because all first home buyers will get the same help, thus robbing the individual of any advantage over the other people competing for the place they're after.

All such attempts to make homes more affordable to first home buyers by supposedly lowering the cost of homes backfire. Because demand continues to exceed supply, what happens is that competing buyers use their tax concession to bid the price of first homes even higher.

So the supposed benefit to first home buyers ends up in the hands of those existing home owners who sell them their home, then move on to another. But this doesn't diminish the concession's cost to the state's budget.

When the Howard government introduced the 50 per cent discount on the tax on capital gains in 1999 and made it available to people with negatively geared property investments, it could argue that, by making property investment more attractive, it would increase the supply of homes.

To the extent it induced investors to buy newly built homes, it probably did – a bit. But the main thing it did was to increase investor demand for existing homes, particularly the type of homes bought by first home buyers.

This tax change prompted a massive increase in negatively geared property investment, at great benefit to the investors (almost all of whom would be existing home owners) and at huge annual cost to the federal budget.

It has cost the budget a lot of money to make the prices of homes as hard to afford as they now are.
Read more >>

Monday, March 6, 2017

Reserve Bank spells out company tax choices to politicians

The pollies can't help themselves. When the Reserve Bank heavies make their regular appearance before the House of Reps economics committee, the main game is to get the governor to say something that favours your side of politics and gives the finger to the other side.

So, when Dr Philip Lowe and friends appeared before the committee a fortnight ago, the Liberal chair of the committee, David Coleman, saw his chance to get Lowe to repeat his remarks in favour of cutting the rate of company tax to make it internationally competitive, remarks that drew headlines of Governor Slams Labor in the national press.

Sorry, Lowe had seen this game before, and wasn't playing. He'd switched to "analytical" mode. In truth, he was backing off at a rate of knots.

Tax, he said, is one of the considerations that internationally mobile capital takes into account when deciding where to do investment, but only one.

"There are a lot of other factors as well," Lowe said. "The kind of legal and political environment, human capital [how well-educated our workers are] and all the other things we value in this country."

Corporate tax rates had been edging down around the world, but in the post-crisis environment some countries had seen lowering the corporate tax rate as a potential strategic advantage to attract business from elsewhere, so we heard governments talking about 15 and 20 per cent rates, he said.

"I think you could argue … that, from a global perspective, this is not actually that useful, because the lowering of the corporate tax rate from one country to another just changes the location of investment and does not increase aggregate [global] investment.

"I hear some economists saying that in a perfect world we would have a common global corporate tax rate, so business would decide where to locate based on the strategic and comparative advantages and not on corporate tax.

"But that is not the world we live in."

So the analytical choice the Parliament faced was to respond to this international competition or to say, "No, we are not going to respond to that because we have other advantages that [make] people want to invest in Australia", he said.

"Australia has other advantages, and the tax system is supposed to deal with issues other than attracting investment – there is equity and fairness and other considerations," he said.

Soon it was time for another Liberal, Scott Buchholz, from my ancestral home of Beaudesert, to try his luck with the assistant governor economic, Dr Luci Ellis. Sorry, no luck.

"If you are a primarily locally oriented corporate entity, you have dividend imputation and it is more or less irrelevant what the corporate tax rate is from the perspective of people who wish to invest in your firm," she said.

"That is also true for the very large pool of superannuation savings that we have in this country."

So the benefit from cutting the company tax rate was limited to its ability to attract investment from foreigners.

But not all foreign capital was equally valuable. Foreign direct investment, she implied, was more valuable than portfolio investment involving "purchasing of existing securities or existing assets [such as businesses]".

Direct investment was where, if the decision to cut the rate was put off, this could "potentially be more damaging to an economy" but – here comes the two-handed economist – "investors think about more than just differential tax rates when they are making foreign direct investment decisions".

"Also," Ellis went on, "you have to remember that many multinational corporations do have the capacity to decide where the revenue [they earn in Australia] is recognised".

"To the extent that there are transfer-pricing alternatives to where you locate your income, it is not clear to me that [the level of our company tax rate] changes people's decisions about whether Australia is a good place to have some business. It might change which government gets the revenue.

"You could imagine that it would become increasingly attractive for multinational firms to seek to locate their revenue recognition in lower tax havens.

"But there are already very low tax jurisdictions where [multinationals] can do that, and we still see investment happening in [this] country.

"I cannot imagine a scenario where a few more countries moving in this direction [of cutting their rates below ours] results in the entirety of that activity moving outside Australia's borders," Ellis said.

What a comfort it is that, while our politicians do little more than try to score points off each other, our econocrats are still capable of laying out the choices we face.
Read more >>

Saturday, March 4, 2017

The news is good, but not for the reason we've been told

Fabulous news on the economy this week. The recession that never was, didn't happen. Phew. That's a relief.

After going backwards by 0.5 per cent in the September quarter of last year, we learnt from the Bureau of Statistics' national accounts that the economy rebounded by 1.1 per cent in the December quarter - meaning, according to the overexcited children of economic reporting, that we've escaped "technical" recession.

Actually, anyone with sense knew three months ago we would. The detail of the national accounts showed the contraction was no more than a pothole on the economic road, the product of an unusual accumulation of negative one-offs.

But even if this week's figures had shown a second consecutive quarter of "negative growth", the recession the excitables would be shouting about would be technical rather than real.

Why? Because you can't have a real recession without falling employment and rising unemployment, and we've had neither. Oh. No one told me.

But back to reality. Just as the economy didn't really contract in the September quarter so, however, the economy didn't really take off like a rocket in the December quarter.

There's a lot of largely inexplicable "noise" in the initial estimates of the quarter-to-quarter change in real gross domestic product. That's why adult economists never take the figures too literally.

