FRIDAY, 6 NOVEMBER | DAY 2
5:57pm | That’s a wrap!
We’ve had two days of great debate here at ESOC 2015. Thank you for following this blog. We hope you’ve enjoyed it. The blog will remain here on Pursuit - bookmark it in case you want to come back.
Your blogging team were:
Editor: Val McFarlane
Production: Shaun Prinsloo
Reporters: Niamh Cremins, Hugh McMaster, Ali Winters, Su-Kim Macdonald, Lennard Iosif
Social media: Tessa Shaw
Photography: Les O’Rourke
5.52pm | Engagement key to policy reform
Achieving meaningful economic and social reform is one of the biggest challenges facing state and federal governments today, according to a panel of political and economic analysts.
In the final session of ESOC 2015, David Uren, economics editor of The Australian, said achieving reform had become “much harder than it used to be, and indeed, (much harder) than it ought to be”.
He was joined on the panel by the Hon Josh Frydenberg, Minister for Resources, Energy and Northern Australia; Michael Thawley AO, Secretary, Department of the Prime Minister and Cabinet; and Paul Kelly, Editor-at-Large of The Australian.
Mr Frydenberg told the audience that governments regularly failed to explain to the public the need for reform – an oversight, he said, which has led to public confusion and mistrust of politicians.
“When there has been significant reform (introduced), the ground hasn’t been tilled by political leaders, so the public hasn’t been forewarned (of the changes),” he said.
“That was our experience in 2007 with WorkChoices and also with Tony Abbott’s first budget.”
But the issue of reform was not just one of communication, the audience heard. Poor policy implementation was a major factor affecting public opinion and its acceptance of reform, according to Mr Thawley, a senior public servant.
“It is very striking just how many reforms we’ve introduced that have ‘hooks’ attached to them, and have not done what we intended,” he said.
Mr Thawley pointed particularly to Indigenous policy reform, which, he said, had unintentionally created another layer of bureaucracy.
Federal–state relations were another problem, he noted, because economic and social reforms could not succeed without full support from the states and territories.
In response, political journalist Paul Kelly said the media could play a far more purposeful role in enlisting support for reform.
He recommended government leaders be pragmatic and willing to cut deals with other parties.
“Engage, consult and negotiate with all relevant stakeholders, including the states,” he said.
“The public always need to know why something is in their interest.”
5.23pm | The panelists on today’s session on higher education
5.19pm | New challenges for universities
Senator Simon Birmingham, Minister for Education and Training, asks if the challenges facing our universities are less about finances, and more about how they ensure they remain institutions of choice for domestic and international students.
Furthermore, he says: “How it is that they lift themselves to be institutions, again of choice, but with research partners, across both the government and non government sectors, ensuring they play a role in Australia being the innovative, agile and adaptive country that we are aspiring as a government to ensure our nation is?”
5.03pm | Audio now available
You can now listen to this afternoon’s sessions.
Higher education: Tertiary institutions have become one of the nation’s largest export earners but still have trouble getting their financing onto a sound footing.
Professor Beth Webster, Director, Centre for Transformative Innovation, Swinburne University of Technology
Senator Simon Birmingham, Minister for Education and Training
Professor Glyn Davis AC, Vice-Chancellor, The University of Melbourne
Professor Sue Elliott, Deputy Vice-Chancellor (International), Deputy Provost, The University of Melbourne
Trade and investment: Bilateral trade agreements have flourished as multilateral trade agreements have become too hard. Do they deliver their promise?
Mr Rowan Callick, Asia Pacific Editor, The Australian
Senator Penny Wong, Shadow Minister for Trade and Investment
Mr Alan Oxley, Managing Director, ITS Global
Professor On Kit Tam, Professor of Finance, RMIT University
Industry/political advice: Government faces a vast array of pressure from lobby groups and interested parties as it develops policy positions. Who succeeds and why?
Mr Nicholas Reece, Director Strategy, Chancellery and Principal Fellow, Melbourne School of Government, The University of Melbourne
Senator the Hon Scott Ryan, Assistant Cabinet Secretary
Dr Andrew Charlton, Director, Sydney, AlphaBeta
Mr Geoff Allen AM, Founder Allen Consulting and Chair, The Centre for Corporate Public Affairs
Policy and practice: The challenge of implementing a new policy agenda
Mr David Uren, Economics Editor, The Australian
The Hon Josh Frydenberg MP, Minister for Resources, Energy and Northern Australia
Mr Michael Thawley AO, Secretary, Office of the Prime Minister and Cabinet
Mr Paul Kelly, Editor-at-Large, The Australian
4.58pm | International students pay for reputation
It’s certainly ethical to charge international students such high fees, says Professor Susan Elliott, Deputy Vice-Chancellor (International) and Deputy Provost at the University of Melbourne.
“More than three million international students go abroad to study and they make a very significant investment. They use two currencies - the money they have got from their parents and the academic results they have got,” she says.
“The vast majority choose to use these to go to the best possible university they can. Students seek out a degree that is going to give them the best possible employability so the reputation that comes with it is very significant for them.”
4.44pm | The price of excellence in education
Why do we not have specialised universities in Australia? It’s simply a matter of cost, says Professor Glyn Davis AC, Vice-Chancellor, University of Melbourne
“You can spend a fortune running an engineering faculty which is why we don’t have universities of engineering in Australia - you’d go broke. It’s why a big engineering school always co-exists with a large nursing program, a large education program and a large law school because the cross subsidies are crucial.”
4.18pm | The role of the public service
Michael Thawley says he thinks the public service is vital.
“I came back (from the US) because I think our public service is one of the best,” he says.
“There are problems. I have ten enterprise agreements in my department. I don’t know any business running with ten enterprise agreements.
“We have a grumpy electorate. The public service ensures continuity. The Public Service Act says the public service is apolitical. What’s important is that it is non-political.
“The public service has got to be realistic politically. It cannot afford to talk like an economics professor to the government
“My view is that the public service is absolutely essential and make its voice heard.”
4.13pm | Change needed to achieve reform
“It is very striking just how many reforms we’ve introduced that have ‘hooks’ attached to them, and have not done what we intended,” says Michael Thawley AO, Secretary, Department of the Prime Minister and Cabinet.
He points in particular to Indigenous policy, noting that governments have created another layer of bureaucracy in Indigenous affairs.
He says reform cannot succeed “without bringing the states with us”.
And he notes that 35 per cent of budget outlays go on social welfare. “Is that really the best thing to do with our money? We obviously need to support those who need a hand, but how much do we need to outlay?” he asks.
He says we fail to acknowledge problems or try to ignore them. “No private company would have gone on with the NBN in the state it is in,” he says.
“We now have a digital transformation office in the government and, for the first time, a digital management programme in the public service. It is very clear in the public service that we simply do not have the digital skills needed.”
4.02pm | Turnbull - the great reformer?
When it comes to reform, the Australian public is confused, says Josh Frydenberg MP, Minister for Resources, Energy and Northern Australia.
“They distrust the political class,” he says.
“The public do understand that we face challenges. But they aren’t manning the barricades, urging significant reform.
“When there has been significant reform, the ground hasn’t been tilled by political leaders, so the public hasn’t been forewarned.
“That was our experience in 2007 with WorkChoices and also with Tony Abbott’s first budget.”
He says that for reform to happen, it is necessary to reach across the political divide, and explain policy decisions.
He says Malcolm Turnbull has the capacity to be a great reformer.
