Features Australia

Is Grattan. Is Good.

Is our lack of reform really ‘gridlock’ or simply the rejection of dud policies?

7 August 2021

9:00 AM

7 August 2021

9:00 AM

Reform is one of those terms that means different things to different people. The dictionary definition talks about changes and improvements to a law, social system or institution that make people better off.

Former chief executive of the Grattan Institute and soon-to-be private sector consultant, John Daley, thinks he knows a thing or two about reform. He has recently authored a report on what he regards as policy gridlock preventing the implementation of reforms he deems to be in the public interest.

The first sentence of his report is a give-away: ‘“Everybody knows” that policy reform in Australia is gridlocked.’  Starting with an unproven assertion is always unwise. What he is really saying is that his preferred policy reforms have not been implemented, therefore the system must be gridlocked.

For my money, I am thankful that the policy reform process in Australia has operated in a way that has prevented the many deficient policy proposals that have emerged from Grattan over the years from seeing the light of day.

The methodology Daley uses in his report is extremely dubious – laughable, really. He takes 73 ‘concrete policy reforms’ devised by his own institute as the basis for analysis. Evidently these reforms were necessary at the time and ‘while people may not agree with each and every report, we hope that they will agree that Grattan’s recommendations over the past decade have been mostly good proposals’.

Sadly for Daley, self-praise is not a guide to the worth of policy proposals. It’s akin to saying: Is Grattan. Is Good. Simply asserting that something dreamt up by the Grattan Institute is in the public interest doesn’t make it so. And slagging off at other organisations such as the Institute of Public Affairs does nothing to strengthen the argument.

The Grattan Institute invariably endorses higher taxes, more government spending, more regulation and bans as their preferred policy positions.

Who can forget the proposal to bring in bigger trucks to sort out urban congestion? Or the idea that encouraging high-rise apartments is the solution to our housing problems? Or that industrial relations arrangements don’t need to be changed? Or that childcare needs to be further subsidised? Or that a binding carbon tax must be introduced? Or banning petrol cars from 2035?

Daley’s view is that the failure of governments to implement hardly any of the 73 policy ideas of Grattan – most of which are strongly contested notwithstanding his suggestion that they are not – is an example of gridlock. The alternative viewpoint is the failure of governments to embrace most of these policy ideas is actually an example of good governance where the key decision-makers know the difference between good and practical policy proposals and duds.

But let’s work with Daley for a bit longer. He compares the last decade or so – his period of gridlock – with the halcyon reform days of the 1980s and 1990s. These were times when many reforms did take place in Australia but the reality was that many changes were essentially foisted on governments.

This was clearly the case with the floating of the dollar. With major currencies around the world being floated, there was no way that Australia could have persisted with having a fixed exchange rate. The cost of defending the dollar would have been too great. The exact timing was a little bit up in the air; but it was basically plus or minus six months.

Once the dollar was floated, it was necessary to lift the international capital controls that had existed up until that point. The deregulation of the financial sector was similarly an inevitable corollary.

To be sure, the Hawke/Keating government did implement a series of controversial policy reforms, including the sequential lowering of tariffs, particularly those covering certain industries (automotive and textiles, clothing and footwear industries), privatisation and a tentative shift to enterprise bargaining.

But the backdrop to these changes was the secular decline in Australia’s per capita income ranking among other developed countries and the acknowledgment of most economists (and indeed the opposition) that the Australian economy needed to be opened up. In other words, our living standards were sliding down a slippery pole and something had to be done.

The Howard/Costello government continued the quest with further industrial relations reform in the 1990s and the introduction of the GST in 2000. Repairing the budget and paying down government debt should also be counted as  major reforms.

Were any of these easy to execute? No. Were there vociferous opponents to many of these changes? Yes. But open communication and explanation certainly helped, with policy development and implementation generally assisted by able public servants.

Having said this, there are a number of reasons to think that this reform purple patch was the exception rather than the rule. And yes, there have been some significant changes since then, such as larger ministerial offices, department heads on fixed terms, more contracting out to consulting firms, weaker ministerial accountability and the like.

There are also now more cross-bench senators who can make life difficult for governments seeking to push through legislation (assuming, of course, that the opposition is not cooperating).

But here’s the conundrum: the slump in productivity growth is a worldwide phenomenon affecting all developed economies. It has occurred in countries in which reforms are easy to implement – for example, the UK and New Zealand. It has occurred in countries in which institutional arrangements make reforms difficult.

Given that the purpose of reform is to lift the rate of growth of productivity and, with it, living standards, it’s hard to sustain an argument that there is something peculiarly Australian about what is going on. It’s a good example of why being wary of the koala explanation – that something special has happened in Australia – is well-advised.

As Professor Robert Gordon has noted, there simply haven’t been many economy-wide technology shifts in recent times that have increased productivity growth. ‘In the late 19th century, we had five or six dimensions, and in the late 1990s we had one invention or, at the most, two: e-commerce and communications.’

So my advice is not to get too worried about Daley’s glum (and self-serving) conclusion about politicians refusing to take any notice of his organisation’s relentlessly left-wing proposals. It may be that they possess more common sense than we think.

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