It's common for a literally unbelievably bad quarterly figure to be followed by an unbelievably good one.

That's partly because of catch-up – work that couldn't be done in the first quarter because of, say, bad weather, is caught up with in the second.

But also because of the laws of arithmetic. If we compare the December quarter with the weak September quarter, we get an increase of 1.1 per cent. But compare it with the quarter before that and the increase is only 0.6 per cent.

The rate of real GDP growth over the year to December – 2.4 per cent – is closer to the rate at which we're likely to actually be travelling, but even that may be on the light side.

One suspiciously strong aspect of the accounts in the December quarter was growth in consumer spending of 0.9 per cent.

With the rise in wages so small, and only modest growth in employment, household disposable (that is, after-tax) income grew by only 0.2 per cent in nominal terms.

So how could consumer spending have grown so strongly? Since, by definition, income equals consumption plus saving, the statisticians assume households must have reduced their rate of saving.

The national accounts show the household saving ratio peaking at almost 10 per cent of household disposable income at the end of 2011, then falling almost continuously since then, taking a big drop in the December quarter to reach a little over 5 per cent.

If that's really happened and isn't just the product of some misestimate of income or consumption (or both), it's probably explained by a "wealth effect" – people in Melbourne and Sydney, seeing the value of their homes shooting up, feel wealthier and so decide they don't need to save as much and can spend more.

The next bit of apparent good news is that new business investment spending grew by almost 2 per cent. This, believe it or not, included an increase in mining investment, plus a stronger-than-usual increase in non-mining investment.

The former is likely to be just a blip as mining investment continues to fall back to normal, post-boom levels; the latter is an encouraging sign that the rest of business is getting on with the rest of their lives.

The last bit of good news in the accounts is that our terms of trade – the prices we receive for our exports compared with the prices we pay for our imports – improved by 9 per cent during the quarter, taking the improvement for the year to almost 16 per cent.

This is mainly because, after falling sharply since their peak 2011, coal and iron ore prices rose over most of last year.

This is important for several reasons. An improvement in our terms of trade increases our real income – since the same quantity of our exports now buys an increased quantity of imports.

"Real net national disposable income per person" – a better measure of living standards than real GDP per person – increased  2.5 per cent in the quarter to be 5.3 per cent higher over the year.

Many people noticed that company profits (the profits share of GDP) leapt by 16.5 per cent in nominal terms during the quarter, whereas the nation's wages bill (the wages share of GDP) fell by a nominal 0.5 per cent.

Why the disparity? Mainly because of the huge boost to mining company profits from the jump in export prices.

Not to worry. If the economy works the way the textbook says, this gain to miners should flow through the economy, causing higher wages and higher tax payments.

This latter likelihood is shown in the fact that nominal (as opposed to real) GDP grew 3 per cent in the quarter to be 6.1 per cent higher through the year.

This is great news for the Treasurer because we pay taxes (and everything else) in nominal dollars, not real dollars.

Last word goes to Dr Shane Oliver, of AMP Capital, who says there are seven reasons to be upbeat about the outlook for the economy.

"Thanks to a more flexible economy, Australia is on track to take out the Netherlands for the longest period without a recession. South-east Australia is continuing to perform well.

"The great mining investment unwind is near the bottom. The surge in resource export volumes has more to go.

"National income is rising again. Public investment is strong and there are signs of life in non-mining investment. Growth is on track to return to near 3 per cent this year," Oliver concludes.
Read more >>

Wednesday, March 1, 2017

How we can get better school results

Have you noticed how our politicians, asked to explain or defend their policy on X will, within a sentence or two, switch to expounding on what's wrong with their opponents' supposed policy?

The sad truth is they much prefer scoring cheap political points and blame-shifting to getting on with developing policies to deal with the various problems the nation faces.

Coming up is policy on schools. We'll be hearing a lot on federal funding of schools in a few weeks when Education Minister Simon Birmingham debates the matter at a meeting with his state counterparts.

I've been boning up on schools in preparation for delivering the Australian College of Educators' Jean Blackburn Oration in Melbourne last week. Here's a taste.

The government keeps telling us the problem with schooling is that, for so many years, we spent more and more on school education and the results did not improve. In fact, they got worse.

Well, the last bit's certainly right.

As summarised by Trevor Cobbold, of Save Our Schools, a public schools lobby group, our results on the OECD's program for international student assessment, PISA, have fallen significantly over the past 15 years. We remain one of the high-performing countries in reading and science, but our maths results have slipped to about average.

The results show continuing declines in the proportion of students at the most advanced levels and also significant increases in the proportion of students below the international standard. This includes high proportions of low socio-economic status, Indigenous, provincial and remote-area students.

We get an even more worrying picture from the results of the national assessment program – literacy and numeracy, NAPLAN.

Peter Goss and colleagues, of the Grattan Institute, have pioneered the technique of converting NAPLAN results into "years of progress", using the results of Victorian students.

They note first that the NAPLAN “national minimum standards” are set very low. A year 9 student can meet this standard even if they are performing below the typical year 5 student – that is, four years behind their peers.

They find that the spread of student achievement from highest to lowest more than doubles as students move through school. Low achieving students fall ever further back. They are two years and eight months behind in year 3, but three years and eight months behind by year 9.

Students in disadvantaged schools make about two years less progress between year 3 and year 9 than similarly capable students in high-advantaged schools.

And get this: bright students in disadvantaged schools show the biggest learning gap. High achievers in year 3 make about 2½ years less progress by year 9 than if they had attended a high-advantage school.

Great. But what about the government's claim to have been spending more and more on schools? Birmingham keeps saying that federal funding has increased by 50 per cent since 2003.