“I’m optimistic that some of those problems we’ve had with reform in this country could be overcome with this prime minister.”
3.38pm | A road paved with failure
Dr Andrew Charlton, Director, Sydney, AlphaBeta, tells the ESOC audience that there have been several really big policy failures in recent years.
The mining tax, which Dr Charlton says resulted in the worst possible outcome for Australia, was just one.
“We had a similar outcome in emissions trading, reform of poker machines, support for the car industries… these are a number of really big policy processes that had really sub-optimal outcomes,” he says.
“If we look over our shoulder in the past decade, the road is paved with failure.”
He says there were a number of factors that contributed, including the asymmetry of winners and losers in the process. “A lot of policies involve significant losses to a small group and potentially small gains to a large group, but the voice and the political power of the losers in Australia is often much larger than the voice of the large number of winners,” he says.
3.21pm | Tax reform must be about fairness, says Labor leader
Lifting Australia’s output of goods and services to increase both productivity and equality should be the main purpose of economic reform, Opposition Leader Bill Shorten has said.
In a lunchtime address at ESOC 2015, the Labor leader said true economic reform was about tackling inequality, driving innovation and developing policies that benefit all Australians.
“Change often gets boiled down to one word: reform,” Mr Shorten said. “[But] all too often, reform comes down to lazy or bad ideas.”
Mr Shorten also told the audience that economic reform was “not a test of rhetoric, salesmanship or spin”.
“We want to drive innovation, but with fairness,” he said. “Our economy is not intrinsically Left or Right. It does not submit under a particular banner or slogan.”
The opposition leader said Australia’s budget deficit had doubled in the past two years, with economic growth four per cent below trend.
He also wanted the nation to have “a proper debate” on tax reform, including the GST.
“Any tax debate has to be about fairness,” he said. “Just having a blanket tax on everything is lazy.
“Labor believes in policy that increases the productivity of goods and services in this country.
“We believe in using the market, emphasising productivity and increasing competition.”
Mr Shorten also used his address to deliver a stiff rebuke of his critics.
“Some people say that opposing an increase in the GST means Labor is unwilling to participate in the tax debate,” he said. “Actually, we are just being honest and upfront about where we stand.
“Fairness is not merely in the eye of the beholder. We can measure its presence and we can measure its absence.
“Jacking up the GST to 15 per cent is not innovative, not agile, [and] not creative.”
3:05pm | Lessons from history
With all this talk of GST reform, it’s worth looking back at how the tax was implemented in the first place.
Speaking in a session on industry/political advice, Geoff Allen AM, Founder Allen Consulting and Chair of the Centre for Corporate Public Affairs, reflects on the Howard government’s implementation of the GST.
“There was a forum between the business and the community sectors to see if they could get to a shared view of the objectives for [the GST] and work on possible design,” he says.
“Having baulked at the reform as politically too hard, Prime Minister Howard agreed to it if the proponents could orchestrate electoral opinion so that he didn’t lose too much political capital if he pursued it. This unconventional alliance was crucial in enabling this difficult reform.”
2:55pm | The Australia-China relationship
Professor On Kit Tam, Professor of Finance at RMIT University, tells a session on trade and investment that there is some imbalance in the China-Australia relationship.
He says China is very important to Australia in terms of trade and investment, but Australia is less crucial - although still important - to China.
However, he says China still sees Australia as very necessary. “China is very keen to conclude, after ten years, an FTA with Australia, as it is to their advantage,” he says.
He adds that China can use Australia to try to test the terms of their relationship, and use the lessons learnt when building partnerships with other countries.
2.34pm | Challenges and opportunity in Asia
Alan Oxley, Managing Director of ITS Global, talks about the lengthy process of constructing the Trans-Pacific Partnership (TPP), and warns that “we should not yet assume that this is a done deed” given the random nature of negotiations.
He says major Asian economies are recognising the need to reform their economies, and highlights the importance of Indonesia’s recent announcement of their desire to join the TPP, particularly its impact on the rest of ASEAN countries.
And he notes the importance of services and investment in changing global trade growth dynamics. “Services need to be the next driver of growth in Asian Pacific developing economies.”
2.28pm | Trade liberalisation “would boost productivity”
Addressing a session on trade and investment, Senator Penny Wong, Shadow Minister for Trade and Investment, argues for a reduction in barriers to trade.
“Trade liberalisation boosts productivity, which we all know is the ultimate source of the nation’s standard of living,” she says.
Senator Wong says Labor is committed to multilateral trade architecture, due to the “superior economic benefits” and the governance mechanisms available through global institutions in multilateral arrangements.
But she says inaction in the latest round of Doha trade talks has pushed the global community to seek bilateral and regional agreements.
She implores Australians not to give up hope on multilateral arrangements, saying that “Australia can and should play an important role in reviving the multilateral system”.
And she acknowledges the importance of the Australia-China relationship in trade liberalisation. “Our proximity to China represents a great opportunity for prosperity for future Australians,” she says.
2:12pm | Taking issues to Canberra
“One of the reasons more and more state and local issues are being brought to Canberra is to garner media coverage,” says Senator Scott Ryan, Assistant Cabinet Secretary. He is one of the speakers in a session on who succeeds in the lobbying game.
1:20pm | Tackling inequality would benefit all, says opposition leader
Inequality in all its forms - discrimination, alienation, exclusion and restrictive opportunities - exacts a cost on our whole nation, says Bill Shorten.
“Tackling inequality would deliver benefits for everyone,” he says.
“By 2020, it is estimated that the costs of family violence will mean that the Australian economy will pay 15 million dollars a year. Treating women equally would make us the richest country in the world.
“The operating costs of the NDIS are $22 billion per year. It will empower people with a disability and 800,000 carers to find work and add 1 per cent to our GDP.”
Mr Shorten says fairness is not merely in the eye of the beholder. “We can measure its presence and we can measure its absence,” he says.
“Some people say that opposing an increase in the GST means Labor is unwilling to participate in the tax debate. We are just being honest and upfront about our where we stand.
“Jacking up the GST to 15 per cent is not innovative, not agile, nor creative. Increasing the GST is not tax reform, especially when the extra revenue is already being spent in five different areas.
“They [the Liberals] think the GST is the solution, without saying what the problem is.
Increasing the GST is not the answer; neither is broadening the base.”
He says Australia’s lowest income households will bear the brunt. Low income families spend around 125 per cent of their family budget, mostly on fresh food and healthcare.
“Australians...do not need another lecture on doing their bit,” he says.
‘When it comes to tax, Australia needs to have a proper debate. We need to talk about Labor’s plan to make multinational companies pay their share of tax. The principles are simple. If you earn money in Australia, you should pay tax in Australia.”
Mr Shorten describes our tax system as “a leaky bucket, riddled with holes”.
“Tax loopholes are 2.5 times more likely to be used by the top 2.7 per cent of income earners in Australia. I make it very clear: these people haven’t done anything illegal. It’s just our tax system,” he says.
1:08pm | Bill Shorten takes to the stage
Bill Shorten, Leader of the Opposition, has the lunchtime speaker spot - and he’s talking reform.
“Digital disruption is redefining everything we do. As investment in mining wanes, and as services industries in particular surge, talking about the change happening around us is the easy bit. Any parrot in a pet shop can do that,” he says.
“Change often gets boiled down to one word: reform. All too often, reform comes down to lazy or bad ideas.
