AFR: Leaders' Consensus Needed to Shape Economic Reforms

Business is generally pessimistic about the prospects for further economic reform. For this it blames Canberra. While the Australian Parliament must shoulder some of the responsibility, the problem runs much deeper: on the question as to what constitutes reform there is agreement neither inside nor outside the Parliament. Until such agreement is reached, any federal government will struggle and the parliament will bicker.

Consider the last big wave of economic reform beginning in 1983. Academic economists, the predecessor body to the Productivity Commission, opinion leaders in the media such as Bert Kelly and Max Walsh writing in the Australian Financial Review, the Hawke and Keating Governments and the Howard-led Opposition all agreed on the essential features of an economic reform program. These were the phasing out of import protection, liberalisation of financial markets, a shift from centralised wage fixing to enterprise bargaining, privatisation of assets the federal government ought not own, and national competition policy. While large sections of the business community and trade union membership were disadvantaged in the short run by these reforms, business and the ACTU broadly accepted them as being in the long-term interests of the nation.

Modern-day reform is a set of productivity raising measures that includes exposing cosseted parts of the economy such as electricity transmission, to competition, investing in the talents of our young people through the needs-based funding system that is now under threat, changing the teaching profession along the lines advocated by former BCA president, Michael Chaney, and methodically considering the future sustainability of our higher education system instead of masquerading budget savings as reform.

Reform involves shifting to a sustainable retirement incomes policy and can include sensible changes to the industrial relations system, but seeking to convert Australia to a low-wage country is not reform. Improving the operation of the Australian Federation to reduce inefficiencies in government service delivery certainly qualifies as reform.

Australia’s unprecedented 23 years of recession-free economic growth has conditioned the public to believe that something will turn up to guarantee ongoing increases in jobs and living standards. Yet it’s hard to imagine what that something might be – the mining boom is over and won't be returning. Australia is not capitalising on the new opportunities presented in the Asian century. The labour market is deteriorating and real incomes are falling. Through an unwillingness of government to reassess retirement incomes policy, living standards for wealthy retirees are being propped up at the expense of government debt that future generations will be required to repay.

Australia is not so much facing an imminent crunch but an ever-tighter squeeze that would likely develop into a full-blown recession in the event of any major external shock. The absence of any consensus within the community on a new economic reform agenda is condemning our nation to a risky and unhappy economic future.

Before turning to Canberra, therefore, opinion leaders in the Australian community need to assemble to agree on an economic reform agenda. A National Economic Forum is needed. Well ahead of the meeting, research papers – not self-serving advocacy – should be prepared, based on discussion among the various parties.

Participants in the proposed Forum would include representatives of business organisations large and small, the ACTU leadership, community organisations such as the Australian Council of Social Services, and public policy academics. Officials from the Departments of Treasury, Finance and Prime Minister and Cabinet, as well as from the Reserve Bank and the Productivity Commission, would be invited to brief the Forum on Australia’s economic outlook. Senior state officials would also be invited, along with the Australian Local Government Association.

Other than perhaps opening addresses by the Prime Minister and the Leader of the Opposition, Members of Parliament would not be invited, averting the risk of a descent into partisan brawling. It would, in any event, be the Parliament that would receive the final report as the basis of a new, essentially bipartisan national economic reform program. As long as the nature of a new economic reform program remains heavily contested in the community it will remain heavily contested in the Parliament. It’s time for opinion leaders across the philosophical spectrum to act.

Craig Emerson is the managing director of Craig Emerson Economics and adjunct professor at Victoria University’s School of Business.