This is highly misleading, particularly since what matters is total school funding, coming from both federal and state governments.

According to Cobbold's fact checking, the real increase in total government spending per student over the nine years to 2013-14 was just 4.5 per cent.

There's more. Although the non-government sector enrols less than 20 per cent of all disadvantaged students, the nine-year increase for non-government schools was 9.8 per cent, whereas the increase for government schools was only 3.3 per cent.

So, does spending more money buy better school performance? Not if you spend it on more of the wrong things.

The truth is that we haven't been spending a lot more in recent times but, in any case, much of what we have been spending hasn't been spent effectively.

Between the federal and state governments, we've given more to advantaged schools than don't need it, at the expense of disadvantaged schools that do need it.

When you study the standardised test results, the answer to how the money could be spent more effectively – that is, in a way that increases the probability it will produce better school performance – leaps out at you: we need to spend more per student on disadvantaged schools and less per student on advantaged schools, where parents have demonstrated their willingness to supplement the school's finances by paying fees.

In other words, the obvious way to make government spending on schools more cost-effective is to put it on a needs basis.

We'll know soon enough whether Birmingham has made any progress on that, or has succumbed to pressure from non-government schools following that less-than Christ-like motto: "For unto every one that hath shall be given".

But though it would help to direct more of the funding to schools with more of the disadvantaged students, we need to ensure schools spend whatever they get as effectively as possible.

One new technique that research says would improve outcomes is "targeted teaching".

One of its advocates, Goss of the Grattan Institute, says teachers should be provided with the time, tools and training they need to collect robust evidence of student learning, discuss it with other teachers, and use it to target their teaching to the wide range of student learning needs in their classroom.

Higher achieving students should be stretched, lower achieving students should be supported to catch up, and no student who stalls should go unnoticed, he says.

The school fosters a culture of progress, in which teachers, students and parents see learning success as being about effort and improvement, not ability and attainment. And see assessment as a way to improve, not to expose student failures.

The best schools in Australia are not necessarily those with the best ATAR or NAPLAN scores, but those that enable their students to make the greatest progress in learning. The goal is for each student to have made at least a year's worth of progress every year, Goss concludes.

Read more >>

Monday, February 27, 2017

Cut in penalty rates another win for 'bizonomics'

When we look at all the crazy behaviour in the United States, we comfort ourselves that it couldn't happen here. Well, last week we took another step in that direction.
Why do blue-collar workers get so alienated and fed up they vote for someone as mad as Donald Trump? It couldn't be because, while America has waxed fat over the past 30 years, their pay has been stagnant in real terms.
How have the top few per cent of US households captured most of the economic growth for three decades?
Three main reasons, which apply in varying degrees to us.
First, because globalisation and "skill-biased" technological change have produced a small number of winners and a large number of losers.
Second, because far from using the tax-and-transfers system to require the winners to compensate the losers, we've gone the other way, making the income-tax scale less progressive and tightening up on payment of benefits to people of working age.
Third, because although the economy has changed in ways that weaken organised labour, we've doubled down, weakening legislative arrangements designed to reduce the imbalance in bargaining power between bosses and workers.
The unions have been weakened by the greater ease with which employers can move their operations overseas and by the technology-driven shift from goods to services.
The legislative attack has focused on removing union privileges, weakening workers' rights and weakening workers' bargaining power by discouraging collective bargaining and favouring individual contracts.
In the US there's been a failure to raise minimum wage rates. Here, there's been a decades-long campaign to eliminate penalty rates for people working "unsociable" hours which, supposedly, are anachronistic.
The mentality that produced these developments is "bizonomics" – something that sounds like economics because it repeats buzzwords such as "growth" and "jobs", but isn't.
In Australia, micro-economic reform has degenerated into a form of rent-seeking that's saying the way to a prosperous economy is to keep business – the people who create the jobs – as happy as possible.
This bizonomics isn't new, of course, as attested by its slogan: What's good for General Motors is good for America.
As it relates to the labour market, the proposition is that the way to make things better for everyone is to make life tougher for the workers.
Pay them less, give them less job security in the name of greater "flexibility", acquiesce to business's ambition of making working life a 24-hour, seven-days-a-week affair, and we'll all be better off.
The flaws in that argument – and the price to be paid for playing this game for decades – are now more apparent.
For a start, the number of workers and their dependents far outnumbers the bosses and owners and their dependents. So if all you end up doing is transferring income from the workers to the bosses, far more people lose than gain.
Of course, that's never what we're promised. The promise is always that the loss to existing workers is justified by the gain to all the would-be workers who'll now get a job.
Trouble is, too often you end up with a lot of workers making a sacrifice with only a handful of would-be workers finding jobs.
The Fair Work Commission's decision to cut Sunday and public holiday penalty rates for workers in hospitality and retail is an experiment in trickle-down economics, based on faith rather than evidence.
That makes it like everything else on big business's "reform" agenda: the immediate benefits come directly to business – in the form of cheaper labour – but, not to worry, those benefits will trickle down to the rest of us, so in the end it will all be much better for everyone.
Do you wonder why the punters don't believe it and conclude simply that "the government" has cut wage rates to benefit its big business mates, thus adding to their disillusionment and willingness to vote for populist fringe parties?
As I've explained before, the claim that lower penalty rates in retailing will lead to growth and jobs is – like the argument for protection – based on a fallacy of composition and the absence of "economy-wide" thinking.
The most likely effect is that total consumer spending remains little changed, but more of it's done on Sundays and goes on recreation and retail.
Plus an apartheid weekend, where the high-paid still get it, but the poor have to work.
A fearless prediction: now business has got some of the "reform" it's seeking, no one will ever bother to come back in a few years' time and do a proper study to check whether all the promises we were given came to pass.
Read more >>

Saturday, February 25, 2017

Why we've never had 'Gonski funding'

It turns out Christopher Pyne was right: Julia Gillard's version of the Gonski school funding reform was indeed "C​onski".