“True reform is not a test of rhetoric, salesmanship or spin. Anyone can talk the talk. Let it be reform for purpose. Let us say what we mean, and mean what we say.”
He says that for him, the core purpose of reform is lifting Australia’s output of goods and services for greater productivity, and increasing equality.
“I want the 2016 election to be a battle of ideas. The Labor Party has released more policies now than any Labor Party before it,” he says.
Mr Shorten says we must move beyond traditional grant financing and utilise Infrastructure Australia to remove blockers and create a more diverse, stronger infrastructure market.
He wants to restore funding certainty to our universities and build better partnerships between the Commonwealth and universities - get 20,000 more students graduating.
He says Labor has developed policies for all Australians - for example coding in primary schools, encouraging girls to enter science and the Smart Investment Fund. He wants to encourage more graduates to back their own ideas and be mentored by business.
Moving onto climate change, Mr Shorten says Labor supports an internationally linked emissions trading scheme.
“We do not support subsidising pollution. Labor is committed to a bold new goal of 50 per cent renewable energy mix by 2020,” he says.
“We want drive innovation, but with fairness.”
12.55pm | Audio now available
You can now listen to this morning’s sessions.
The Federation: The Commonwealth has steadily increased its power and revenue base at the expense of the states. There is agreement on the need for rebalancing but not the means.
Laureate Professor Emeritus Cheryl Saunders AO, Director of Studies, Government Law, Melbourne Law School, The University of Melbourne
The Hon Peter Gutwein MP, Treasurer of Tasmania and Minister for Planning and Local Government
The Hon John Brumby MP, Former Premier of Victoria and Professional Fellow, Monash University and The University of Melbourne
Professor John Daley, Chief Executive Officer, Grattan Institute
Political Economy of Tax Reform: The Henry Tax Review was widely acclaimed but most of its recommendations ignored. What are the ingredients of successful tax reform?
Professor Janine O’Flynn, Professor of Public Management, Melbourne School of Government, University of Melbourne
Dr David Gillespie MP, Federal Member for Lyne
Mr Greg Smith, Senior Fellow, Chairperson, Commonwealth Grants Commission
Professor John Freebairn, Ritchie Chair in Economics, Department of Economics, University of Melbourne
Retirement Policy: Covering the cost of a rapidly growing aged population will challenge both retirement and pension systems. What can be done to ease the burden?
Ms Patricia Karvelas, Presenter, Radio National Drive, ABC Radio National
Ms Karen Chester, Commissioner, Productivity Commission
Mr Peter Davidson, Senior Adviser, Australian Council of Social Service
Professor Susan Thorp, Professor of Finance, the University of Sydney Business School
Innovation: Does government have a role in supporting business innovation beyond fostering competition and securing intellectual property?
Professor Paul Jensen, Acting Director and Professorial Research Fellow, Melbourne Institute, University of Melbourn
Dr Matthew Butlin, Red Tape Commissioner, Department of Treasury and Finance
Mr David Dyer, Principal, McKinsey & Company
Ms Deena Shiff, Non-Executive Director, the Citadel Group
12:15pm | The ABC’s view on the Prime Minister’s presentation
The ABC’s political editor Chris Uhlmann has analysed Malcolm Turnbull’s speech from the conference yesterday.
He says the Prime Minister’s goal of Australia being a high-wage, generous social welfare net first-world economy is “utterly unremarkable”.
But, he says, the tricky bit will be turning the vision into reality. “If he is to succeed, then Mr Turnbull will have to fix what was so badly broken in the Rudd-Gillard-Abbott era: the chronic loss of trust in the office he now holds.”
11.57am | Funding income tax cuts
Speaking at a session on the political economy of tax reform, Professor John Freebairn, Ritchie Chair in Economics at the University of Melbourne, recommends the government broaden the tax base, lower rates, and cut fringe benefits to fund income tax cuts.
He also advised the government to shift the tax mix from high distorting taxes to lower distorting taxes
This can be accomplished, Dr Freebairn says, through larger GST and land taxes, and a lower corporate tax rate and stamp duty.
11.53am | The panel at today’s session on retirement policy
11.49am | Slicing the retirement cake
Professor Susan Thorp, Professor of Finance in the University of Sydney Business School, tells a session on retirement policy that people retiring from work face a new challenge - covering their expenses from their savings and pension payments.
Retirees who spend too slowly miss out on comfort and perhaps leave behind more than they intend to. This is a wealth management problem, she says.
“Uncertainty makes it hard to know how to slice the retirement cake.
“In the perfect world, we would know exactly how much we’d need, with the last crumb just enough to put the petrol in the hearse to take us to the cemetery.
“In reality, retirees have to live in a haze of uncertainty as they don’t know how many slices to cut into, and don’t even know how the cake is going to be as investments move from year to year, and we don’t know how hungry we are going to be and therefore know how much to consume. These uncertainties take their toll on retirees.”
Professor Thorp says wealthy, younger pensioners spend, but older pensioners preserve wealth - this is true for both couple and single pensioners.
However, losing a partner or moving into aged care affects wealthier pensioners with wealth dropping significantly.
“Wealth preservation is a much more important issue than wealth dissipation,” says Professor Thorp.
What we see is people eating the icing off the retirement cake, but keeping the cake intact.
Professor Thorp says her study with colleagues has found that annual consumptions are far lower than what would be needed by the ASFA standard of a comfortable lifestyle and this is true across all pensioner age groups. http://www.superannuation.asn.au/resources/retirement-standard
So why are they keeping this money in the bank when they could be using it to make their lives more comfortable?
“Is it a question of inheritance for their children? No - a pensioner interviewed planned to ‘live forever’. This is their priority, whatever is left is given to the children.
“The answer is self-insurance - because you don’t know when you’re going to die, so you need to create a wealth perpetuity, which is difficult to calculate accurately.”
Thorp says that most of the cake stays uneaten. While most pensioners save, they can’t say what they are saving for: health, home repairs, strong habits of frugality that are hard to undo.
She says we need CIIIPRs: Comprehensive Income, Insurance and Intergenerational equity products for retirement.
She adds that that these can distribute income from current earnings AND enable product decumulation of capital.
“CIPRs could offer insurance against aged care costs, medical expenses and other shocks, not just longevity, and reduce buffer stock savings,” she says.
“We are seeing accumulation of private lump sum savings, and we need to think about how to create intergenerational wealth transfers.”
11.31am | Innovation statement needed
Speaking in a session on innovation, Ms Deena Shiff, Non-Executive Director of the Citadel Group, says that the “move from policy to practice isn’t always done very well”. She says she wants to see an innovation statement from the government that “clearly defines the purpose and plan of attack”.
She identifies three key things that she wants to see in the innovation statement: encouraging growth in the stock of new companies that are innovative/use new technologies, commercialisation of IP from universities, chosen government certified growth centres or the CSIRO, and a focus on education to improve skill base and continue to maintain Australian standards and competitiveness.
She holds up the UK Seed Enterprise Scheme as a successful government program to encourage investment in innovation, and advocates for the use of R&D rebates for companies to encourage innovation in the private sector.
11.24am | The Federation and GST
Tasmania’s Treasurer Peter Gutwein was a lone voice on today’s first panel in his opposition to a GST increase.
“Raising taxes should be the last resort for any policy makers, not the first option,” he said.
“Rather than having a proper debate about reform, Australians have been wedged into a debate about how much tax should be raised.”