The con was that the funding changes Gillard put into law in 2013 – which Labor and the teacher unions christened "Gonski" and have virtuously defended from Coalition attack ever since – bore only a vague resemblance to what leading company director David Gonski's panel recommended in its report to the government in 2011.

In a speech last week, Dr Ken Boston, a member of the panel and former NSW Education Department director-general, argued that much of what people think they know about "Gonski" is wrong. He listed four common beliefs that are mistaken.

First, many people believe the Gonski report said additional funding was the key to improving education.

Wrong. "The Gonski report did not see additional funding as the key to improving Australian education. It's most critical recommendations were about the redistribution of existing funding to individual schools on the basis of measured need," Boston said.

"The report envisaged the amount allocated to independent schools being based on the measured need of each individual school, and the amounts allocated to Catholic and government systems being determined by the sum of the measured needs of the individual schools within each system – a process of building funding up from the bottom."

This was in sharp contrast to the process of the last 40 years: top-down political negotiation by the federal government with state governments, independent school organisations, church leaders, teacher unions and others, he said.

The outcome had been that the funding allocations to the three sectors – independent, Catholic systemic and government – were arrived at without any agreed and common system of assessing real need at the level of each individual school.

School funding has been "essentially based on a political settlement, sector-based and largely needs-blind", whereas the Gonski report proposed that it be determined on an educational, not political basis, be sector-blind and entirely needs-based, as well as being bottom up, not top down.

But Gillard rejected Gonski's recommendations and stuck with the old, religion-based arrangements.

"We concluded that an additional $5 billion might be needed on top of the $39 billion being spent annually by the state and federal governments, because of the commitment given by the federal government [Gillard], after the review had started, that no school would lose a dollar as a result of the review.

"This was an albatross around our necks," Boston said.

The second common misunderstanding was that the Gillard and second Rudd governments, having adopted Gonski's approach, then reached "Gonski agreements" with the states, promising additional "Gonski funding" over six years.

Nothing Gonski about it. Gonski recommended that the loading for non-government schools as a proportion of "average government school recurrent costs" – a biased formula that meant public funding for new places for children in disadvantaged government schools automatically increased the federal government grants to non-government schools, without any consideration of disadvantage – should cease.

Gillard, supposedly that great champion of needs-based funding, kept the biased formula alive.

Gonski recommended that the basis for general recurrent funding for all students in all sectors be a "schooling resource standard" for each school, set at a level comparable with schools with minimal educational disadvantage.

To this should be added loadings for schools according to their social disadvantage – low socioeconomic status, English language proficiency, school size and location, and indigeneity​.

Calculation of the resource standard and the size of the loadings should be done by a "national schools resourcing body", similar to the former Schools Commission. Gillard wouldn't touch it.

"Like the Coalition government, Labor has ducked the fundamental issue of the relationship between aggregated​ social disadvantage and poor educational outcomes, and has turned its back on the development of an enduring funding system that is fair, transparent, financially sustainable and effective in promoting excellent outcomes for all Australian students," Boston said.

The third misunderstanding – which Boston labels "the Fairfax view" (not this time, Ken) – is that most of the problems facing Australian education would be solved if we got the last two years of "Gonski funding".

It's true that, so as to disguise the true cost of Labor's politically gutless, bastardised version of Gonski, it was to be phased in over six calendar years, with the bulk of the cost loaded into the last two years, 2018 and 2019.

This was $4.5 billion, which the Turnbull government has cut to $1.2 billion over the four years to 2021.

Even so, "providing the so-called 'last two years of Gonski funding' will not deal with the fundamental problem facing Australian education. Neither side of politics is talking about the strategic redistribution of available funding to the things that matter in the schools that need it, on the basis of measuring the need of each individual school," Boston said.

The fourth common misconception is that the two sides of politics are poles apart. At one level, yes. What they have in common, however, is that neither is genuinely interested in moving to needs-based funding.

"The government and opposition are fluffing around the margins of the issue, and neither appears to understand the magnitude of the reform that is needed, or – if they do – to have the capacity to tackle it," Boston said.

"Equity and school outcomes have both deteriorated sharply since we wrote the Gonski report. Some stark realities now shape the context in which governments – state and federal – must make decisions two months from now about how Australian education might recover from its long-term continuing decline.

"The present quasi-market system of schooling, the contours of which were shaped by the Hawke and Howard governments, has comprehensively failed.

"We are on a path to nowhere. The issue is profoundly deeper than argument about the last two years of 'Gonski funding'," he concluded.
Read more >>

Wednesday, February 22, 2017

HOW WE CAN DO BETTER ON EDUCATION

Jean Blackburn Oration for the Australian College of Educators, Melbourne, February 22, 2017

I’m honoured to be invited to deliver the Jean Blackburn oration, especially to follow the inaugural oration by someone whose name will long be synonymous with education policy, David Gonski. David’s name will return in what I have to say, but let’s focus on Jean Blackburn, whose contribution we are here to acknowledge. I never had the pleasure of meeting Jean and, no doubt, hearing her frank assessment of the weaknesses in whatever argument I’d been mounting. But from all her many friends and colleagues have said about her, including my friend Lyndsay Connors, it’s clear she was both formidable and likeable. Jean was a high school teacher who became a leader in the development of school education policy from the time of the Whitlam government. Her potential was uncovered and encouraged by a friend from her uni days, Peter Karmel. As a member of the Australian Schools Commission she worked with him on the hugely influential Karmel report, staying on after he left the commission. According to Dean Ashenden, she was “among Australia’s most influential shapers of policy and thinking about schooling and about the condition and education of women and girls. She was charismatic, passionate and ferociously intellectual, and was widely admired and loved. A woman of the Left, she hated cant, loved tough thinking and insisted absolutely on open debate and hard facts.” According to Lyndsay, she was both blessed and cursed with an ability to see both sides of every argument, as well as the potential for unintended consequences from the policy changes she was part of proposing. She seems to have been among the first to realise that, far from dispensing with the problem of “state aid”, the Whitlam government was giving the place of sectarianism in Australian education a new lease on life - one that has kept it thriving to this day.

Jean Blackburn trained as an economist. She had an honours degree in economics and worked as an economist with the War Office of Industry, planning post-war reconstruction. This fact is a comfort to me as I, an economic journalist, speak to you about education. It’s likely that all of you know more about education than I do. I agreed to give this speech almost a year ago because I knew it would oblige me to get up to speed on the economics of education. Economists have a big say in education - particularly its funding - and it’s obvious that economics is important to education, just as education is important to the economy. But to acknowledge that education is important to the economy is not to imply that is the only or even the main reason education is important. Far from it. I think even the little I’ve said about Jean Blackburn will have convinced you she wore her economics training lightly, seeing it - and education - in a much broader context. According to Ashenden, she believed the job of schools was not just to prepare young people for life and work, but also to introduce them to “important achievements of the human mind, imagination and spirit to which all have the right of access”.

Why education matters more than ever

Economists are right to think of education as an important means to the end of economic growth and greater material prosperity. But they - and our business people and politicians - keep forgetting education is also an end in itself. People working in education should be shameless advocates of knowledge for its own sake. Humans are a curious animal, we want to know as much as we can about how we, and everything around us, tick. In the back of our minds we know this knowledge may one day be of practical use but, whether or not that proves the case, we still want to know. We want to know how the universe can be growing, what the invisible bugs in our stomach do to us, and how humans evolved over the millennia. The more comfortable we are materially - and don’t be misled, we’re more prosperous than we’ve ever been - the more we can afford to spend on pushing out the boundaries of human knowledge and on passing on knowledge to the next generation.

But economists are also inclined to forget that education is a means to ends other than just our material prosperity. There’s little reason to doubt that education allows us to live emotionally richer, more fulfilling lives. As NSW’s now-sadly-missed minister for education Adrian Piccoli has said, education has the power to transform lives. Recent research by the OECD has found that greater education is associated with being more satisfied with life.

And then there’s the link between education and health. The same OECD study found that both education and skills are associated with better health. The percentage of adults in member countries who report being in good health is 33 percentage points higher among those with high literacy skills and a high level of education. Of course, as we were taught at uni, “correlation is not causation”. But research by academics at the Melbourne Institute has established a causal link between education and health. It used the increase in the minimum school leaving age from 14 to 15 to study differences between those who left a year earlier and those who didn’t, and found the extra year of schooling had improved overall health and physical functioning.

That education allows us to live more intellectually satisfying, fulfilling lives has always been true, but it’s more significant now we have succeeded in raising the level of girls’ educational attainment to the level of boys’, and beyond - something that would no doubt have given Jean Blackburn much satisfaction. This major social advance has left us with much work to do in modifying the institutions of a male-oriented labour market. But that’s a subject for another day, except to the extent that the need for the provision of adequate childcare opens the opportunity for this to be combined with a big improvement in the quality and availability of early childhood education. Our need to improve our performance on education starts with much better and widespread early childhood education.

I said in my teaser for tonight that “the reasons education is central to Australia’s social and economic future keep increasing and becoming more urgent”. Here I’m referring to the effects of globalisation and technological advance - and the adverse reactions to these developments we’ve become more conscious of since just last year.

Globalisation - and improvements in transportation, and information and telecommunications - has moved many of the developed world’s manufacturing jobs to China and other developing countries. There was a time in Australia when young people could leave school with an inadequate education and still easily find unskilled jobs in manufacturing, construction and elsewhere. Not today. Notwithstanding the flurry of the resources boom, we’ve already moved a long way towards an economy that doesn’t make things so much as perform services - for each other, and for foreigners, in the form of tourism and education and exports of business services. Many of the jobs in primary industry and manufacturing are now done by machines. So far, the growth in service-sector jobs has been sufficient to keep employment high and unemployment low. Many jobs in the services sector are low skilled - in hospitality and retailing, for instance - but the fastest growth has been in jobs requiring tertiary qualifications. This, of course, underlines the growing importance of education - and of doing as well as we possibly can. Two of the biggest and fastest growing industries in the modern economy are education and healthcare. Both of those things are what economists call “superior goods” - the more our real incomes grow over time, the more of them we wish to devote to improving our health and improving our education.

All this is another way of saying we’re moving into to the “information economy” where the plentiful provision of high-quality education and training to increase the “human capital” of individuals and the workforce is of paramount importance. We’re often told that robots are about to take huge numbers of jobs in the services sector, leading to the mass unemployment the prophets of future shock have been predicting since businesses began using computers in the 1980s. Maybe it will happen this time, but I remain doubtful. Many of the jobs in the services sector are “personal service” jobs that either can’t be done by robots or that we choose not to have done by them. I find that the people who know a lot about what machines will soon be able to do don’t know a lot about human nature.

But let’s say there is a lot of disruption in the job market and people being required to change jobs and even occupations many times throughout their working lives. That says two things of relevance to educationists. First, we need to do more to ensure people leave school and university with strong foundational, generalisable and transferable skills. And, second, we need to have a VET system capable of providing the retraining so many people are likely to need.