The Tasmanian Treasurer went on to say that Tasmania is climbing out of debt “without raising a single tax”, and that an increase in GST will entrench Tasmania’s “relative disadvantage even further”.
“We’re not in favour of increasing the GST because our house is in order… we remain crystal clear on this,” he said.
Former Premier of Victoria, John Brumby, and Professor John Daley, CEO of the Grattan Institute, joined Mr Gutwein on the panel, chaired by Laureate Professor Emeritus Cheryl Saunders AO of the University of Melbourne.
Mr Brumby is on the record since last year in support of a GST increase and he didn’t shy away from taking this position today, saying that it would be more support for the states and “pay down quicker”.
“If you increased the GST to 15 per cent, one of the things you could do, if you wanted to, you could take a pot out of that revenue, let’s call it a round five billion dollars and you could provide that as a permanent pot for the needier states, for South Australia, Tasmania and the Northern Territory… and then just index that over a ten year period and review it every ten years… and it would then mean you could fund all of the other states on a per capita basis.”
Mr Brumby warned: “Unless there is a coherent national reform our living standards will continue to slide.”
“Only a national reform agenda is going to help Australia.”
Professor John Daley of the Grattan Institute opened by asking the question “why change the federation?”
He said there are “four things kicking around motivating change” - efficiency and clarity, accountability and responsibility, tax reform and sharing the cost of reform.
Professor Daley suggested that tax reform is the one of the most “plausible” outcomes for change in the federation, although beset with challenges like compensation for Australians in the lowest income bracket, and “state pay-offs for going through all this pain”, but overall he was optimistic about a hike in GST.
“A GST package like this does not have to be regressive. You can very easily design a package of GST increases, tax cuts and welfare increases which leave the bottom fifth materially better off than where they are at the moment.”
11.13am | Call for new retirement income system
”It seems that the retirement income system isn’t clear about what it is meant to do,” says Peter Davidson, Senior Adviser, Australian Council of Social Service (ACOSS).
He says that in the 90s, the government focused on super policies so much that tax breaks were left to be picked up, and are still needing to be reformed now.
“No tax reform has ever fixed the problem of the tax breaks, one of which is the regressive 15% on employer contributions. Why is it a flat 15%? Is it fit for purpose? We need to end this flat tax arrangement. And the answer is no - the tax breaks are not fit for purpose.
It seems that we are reinventing the wheel, spoke by spoke.”
He says ACOSS is proposing a new system. “We need a simpler fairer system, replacing all concessions for contributions with a two-tier annual rebate off each member’s marginal tax rate with everyone having the same tax break up to a cap.”
11.09am | An incentive for innovation
David Dyer, Principal, McKinsey & Company, talks about how the change in the drivers of national income is providing an incentive for innovation within Australia, alongside the competitiveness challenges of the Australian economy, and the disruptive forces within the global economy - industrialisation and urbanisation of emerging economies, global ageing population, disruptive technologies and greater global interconnections.
He speaks favourably about the innovative conditions in which we find ourselves. “We should be optimistic about [these conditions]. There are lots of opportunities, but we have to understand it’ll be a very different world in which we operate.”
He highlights three key things the government can do to propel innovation within the Australian economy: setting the tone as optimistic and externally oriented, securing inputs, market access and infrastructure, and prioritising innovation even in uncertain conditions.
11.05am | Ageing population a major issue for government
Karen Chester, Commissioner, Productivity Commission, says the ageing Australian population is the biggest policy imperative facing the government right now.
Male lifespans are catching up with those of women, she says.
“Older australians tend to be income poor and asset rich. Most older households rely on government payments and around 70% receive full or part payment, with health and aged care taking up the bulk of the cost.”
Ms Chester says retirement income should be seen as three buckets that can and should be drained: age pension, superannuation & private savings, and the family home.
“The age pension bucket is pretty well-drained and forecast to grow to 20% of the GDP by 2050,” she says.
“Retirees tend to rely on super and private savings to fund their retirement lifestyles in conservative ways.
“Older households are unwilling to tap into the family home bucket and it is not drained that well.”
A report due to be released by the Commission later this month found that older people are more likely to see the home as a place to live (76%, with only 40% seeing it as an income bucket. Most were uncomfortable with having a mortgage in retirement.
Most people enter permanent aged care aged 80 and over, and trends show that it is increasingly a last and short stop.
While residential aged care is necessary for many, it is not the preferred option for most Australians. Home-based care can be one way of aligning the interests of both the Australian government and the people, says Ms Chester.
10.45am | Supporting innovation
“Innovation is primarily about business behaviour,” says Dr Matthew Butlin, Red Tape Commissioner for the Department of Treasury and Finance.
He says it’s important not to think about innovation as an issue of who wins, but rather about the performance of enterprises in general and ways to strengthen their performance.
10.21am | The panel at today’s first session, on the Federation
10.09am | Fiscal imbalance “creates challenges”
“The reach of the federal government has certainly expanded,” says Peter Gutwein MP, Treasurer of Tasmania.
“The vertical fiscal imbalance creates real challenges in relation to the different responsibilities of the different levels of government.
“Even where states have retained responsibilities, the federal government has sought to increasingly impose control on those service deliveries, simply because it can.”
9.47am | Tassie says no to GST rise
Peter Gutwein MP, Treasurer of Tasmania, says: “We’re not in favour of increasing the GST because our house is in order… we remain crystal clear on this.”
9.41am | What the papers say - The Australian
Judith Sloan, Professorial Chair at the Melbourne Institute and Contributing Editor for The Australian, chaired a session yesterday.
She writes in today’s paper that it’s rare for the Prime Minister, the Treasurer, the opposition Treasury spokesman and the opposition assistant Treasury spokesman to speak on the one day at the one event.
ESOC allowed that to happen, making their differences of opinion and approach on matters relating to the economy, tax reform and innovation more apparent than normal - something that only usually happens during an election campaign.
Subscribers can view the full article here.
9.21am | Praise for University of Melbourne Professor
Professor John Daley, Chief Executive Officer of the Grattan Institute, acknowledges that it’s a privilege to be introduced at ESOC by Laureate Professor Emeritus Cheryl Saunders AO, his former teacher. He says she taught him everything he knows about constitutional law.
9.18am | Former Premier calls for reform
John Brumby, former Premier of Victoria and Professorial Fellow at Monash University and the University of Melbourne, says everything should be on the table for reform.
“It is my view that unless there is a coherent national reform our living standards will continue to slide,” he says
“If you want to reform the federation you have to get the model right.
“The states should be doing more not less. The states are closer to the people.”
9.06am | GST back on the agenda
In today’s first session, chaired by Laureate Professor Emeritus Cheryl Saunders AO from the University of Melbourne, the focus is on the federation - but the talk is again of GST.
The Hon Peter Gutwein MP, Treasurer of Tasmania and Minister for Planning and Local Government, says raising taxes should be the last resort for policy makers, but that it has become the first thing to do in the minds of many.
He says Tasmania is climbing out of debt without raising a single tax. “Our business sector is the best in the country,” he says.
He adds that he does not support current proposals on GST reform and says an increase to 15% would “entrench our relative disadvantage even further”.
“But at the moment much of the focus is about expanding the GST and of that we are not in favour. Raising taxes should be the last resort. It will inevitably lead to horizontal fiscal imbalance.”