Now let’s say it’s much worse than that and we end up with far less work needing to be done than we have workers to do it.  One possible consequence is mass unemployment, but another is most people being employed, but for much shorter hours per week - as Keynes predicted almost 100 years ago we’d end up with. The surprising fact is that many workers find the prospect of large amounts of extra free time a bit frightening. What on earth would they do with it? Two take-aways for educators. First, many people would end up doing courses and degrees for essentially recreational purposes. Second, you’d expect that the better a person’s education, the less trouble they’d have finding activities more worthwhile than watching telly or hanging around the pub.

One of the consequences of globalisation and technological advance - the move to the knowledge economy - has been to widen the gap between the wages of high-skilled and low-skilled workers. This is probably the main cause of the marked increase in the inequality of household income observed in all the English-speaking economies since the early 1980s. It’s worse in America, where real wages in the middle and at the lower end have been stagnant for 30 years, meaning almost all the benefits of economic growth have been captured by the top 10 per cent or so of income-earners. It hasn’t been nearly than bad in Australia because our institutions - such as the regular adjustment of minimum wages - and governments have done more to counter it.

The French economist Thomas Piketty has drawn much attention to his thesis that inequality is being driven by inherited wealth, thanks to high returns on capital. But The Economist magazine has advanced an alternative spectre I find more plausible. It combines the knowledge economy and high returns to high-skilled labour with a social phenomenon the better education of women has made more prevalent, “assortative mating” - the tendency for men and women to marry people of the same socio-economic status and level of education. When two highly educated, highly paid people marry and form a two-income household, they have the values, behaviours and wherewithal to ensure their offspring go to the best schools and end up with the qualifications most likely to ensure they, too, get the best-paying jobs. Thus do we end up with a new education aristocracy. If we want to diminish such a likelihood, the obvious first step is to fund schools - public and private - on the basis of need, so that schooling plays the greatest part in our pursuit of that unattainable but worthy goal: equality of opportunity.

Another consequence of globalisation is high levels of immigration, mainly from poor countries to rich countries. You can see that in the Mexicans pouring into the United States, the Poles and other eastern Europeans moving to Britain and, in Australia, the many Asian immigrants, including a fair share of Muslims. You see where this is leading. When you do so little to require the winners from economic change to compensate the losers, and then, whether by accident or design, you have an influx of immigrants, you end up with Trump, Brexit and the resurrection of One Nation.

Trevor Cobbold, that great warrior for public schooling, has said that “greater social equity in education would help reduce social alienation and division, and strengthen the social fabric of Australian society”. He’s right.

So far we’ve had a highly successful multicultural society, but instances of intolerance are growing. Distrust of foreigners and people with unfamiliar religious practices is growing, and being fanned by radio shock jocks and the tabloid press. Our cities are becoming more stratified geographically, so that anglos live in well-placed suburbs and immigrants live in outer suburbs. Schools are becoming part of this stratification, with higher SES parents increasingly sending their children to higher SEA schools - no matter how much daily driving this involves - leaving lower SES students going to increasingly lower SEA schools. Almost all non-government schools have a religious affiliation, so that, increasingly, Jewish kids go to Jewish schools, Islamic kids are able to go to Islamic schools, and Baptist and Pentecostalist kids go to “Christian” schools. This trend is being assisted by our three-sector funding system, which has continued under the Gillard government’s version of Gonski. It’s becoming increasingly possible to go through schooling without meeting people very different to yourself. And then we wonder why social cohesion is fraying.

I rest my case. The reasons education is central to Australia’s social and economic future keep increasing and becoming more urgent.

Have we been spending a lot more on education?

So, let’s get down to cases. Ever since its election, the Abbott-Turnbull government has repeated the line that “for so many years we spent more and more on school education and the results did not improve: in fact they got worse”. I’ll look at what’s been happening to results in a moment, but let’s start with whether we’ve been spending a lot more on education.   The federal minister, Simon Birmingham, has claimed repeatedly that federal funding has increased by 50 per cent since 2003. But is it true?

After more than 40 years as an economic journalist, I have some experience in fact-checking the statistical claims politicians of all sides keep making. They’re always claiming that spending on X has greatly increased and never been higher. You run such claims through a check list: have they allowed for inflation? Have they allowed for growth in the population? Are they talking about total government spending or just the spending by their own level of government?

According to Cobbold’s fact checking, when you allow for all those factors, the real increase in total government spending per student over the nine years from 2004-05 to 2013-14 was just 4.5 per cent, or 0.5 per cent per year. But it’s worse than that. Although the non-government sector enrols less than 20 per cent of all disadvantaged students, the nine-year increase for non-government schools was 9.8 per cent, whereas the increase for government schools was only 3.3 per cent. Doesn’t sound like needs-based finding. It turns out that, while the federal government was increasing its funding to government schools, the state governments took the opportunity to limit their funding to their own schools, while increasing their grants to non-government schools.

To put Australia’s funding in an international context, Peter Goss of the Grattan Institute has checked Tanya Plibersek’s claim that “Australia is slightly below average when it comes to international funding for our schools”.  She drew this conclusion from the OECD figures showing spending per student as a percentage of GDP per person, and she’s right. Although including private spending on school fees puts us slightly above the OECD average, looking just at government spending puts us at 3.2 per cent of GDP in 2013, compared with the average of 3.4 per cent. So, we haven’t had rapid growth in government spending on schools over the past decade and nor are our governments spending more than other countries are. But what about the other side of the argument: what’s been happen to the measured performance of our schools?

What’s happening to our schools’ measured performance?