8:55am | What the papers say - The Canberra Times
The Canberra Times’ editorial focuses on Reserve Bank Governor Glenn Stevens’ “characteristically forthright” assessment of Australia’s economic performance since the GFC.
The paper says Mr Stevens’ “mostly upbeat” take on the situation will be welcomed by Malcolm Turnbull, as it will give the Prime Minister the room he needs to implement change.
8:39am | What the papers say - The Australian
The Australian’s political columnist Graham Richardson says it would be foolish for the government to proceed with a GST increase without substantial support from the states. Labor and the Greens are also likely to oppose a rise.
“It does not seem to have registered with anyone in the opposition that the campaign they are replicating failed last time around. Australians appear to live happily with a GST and there has been no agitation against it for many years.,” he says.
The full piece is only available to subscribers.
8:23am | What the papers say - The Age
Good morning and welcome back to our live blog. As day 2 of ESOC 2015 gets underway, the media is full of analysis of proceedings thus far.
First up, The Age.
Mark Kenny, Chief Political Correspondent of The Age, says Malcolm Turnbull would risk everything trying to raise GST.
Kenny notes that John Hewson’s 1993 manifesto, which contained a proposal for a 15% consumption tax, came to be regarded as “the longest suicide note in Australian political history.”
“Can Malcolm Turnbull defy the history to increase the tax without losing either the leadership or the election next year?” he asks.
Thursday, 5 November | Day 1
10.15pm | The voice of experience: John Fraser
Secretary to the Treasury, John Fraser, was the last speaker of the day, addressing the conference dinner at the Myer Mural Hall.
In a wide-ranging conversation with Paul Kelly, Editor-at-Large of The Australian, Mr Fraser spoke about his global career and time at the Treasury.
He talked about how former Prime Minister Tony Abbott persuaded him to take the role at the Treasury. “Tony Abbott is a man with a good heart. There is no doubt about that,” he said.
“His focus was as much on other things as it was on the economy, unfortunately from our point of view, but understandable in lots of ways.”
Mr Fraser said that colleagues in the financial sector had been largely blindsided by the Global Financial Crisis. “Nobody picked it,” he said. “It caught them unawares.”
Australia had benefited from having sorted out its financial sector in the 90s, before the GFC hit, he explained.
Mr Fraser said everyone had thought the mining boom would continue for another 30 years - so spent the proceeds. “We got caught short when the revenue went south,” he said. “One thing, if you could turn back time, is realise that this mining boom is not going to go on forever.”
As the conversation turned to the US, Mr Fraser said his view of America had been coloured by its resilience. “They play the exchange rate game beautifully,” he said. “It is hard not to be optimistic about the American economy.
“I am a dyed-in-the-wool optimist and I’m stepping out of my area of expertise, but having a strong America is a pretty good thing.”
On Europe, Mr Fraser said he was pleased the UK government had not adopted the Euro. He praised former UK Prime Minster Gordon Brown for not taking his nation into the Eurozone. “Good on him, because I think not being part of the Euro has been good for them,” he said.
He said the British government had introduced policies designed to tackle the issue of several generations of families being on benefits - what he called a “self-reinforcing culture”.
What’s the lesson for us, he asked. “For good policy, we have to be patient, we have got to be persistent and we have got to explain it.
The benefits of good policy don’t happen overnight.
Mr Kelly asked Mr Fraser for his views on China. Mr Fraser said he felt we had a mature relationship with China, and said he felt “blessed” that we had a Chinese ambassador who had spent time in New York and London.
Mr Fraser has worked across the private and public sectors - a point raised by an audience member during the question-and-answer session.
“The key difference is that there is no finish line in the public sector,” he said. “It’s like painting the Sydney Harbour Bridge. In the private sector you have a sense of where you are going.”
“There is a bit more pressure in the private sector because you put a bucket of money in front to people and it does strange things…not always good things.”
Finally, Mr Fraser addressed the issue of where Australia’s competitive advantage lies. “Clearly in our resources,” he said. “I think what we have done in mining, in agriculture, is terrific.”
He said Australia’s adaptability and egalitarian society were strengths. And he added that he hoped people would be encouraged to go overseas to get experience - but also to return, so Australia could enjoy the benefits of the diaspora.
“This is a great society,” he said. “We may have a tendency to change politicians rather frequently but there is no blood on the streets.”
7.10pm | Guests arrive at Myer Mural Hall for the Outlook Conference dinner
5.47pm | Audio now available
You can now listen to this afternoon’s sessions.
Driving Economic Growth: There have been constant shifts in the sources of Australia’s growth since the last recession in the early 1990s. As the resource construction boom winds down, where does Australia turn for future prosperity?
Professor Christine Wong, Professor of Chinese Studies and Director, Centre for Contemporary Chinese Studies, The University of Melbourne
Professor Bob Gregory AO, Emeritus Professor, Research School of Economics, The Australian National University
Professor Mark Wooden, Professorial Research Fellow and Director, HILDA Survey, Melbourne Institute, The University of Melbourne
Mr Phil Ruthven AM, Founder & Director, IBISWorld
Competition Policy: How are commonwealth and state governments progressing with the implementation of reforms urged by Ian Harper’s Competition Policy Review?
Professor Judith Sloan, Professorial Fellow, Melbourne Institute, The University of Melbourne
Professor Ina Harper, Partner, Deloitte Access Economics
Ms Lin Hatfield Dodds, National Director, UnitingCare Australia
Professor Gary Sturgess AM, NSW Premier’s ANSZOG Chair in Public Policy, The Australia and New Zealand School of Government
Inequality: The rise in extreme wealth among the “1 per cent” has occurred at the same time as an unprecedented reduction in global poverty.
Professor Shelley Mallett, General Manager, Research and Policy Centre and Professorial Fellow, Brotherhood of St Laurence and The University of Melbourne
The Hon Dr Andrew Leigh MP, Shadow Assistant Treasurer
Professor Ross Garnaut AO, Professorial Research Fellow, Faculty of Business and Economics, The University of Melbourne
Dr Francisco Azpitarte Raposeiras, Ronal Henderson Research Fellow, Melbourne Institute, The Brotherhood of St Laurence and The University of Melbourne
Is the social welfare system sustainable?: Australia’s targeted system of welfare is efficient by global standards, costing less and achieving more. But its cost is rising faster than GDP. Is it sustainable?
Associate Professor Roger Wilkins, Principal Research Fellow and Deputy Director (Research), HILDA Survey, Melbourne Institute, The University of Melbourne
Mr Simon Cowan, Research Fellow, The Centre for Independent Studies
Professor Peter Whiteford, Professor, Crawford School of Public Policy, The Australian National University
5.33pm | A targeted welfare state
Professor Peter Whiteford of the Crawford School of Public Policy at the Australian National University says Australia’s social security system is more targeted to low income groups than any other OECD country.
“Most countries give roughly the same amount to the poorest and richest - but we have a more targeted system,” he says.
“We have a very age-oriented welfare state. Since 1997 there has been a growing divergence between benefits and pensions.”
5.12pm | Creating a sustainable welfare system
Simon Cowan, Program Director of Target30 and Research Fellow at the Centre for Independent Studies, says it is important to discuss what the word “sustainable” means in relation to a welfare system.
“Other countries spend more on welfare systems than we do - does this mean our system is sustainable?” he asks.
“Welfare has come to dominate the budget,” he says.
He says the current means test for the pension is unfair. The purpose of the pension was to support people who could not help themselves in their retirement, but it has turned into an entitlement.