The performance of our schools on literacy, numeracy and science is now measured regularly by PISA and NAPLAN. Before we start, I have to acknowledge that there’s a lot more to what schools impart to students than literacy and numeracy. These standardised tests are an imperfect way to measure the performance of schools. But I have to say they are key competencies, part of the essentials with which our children need to be equipped. It’s possible that, while not doing well in these measured subjects, our schools are doing much better in imparting “soft skills” that are harder to measure. It’s possible, but I don’t think it likely.

A good summary of what PISA tells us about our performance, using the 2015 figures released late last year, has been provided by Cobbold. Wisely, I think, he focuses not on the media’s favourite of our ranking on the league table of countries, but on how our own performance has changed over time. He finds that our results have fallen significantly over the past 15 years. We remain one of the high-performing countries in reading and science, but our maths results have slipped to about average. The results show continuing declines in the proportion of students at the most advanced levels and also significant increases in the proportion of students below the international standard. This includes high proportions of low SES, Indigenous, provincial and remote-area students. He finds continuing very large gaps between the achievements of the highest and lowest performing students after 10 or more years of learning.

Tim Dodd, the Financial Review’s education editor, summarised the results a different way: they found the standard of Australian 15-year-olds’ maths is a year behind where it was in 2003, reading standards are 10 months behind compared with 2000, and science is seven months behind compared with 2006.

A good review of the latest NAPLAN results comes from Chris Bonnor and Bernie Shepherd, two retired high school principals who’ve done a fabulous job in “data mining” the MySchool website. They say NAPLAN results have mostly drifted up over the years, whereas the latest results for literacy and numeracy show a plateauing. They note the haste with which Simon Birmingham seized on this one year of poor results to repeat his claim that money doesn’t buy improved results.

Peter Goss and colleagues, of Grattan, have pioneered the technique of converting NAPLAN data into “years of progress”, using the results of Victorian students to reveal some worrying trends. They note first that the NAPLAN “national minimum standards” are set very low. A Year 9 student can meet this standard even if they are performing below the typical Year 5 student - that is, a stunning four years behind their peers. They find that the spread of student achievement from highest to lowest more than doubles as students move through school. Low achieving students fall ever further back. They are two years and eight months behind in Year 3, but three years and eight months behind by Year 9. Students in disadvantaged schools make about two years less progress between Year 3 and Year 9 than similarly capable students in high-advantaged schools. And get this: bright students in disadvantaged schools show the biggest learning gap. High achievers in Year 3 make about 2½ years less progress by Year 9 than if they had attended a high-advantage school. They actually make less progress than low achievers in high-advantage schools.

Does spending more money buy better school performance?

This brings us to the key political question of the hour: does spending more money buy better school performance? Short answer: not if you spend it on more of the wrong things. But first, it’s surprising to have the claim that “money doesn’t matter” coming from the conservative side of politics, and even from, of all people, some economists. It’s surprising to have people who fight tooth and nail to protect and increase their personal income assuring us that spending more money on any category of spending yields no benefit. Do they follow this precept in their own spending on education? Does it mean they’re happy to send their children to the local public school, or are they sending them to expensive private schools, similar to those most of the cabinet ministers attended?

The truth is that we haven’t been spending a lot more in recent times but, in any case, much of what we have been spending hasn’t been spent effectively. Between the federal and state governments, we’ve given more to advantaged schools than don’t need it at the expense of disadvantaged schools that do need it. When you study the standardised test results, the answer to how the money could be spent more effectively - that is, in a way that increases the probability it will produce better school performance - leaps out at you: we need to spend more per student on disadvantaged schools and less per student on advantaged schools, where parents have demonstrated their willingness to supplement the school’s finances by paying fees, sometimes very high fees. In other words, the obvious way to make government spending on schools more cost-effective is to put it on a needs basis.

As an economic journalist I know exactly why Birmingham and his colleagues keep saying that spending more money on schools would be a waste of money. It’s because the Coalition government’s project is to return the budget the surplus, but do it by curbing government spending rather than increasing taxes. If saying this implies that schools’ performance could be fixed simply by schools and teachers trying harder, this is not an interpretation that would discomfort the Coalition and its heartland supporters. But on one matter I do sympathise with Birmingham: the version of “Gonski” he has inherited from Labor is far too expensive a way to move to needs-based funding. As David Gonski gently reminded us in the first of these orations, and his colleague Ken Boston more forcefully reminded us in a speech just last week, what the Gonski panel wanted was a redistribution of schools spending to make it needs-based. Its recommendation of greatly increased spending arose from Julia Gillard’s stipulation that “no school should be a dollar worse off”. One matter on which I don’t sympathise with Birmingham’s government is its quite unreasonable cost-shifting and politically unsustainable plan, announced in the 2014 budget, to reduce the indexation of federal schools grants to the consumer price index. Nothing less than indexation to the expected rate of growth in teachers’ wages is politically sustainable.

The ideal would be for Gonski’s original proposals to be implemented but, since these were quite unacceptable even to Gillard, we’re likely to be waiting some time to see that happen. But Labor’s line that Gillard’s bastardised version of “Gonski” must be honoured to the letter, in veneration of the great reformer, is dishonest and manipulative. Peter Goss of Grattan has proposed a compromise arrangement which, without requiring any more spending than the temporary extra the government has agreed to, would get a lot more schools closer to the “schooling resource standard” a lot earlier even than envisaged under Gillard’s Gonski. It seems clear that Birmingham is working on his own compromise plan, which would involve better-resourced schools’ grants increasing by less than provided for by Gillard’s Gonski - which is still law. Birmingham has hinted that he may be interested in introducing the national schools resources body that Gonski recommended, but Gillard wouldn’t touch. This could be a big step forward. But the Labor opposition is unlikely to accept any compromise, virtuously holding out for “the full Gonski” as it poses as the one true believer in needs-based funding.

Beyond the eternal fight over money: what works and what doesn’t

We’re unlikely to get far in improving school performance until we get closer to the ideal of needs-based funding - that is, until we direct more of total funding to those disadvantaged students and schools that most need additional resources. But it’s important to realise that better-targeted funding is a means rather than an end in itself. If all we did was give disadvantaged schools a big bucket of money to spend, there would be no certainty that all of it was spent in ways that actually benefited disadvantaged students.

It’s a great pity that the crazy way we fund our schools - two levels of government funding differently three different school sectors - keeps us so preoccupied that we rarely turn our mind to the more important question of how we can improve our schools’ ever less-impressive measured performance. The truth is that we have tried a lot of things that didn’t work. Dean Ashenden reminds us there was a time when we really did increase spending on schools. Over the 40 years to 2004, real spending per student grew by more than 80 per cent. What was that extra money spent on? Mainly on reduced class sizes. Smaller classes seem an obvious improvement to teachers and parents, but any amount of research has shown this does little to improve outcomes.

Next comes the Howard government’s experiment with “choice and competition”. Howard increased federal grants to non-government schools using several funding formulas biased in their favour and encouraged the establishment of many more, low-income independent schools. The justification was that greater choice - particularly choice between public and private - was one of the Liberals’ great values. It would encouraged greater competition between the sectors, obliging public schools to lift their game. It didn’t work. But it did subsidise the drift of higher SES parents who could afford private school fees away from low SEA schools, leaving them with a much harder climb to improved performance.

I think Howard’s advocacy of “choice” was much more about conservative political values - and his penchant for providing middle-class welfare to the Liberal heartland - than about economic fundamentalism. The “economism” came, paradoxically, more from Julia Gillard throughout the Labor government’s six years in office. Along with good measures such as a national curriculum, a universally accessible year of pre-school and maybe professional standards for teachers and principals, came economist-inspired measures such as standardised national assessments through NAPLAN, national reporting on schools through the MySchool website, and dabbling in performance pay for teachers. There is no evidence that this more information-based attempt to use increased competition between and within sectors to raise performance has worked. Geoff Masters, of ACER, has concluded the belief that “improvement will occur if schools are given incentives to improve” - including rewards, sanctions and the need to compete for students - is mistaken. I think that, to the extent that standardised testing encourages teaching-to-the-test and other gaming of the system - as with all KPIs - this is regrettable and to be discouraged. But you’d never convince a journalist that, because statistics can be misinterpreted and misused, we’re better off suppressing them or leaving things unmeasured. And though MySchool seems to have done little to encourage better test results, it has provided people such as Bonnor and Shepherd with a rich data set for drawing highly enlightening, evidence-based conclusions about what’s happening to our schools over time.

Conservative governments have been attracted by the idea of school autonomy - including the “charter school” variation - but research has not confirmed their success.  Similarly, the earlier fashionable, very economist-appealing idea of giving people vouchers they can take to a school of their choice, has not been supported by the many studies conducted.

What then is more likely to work?  Ken Boston reminds us that, in its last chapter, the Gonski report set out priorities for the extra funding to be provided to disadvantaged schools, including “innovative approaches to teaching and learning”. We were cognisant, Boston said, of what research was saying about the critical classroom factors for success: “instructional leadership by the principal and senior staff, diagnostic assessment, differentiated teaching, and tiered interventions to extend high-achieving students and support those falling behind”.

Adrian Piccoli has told how NSW has been using its extra Gonski funding, including that: “Our reforms focus on quality teaching - getting the best and brightest into teaching and better supporting them throughout their careers; providing more time for early career teachers to hone their skills and be mentored by experts . . .”

Gill Callister, Victoria’s Education department secretary, has said that “the wave of international evidence from the successes of the world’s very best school systems shows unequivocally that investing in teaching quality, capability and development makes the single biggest difference to outcomes.” She added that “there is strong evidence that spending on early-years education has huge impacts down the line”.

Geoff Masters says we should built the “capacity” of teachers and school leaders and ensure “high quality practice across the system”. Such an agenda would involve: a higher-status and more academically capable teaching profession; a 21st century curriculum aimed at high levels of reading, maths and scientific literacy; more flexible learning arrangements focused on “growth”; early and extra attention for children “at risk of being locked into trajectories of low achievement”; and a narrower gap between the best and worst performing schools.

Part of what Masters is advocating is “targeted teaching”, which involves careful monitoring and evaluation of individual student’s progress. The greatest exponent of targeted teaching and the “growth” approach is Peter Goss of Grattan. Teachers should be provided with the time, tools and training they need to collect robust evidence of student learning, discuss it with other teachers, and use it to target their teaching to the wide range of student learning needs in their classroom. Higher achieving students should be stretched, lower achieving students should be supported to catch up, and no student who stalls should go unnoticed. The “growth” approach means a student is benchmarked against him or her self, not just against other students. The school fosters a culture of progress, in which teachers, students and parents see learning success as being about effort and improvement, not ability and attainment, and assessment as a way to improve, not to expose student failures. The best schools in Australia are not necessarily those with the best ATAR or NAPLAN scores, but those that enable their students to make the greatest progress in learning. The goal is for each student to have made at least a year’s worth of progress every year.

According to research by the Mitchell Institute at Victoria University, 26 per cent of students fail to finish school or a vocational equivalent. I’m sure some of these people catch up in later life, while others lead perfectly rewarding lives without benefit of further education. But I fear most of the 26 per cent lead lives of economic insecurity and limited personal fulfilment. They are the shockingly high proportion of students our school system has failed. I don’t believe in KPIs, but if I were to set one for schools, it would be to get that appalling indicator of our society’s failure very much lower.


Read more >>