“Is each generation paying for themselves? No. They’re taking more from the next generation than they’re willing to give to the generation after them. In 40 years time the pension will cost more than $140billion a year.”
Mr Cowan says the current pension means test is unfair to people who do not own their own home. “This is where pensioners have their wealth,” he says.
“Pensioners hold between 700 and 750 billion dollars in home equity - there is a huge disparity between those who have and have not. The richest pensioners still receive more than $10,000 per year from the federal government.”
Mr Cowan says that to create sustainability and boost incomes, we must include the family home in pension assets test, help pensioners access reverse mortgages, and include reverse mortgage payments in the income test.
“This is not about punishing pensioners who own their own home. It’s about figuring out who needs the most support and providing it to them,” he says.
He says a government reverse mortgage would have low rates, low fees and would replace the pension - backed by government with guaranteed return. It would ensure that they can’t lose their home to dodgy mortgages.
“The pension and welfare systems are not sustainable at this point but we only have a small window of opportunity to change this,” he says.
“Pensioners can’t continue to rely on government to increase their incomes forever. Our system is well targeted but it can be better targeted - we should not be complacent.
“We need to convince a generation who have been locked out of the housing market and facing a longer working life to pay higher taxes to support the generation that brought this about.”
4.58pm | A welfare system that’s fit for purpose
People and families are primarily responsible for their own lifestyle and wellbeing, says Sean Innis, Group Manager, Policy Office, Department of Social Services.
“Governments are important but they can’t fix everything,” he says.
“We have to look at how the system is working for the average Australian - not just the rich or poor. What do we expect the average Australian to contribute to their own wellbeing? Society needs to constantly monitor what is going on in the welfare system to ensure it is fit for purpose.
“You want a welfare system that is genuinely there for people who are not able to support themselves - and this will lead to a more sustainable system overall.”
4.32pm | Opportunity for reform
Professor Ross Garnaut AO says there has been no substantial or sustainable policy reform over the past few decades. When given the opportunity a few years ago to recognise the deterioration in the traditional Australian culture of egalitarianism and reform the system, Australians instead choose ‘business as usual’ and opted for stagnant income and rising inequality, he says.
Professor Garnaut, Professorial Research Fellow at the Faculty of Business and Economics, University of Melbourne, says that the recent leadership change presents a new opportunity for reform at a federal level. “[Malcolm Turnbull’s] emergence as Prime Minister is another chance to choose reform and sustainable growth and equality.”
He says globally, inequality has most impacted two groups of people - the ‘bottom billion’ in low income countries in areas of Africa and Asia, and the lower middle classing in developed countries such as the United States and Japan. He says the bottom billion’s development will determine how equity in global wealth distribution changes in the future.
4.23pm | The recipe for good policy
“Policy is made up of three things - evidence, principles and politics,” says Sean Innis, Group Manager, Policy Office, Department of Social Services. “Where the evidence is strong it drives decision-making.”
However, he says, no policy is purely evidence-based. Policy reform requires all three elements, and good policy principles tend to endure across governments.
4.09pm | Broadband woes threaten job growth
As of September 2015, 11.8 million Australians were employed, Phil Ruthven, founder and Director of IBISWorld tells ESOC.
The health sector is the single biggest employer in Australia. and also the biggest growth sector, employing 12.4 per cent (of 11.8 million people).
Many new jobs are being created, and most people are earning more than before, says Mr Ruthven. “In 2014, we created four times more jobs than we lost in Australia,” he says. But he adds: “Our broadband is woeful. We are not even in the top 25 anymore. This is holding us back.”
3.51pm | Change starts at the top
“If we want to see changes to inequality, we need to look at the top”, says Dr Francisco Azpitarte Raposeiras, Henderson Research Fellow, Melbourne Institute, the Brotherhood of St Laurence and the University of Melbourne.
He says technology and global markets help to reinforce inequality, by benefiting high skilled workers and putting extra pressure of middle and low skill workers. He adds that fiscal policy can impact distribution in two ways – directly with a decline in top tax rates over the past four decades, as well as through more indirect ways such as tax avoidance.
He says children from low-income families will need assistance to “catch up with the rich”.
He believes that policy makers have not addressed inequality because those in power tend to be more privileged. “We are not the consequence, [therefore] we have done nothing about it,” he says.
“We have a good knowledge about the trends, some knowledge about the factors, but we need to do a lot of research to understand the impact and importance of inequality.”
3.40pm | Balancing budget key to good government
Phil Ruthven, Founder and Director of global business intelligence firm IBISWorld, suggests a number of ways to enhance economic growth.
He says balanced budgets are the first rule of good government.
“If you cannot balance a budget, you cannot get anything right,” he says. “In this context, there is not much difference between a family budget and a government budget. If you can’t balance a budget, a sloppiness ends up running through the entire government.”
He says Australia is a very, very under-taxed nation and that we need to raise taxes about 1.5 to 2 per cent to balance the budget. “Lowering income taxes always makes me suspicious,” he says.
Fully embracing the digital era is vital to be internationally competitive, he says, adding that our fast broadband is not actually fast compared to other nations, such as Finland.
“Worrying whether the cost of the NBN is $30bn or $60bn misses the point,” he says.
3.20pm | Tax reform in the pipeline - but no rush
Personal income tax is the “silent tax”, according to Treasurer Scott Morrison.
He told the ESOC audience that not many Australians are aware of what they pay in tax when they draw their money out of the ATM.
Mr Morrison said that personal income tax is “out of sight, out of mind” in comparison to other taxes, “like the GST”.
The Treasurer opened to a packed-out round table lunch saying. “I am a realist and an optimist,” he said, stressing how optimistic he was about Australia’s future despite the current economic challenges.
The audience was ready for news on tax reform, following hints of a revision of the GST to 15 per cent.
Mr Morrison said the government will achieve a stronger economy but “not by placing a greater tax burden on our economy and on Australians”.
He said: “There is strong evidence is that Australians are paying too much for their taxes. The economic costs are too high, and frankly it’s been a long time between services for this tax system that we operate.
“The Australian tax system was designed in a different era, for a different economy.”
He added that among other things, it was not designed to deal with the internet.
“I want Australians to be able to earn more and take home more from what they earn,” he said.
“I would prefer to leave it to them to spend and save and invest the money that they earn in a way that best suits them and their families.”
But he said the government had no intention of rushing. “We will be patient and we will be clear-headed,” he said.
Listen to the Treasurer and Mr David Uren, Economics Editor, The Australian, speak during the conference lunch.
3.16pm | Are we teaching the right things?
Professor Mark Wooden, Professorial Research Fellow at the Melbourne Institute, University of Melbourne, says the publicly funded education system means there are budget constraints. “Do children learn the right sort of skills? Are technical/cognitive communication skills more worthwhile than ‘soft’ skills taught at universities?” he asks.
3.12pm | Economic growth and the job market
Professor Mark Wooden of the Melbourne Institute, University of Melbourne, tells a session on driving economic growth that from a jobs perspective, there was a recession in 2008.
He says that between 1994 and 2008, the hours worked per person increased 0.59 per cent per year. From 2008 to 2014, there was a decrease of 0.92 per cent per year.
“The 0.8 per cent decrease in annualised growth in 2008 was not due to productivity,” he says.
“Productivity is... almost everything. From 40 years ago and looking ahead 40 years, productivity will drive GDP growth per head.”
Turning to the relationship between education, the labour market and the economy, Professor Wooden says those with university degrees will typically get a job in their chosen profession - but the job market is changing.
He says the HILDA survey - of which he is Director - found that 49% of people in 2012 were over-qualified for their occupation.
2.51pm | The impact of immigration
Professor Bob Gregory, in a session on driving economic growth, says the success of Australia’s immigration program is an issue.
“The large population growth over the past decade requires large infrastructure investments, which will, in turn, require additional government expenditure and decisions to increase taxation to some degree,” he says.
2.49pm | Tackling inequality
In a session on inequality, Dr Andrew Leigh, Shadow Assistant Treasurer, says: “We can never lose sight of making Australia fair.”
He adds that just because inequality has stopped rising for a period, it doesn’t mean we’ve reached an ideal level of egalitarianism in Australia, or that inequality has gone away.
“We need to keep inequality on the national agenda, because even though inequality hasn’t necessarily increased, it also hasn’t reduced. As policy makers make choices, we can make policy to have a significant impact on the inequality gap.”
Mr Leigh highlights three main priorities for tackling inequality – transforming the tax and transfer system, finding and utilising data to back up distribution decisions, and considering impacts on inequality in competition policy.
He remains an optimist about the challenge that faces Australia. “We should reach back to the Australian values – ‘Jack as good as his master, and maybe even better’, to ensure prosperity remains within our regions.”
2.43pm | Immigration and economic growth
Emeritus Professor Bob Gregory AO of the Research School of Economics at the Australian National University says immigrants are missing from the debate around driving economic growth.
“Two or three decades ago, an immigrant was someone who came here to work from overseas. The government would allocate a set number of immigrants.
“Now, an immigrant comes on a student visa or 457 visa. They have work rights. Then they move through the visa system, ultimately becoming citizens.
“Mining booms come and go but large population changes last forever.”
He says the temporary migrant group may now account for between 4 and 9 per cent of the Australian population.
“These immigrants have become increasingly better than Australians at earning money and getting jobs. We try before we buy. We give jobs to the ones we like. The others, who don’t like it here, go home.”
2.40pm | Personal income tax “the silent tax”
Scott Morrison says although personal income tax is the largest revenue source for the government, it has become the “silent tax” for many Australians, and that Australians aren’t aware of what they are paying in tax when they draw their money out of the ATM. But when they buy something, they see what they are paying in tax. He says personal income tax is “out of sight, out of mind” in comparison to other taxes, “like the GST”.
2.37pm | Competition policy in the public interest
Lin Hatfield Dodds, National Director of UnitingCare Australia, says the social services sector requires focused consideration in the competition space because it impacts real people, often the most vulnerable and disadvantaged in society.
“Competition is not an end in itself, it’s got to serve the public interest.”
She outlines four propositions for the future of competition policy in social services:
1. Choice for people accessing human services is a positive game changer
2. Success requires recognition of different capacities to exercise choice
3. In social services, government must ensure that service infrastructure underpins choice
4. Choice needs to build on existing settings to be successful
She highlights an important shift in the language used to describe people who use social services; from charity case to client consumer, and finally to citizen consumer which positions the client as an active agent in the exchange.
“This charts a journey of reframe from unworthy supplicant to professional subject to transactional purchaser to the current complex emerging understanding of citizen consumer,” she explains.
“It’s not about buying what’s on the shelf, but saying I don’t like your shelf, buddy, build me a new one.”
She says real competition is almost always good, but, in social services, competition on its own won’t get us where we need to go. We need to think about empowerment and infrastructure.
She calls on government to ensure that service infrastructure underpins choice.
2.31pm | More competition for public services?
Professor Ian Harper, Partner, Deloitte Access Economics, and Chair of the Competition Policy Review Panel, says the new government has given competition a “new lease on life”.
He says competition principles should be applied to the government’s public services, such as health, education, and welfare. He has also championed the private sector’s role in these issues, saying “as far as possible, human services should be passed off to the private sector”.
2.17pm | Major reforms needed to achieve surplus
Bringing the budget back into surplus will require significant financial and tax reforms, according to a panel of economists at the 2015 Economic and Social Outlook Conference. It will also require the public to change its mindset on welfare and entitlements.
“We are burdened with 19th century institutions, norms and processes, and are complacent about them,” said Professor John Wanna, the Sir John Bunting Chair of Public Administration at the Australian National University.
“We are tied to ways of making budget decisions when government was very small and had few responsibilities.”
Professor Wanna was joined on the panel by Shadow Treasurer Chris Bowen and economist Chris Richardson, of Deloitte Access Economics. Professor Helen Sullivan, director of the Melbourne School of Government, chaired the 90-minute session.
“Budgets are not financing exercises,” Professor Wanna said. “Since the Global Financial Crisis, we’ve had our head in the sand.
“We are stuck in a conventional and inflexible way of creating budgets.”
Chris Richardson said Australia needs sufficient strength in its fiscal finances to survive recession and damage to the national social compact.
The panellists all agreed that Australia was capable of returning the budget to surplus, although they disagreed on the correct approach.
“Knowing there are sensible plans to return the budget to surplus over time gives consumers and businesses confidence,” Mr Bowen said.
“It is time for policy makers to restore some reality into the budget conversation.”
Federal spending is now at 26 per cent of national income – just above the long-term average of 24.5 per cent – and there have been only 18 budget surpluses since the end of World War II.
Proposed budget fixes include imposing rigid budgets on government agencies and services, charging users for traditionally free services, and adding an expenditure ceiling over a four-year period.
Increasing the GST was also an option, but Mr Bowen said the move would be “just a tax rise, not a tax reform”.
“Is increasing the GST… really the best we can do?” he asked.
2.13pm | No rush, says Treasurer
“Government will continue to engage as we are. Others may wish to rush to failure, I certainly don’t want to do that and I want to bring the Australian people with us,” Scott Morrison says.
2:01pm | Achieving a stronger economy
Scott Morrison says the government will achieve a stronger economy, but “not by placing a greater tax burden on our economy and on Australians”.
1:56pm | Scott Morrison on Australia’s transition
Treasurer Scott Morrison says Australia is a “transitioning economy”, and the government’s policies are designed to “back Australians”. First and foremost, he says, “it’s about jobs”.
1.49pm | Supercharging Australia’s economic engine
As the speakers at ESOC consider Australia’s economic future, the need to boost the nation’s entrepreneurial culture is once again on the agenda. Here’s what Professor Rufus Black of the Wade Institute of Entrepreneurship had to say about it on here - the University of Melbourne’s news platform, Pursuit.
1.41pm | Making a difference session
1.37pm | GST and your hip pocket
With all this talk of a GST increase, it’s worth thinking about what the impact on the average family budget might be. The Guardian has crunched the numbers.
1.26pm | A fair future for GST?
Would a rise in GST be acceptable if low income earners were compensated? The ABC’s Tomas Fitzgerald looks at the arguments in this piece for The Drum.
1.03pm | Why is the budget so hard to fix?
We thought we had fixed it, says the Australian National University’s Professor John Wanna.
Yet Australia, like most OECD nations, is struggling to maintain economic growth and balance its budget, he says.
Professor Wanna, the Sir John Bunting Chair of Public Administration, says Australia has had its head in the sand since the Global Financial Crisis.
“We are stuck in a conventional and inflexible way of creating budgets. We are burdened with 19th century institutions, norms, processes and are complacent about them. We are tied to ways of making budget decisions when government was very small and had few responsibilities.”
12:38pm | Tax reform to boost living standards
Chris Richardson, Partner, Deloitte Access Economics, says tax reform is mostly about prosperity.
“It can boost living standards if we rely less on taxes that hurt the economy the most,” he says.
“For efficiency and fairness, superannuation is the standout. Give everyone the same tax benefit from putting a dollar into their superannuation.”
12:25pm | “No fiscal reform without losers” - Shadow Treasurer
Shadow Treasurer Chris Bowen says he believes the Australian people are more than willing to deal with difficult decisions. “There can be no fiscal reform with no losers,” he says.
“We cannot get the budget into surplus through some sort of magic. No debate can be had without acknowledging the falling revenue base.
“The government argues that it can deliver a budget surplus by cutting spending. I’m disappointed the new Treasurer has repeated the same tired old lines.
“Both spending and revenue measures need to be on the table.”
Mr Bowen says the debate inevitably returns to the GST, and that imposing GST on online downloads is a good policy - but that sending a price signal that processed food would become cheaper than fresh food after a GST rise is irresponsible.
12:14pm | 2009 lessons still relevant, says Stevens
Reserve Bank Governor Glenn Stevens recalled the 2009 ESOC conference, entitled “Road to Recovery”, held off the back of the 2008 GFC.
“My theme is six years on - where are we? We haven’t slipped back into a recession. We have managed the biggest turn of economic events with some success.”
He says we are halfway through a downturn in the mining industry, yet we are continuing to grow.
“Conditions have been improving,” he says. He is quick to point out that this is not what he says, but what the business community says.
Mr Stevens says he did not offer an endorsement of the banks’ recent rate lift.
“Others have observed that the correct rate of return for bank shareholders is an open question.
“It’s a variable, not a constant of the universe.”
Stevens says many of the observations from the conference six years ago are relevant today.
He says the lending rates are still the lowest that many borrowers have ever seen in their life.
Today, he says, key issues are governance, risk sharing and pricing. The need for medium term budget repair also remains.
“My sense is how we pay for all the things we voted for for is a conversation we need to have.
“The nature of the path to prosperity isn’t that different to six years ago. Productivity is the main game. It’s unrealistic to think the pressure will just go away.”
And he adds that future employment will come “from lots of places we haven’t thought of yet”.
11:34am | Shadow Treasurer calls for reality check
It is time for policy makers to restore some reality into the budget conversation, says Shadow Treasurer Chris Bowen.
“Why does Australia’s alternative government, a progressive party of the centre Left, think we need a clear return to surplus over the next decade?” he says.
“I’m a Keynesian. I want the treasurer of the day to have the flexibility to spend and conserve. Knowing there are sensible plans to return the budget to surplus over time gives consumers and businesses confidence. Keeping our AAA credit rating from all three credit agencies... is important.”
He says a government with no mandate will struggle with fiscal reform, and cites the Abbott government as an example.
“This year’s budget was characterised as a ‘do nothing budget’,” he says. “Spending is now at GFC levels. An extra $20 billion of spending every year.
“The Australian people cannot be expected to be convinced by budget consolidation when the narrative changes too frequently. It is time for policy makers to restore some reality into the budget conversation.”
11.28am | Listen to the PM’s speech
Audio of Malcolm Turnbull’s address is now available.
11.20am | Why is the budget so hard to fix?
Professor Helen Sullivan, Director, Melbourne School of Government, is chairing a session on why the budget is so hard to fix. The first issue she puts to the panel is what exactly “fix” means.
“There is a problem with how the budget works - too much money going out and not enough coming in. That is a traditional view: budget fixing, in terms of repair,” she says.
Then, she says, there is ‘fixing’ as in providing steady direction. “We need to think about the importance of the budget in the overall political and economical life of the country,” she says.
And there is one other interpretation of ‘fix’. “Things can be ‘fixed’. Various powerful actors can ‘fix’ something to get to the action they seek.
“Language has multiple interpretations. We need to think about how we use words.”
10.55am | Shadow Treasurer signals opposition to GST rise
Speaking to media ahead of his presentation to ESOC, Shadow Treasurer Chris Bowen says Labor is ready for the debate on tax.
He says Mr Turnbull and Mr Morrison’s plan will hit low income earners hardest. “GST should not be the first option, it should be the last.
“Mr Turnbull is giving us a whole lot of talk but no plan.
“Our position is to oppose an increase in GST. We don’t see it as fair, reasonable or necessary.”
10.18am | Prime Minister points to fiscal policy changes
Prime Minister Malcolm Turnbull has proclaimed that opportunities for Australians have never been greater, or their horizons wider.
In his keynote address, the Prime Minister said Australians were “living in the most exciting times in human history”.
Free markets, long periods of peace and two decades of positive, technological change had all contributed to the Australia’s prosperity, he said. But “the velocity of change” was threatening to slow Australia’s economy, and would take hold unless governments both in Australia and worldwide could make innovation a priority.
Mr Turnbull said governments had to play a key role in economic and social reform, noting that the Australian public was sick of the political blame game and monotonous three-word slogans.
“Good consultation and discussion aid the task of reform,” he said. “We must respect our audience. We need to explain that government policy is dedicated to securing a more prosperous future for our children and grandchildren.”
But he also warned that no fiscal policy could be set in stone. “If a particular policy approach doesn’t work, we have to be ready to re-appraise it, (or even) be ready to throw it out,” he said.
“Agility in a world of volatility is absolutely key.… That requires change in political discourse.”
The Prime Minister also told the audience that his response to the Harper Review “would not gather dust”.
“Any set of tax reforms must be fair,” he said. “A reform package must raise the revenue we need and also be able to share the (benefits) across the community.”
The Prime Minister’s comments were well-received by the large audience, which included University of Melbourne Vice-Chancellor Glyn Davis and Editor-at-Large of The Australian, Paul Kelly.
Mr Turnbull said that his government wanted an Australia that was “more innovative, more productive”. The test, he added, was whether new and existing social and economic policies would allow all Australians “to seize the opportunities of the future”.
“We are a great nation with a great future,” he said. “There has never been a more exciting time to be an Australian.”
Join the conversation: #ESOC2015
9.17am | Tax reforms must be fair
Mr Turnbull says any set of tax reforms must be fair. “I’m waiting to see a new tax reform proposal that hasn’t been around for ten years or so. A reform package must raise the revenue we need and be able to share the (benefits) across the community,” he says.
He says the Harper competition review report imposes challenges for all governments, especially state governments.
“A high wage, generous social net economy. One that is more innovative, more productive. That is the goal of the government. We will use every measure we can to achieve that. Everything we do will be assessed by that test: is this making Australia more prosperous, more competitive? Is it allowing us to seize the opportunities of the future?”
He says we are living in the best times in human history. “There has never been a more exciting time to be an Australian. We are great nation with a great future.”
9.08am | Tax reform on the table
Malcolm Turnbull is expected to make a major announcement on tax reform today, says The Australian. Speaking at ESOC, he has promised to respect the audience, and explain that government policy is dedicated to securing a more prosperous future. He says good consultation and discussion aid the task of reform. “You have to demonstrate that you have taken decisions in a thoughtful, consultative way. We are not trying to reduce complex decisions to three-word slogans.”
8.40am | Our live coverage of ESOC 2015 starts here.
PM Malcolm Turnbull has just arrived.