Using evidence to design Australia’s economic policy

As we move out of the pandemic, face a global economic crisis and combat climate change, the agenda of Australia’s new government is full and challenging.

The response to these factors will require bold public policies. These policies will permeate into every aspect of our lives, directly impacting individuals and communities.

It is vital these policies be based on data and evidence.

Policymakers should have a framework for thinking through an issue and considering how people live and work in Australia – including what data would be most suited to testing and evaluating proposed ideas and policies.

The embedding of evidence into the process would ensure the policy and its implementation are based on the current lived experience in Australia.

There are three main ingredients for creating evidence-based public policy and, fortunately, Australia has an abundance of all of these.

The first is high‐quality information databases. The second is professionals with passion and skills in data analysis. And the third is political incentives for using evidence‐based analysis in government decision‐making.

Access to data is vital

This century, data collection has increased exponentially and methods for handling big data sets have improved. But many valuable data sets remain locked up or provided only to a select few individuals.

Data about education, employment, housing, social welfare, tax and experiences with government services (both positive and negative) helps provide valuable insights into big economic, environmental and societal challenges.

This data, while respecting the importance of data security and personal privacy, should be shared with analysts so that they can build an effective and timely evidence base to inform policy in Australia.

But who should we trust to analyse this data?

Mobilise our data analysts, especially in social sciences

There is no shortage of professionals who work with, and who are passionate about, data. They are in our universities, government departments and the private sector with titles like economist, sociologist, statistician and psychologist.

They can review complex data and inform decision-makers about how it applies to societal challenges. We don’t expect our elected officials to possess these skills, but they are encouraged to seek the help and insights of analysts before making decisions.

Policymakers can engage with analysts in many ways.

The 2022 Economic and Social Outlook Conference provides an opportunity for government officials to converse with our researchers, industry representatives and journalists about the vast array of existing evidence and how it can be applied to current challenges.

Policymakers should engage with researchers directly as part of their daily business. For more than sixty years, the Melbourne Institute: Applied Economic and Social Research has provided analyses and insights that have served as a base for effective policy-making for sixty years.

Our Breaking Down Barriers report shapes policy to break cycles of poverty. Taking the Pulse of the Nation informs policy by taking a reading of the population’s current sentiments and behaviours. Our Melbourne Institute Research Insights, provide short reviews of policy-driven questions and the analysis that can be used to inform issues.

This year, the latest Household, Income and Labour Dynamics in Australia survey will give policymakers insight into how we have changed as a population over the last 20 years.

And soon to be released is the Melbourne Institute 2022 Compendium: Economic & Social Policy: Towards Evidence-Based Policy Solutions, ten chapters that present the evidence and policy implications on a range of economic and social policy issues.

Politicians have political incentives to use evidence

There are reasons to be hopeful about political incentives for utilising evidence‐based analysis. The new Federal Government has no shortage of economic and social challenges and not many pre-determined solutions promised during the election campaign.

The population is sceptical about decisions that are politically motivated and are (mostly) trusting of facts that can withstand scientific rigour.

A politician who can stand up and say their decisions are based on recent data assessed by researchers is able to gain and hold the public’s support, especially when an evidence-based decision is more likely to have a positive outcome.

Now is the time to create a sustainable environment for testing ideas, embedding evidence into public policy and allowing for data-driven evaluations of policy before, during and after implementation.

We shouldn’t leave anybody behind

Policymakers, especially at the level of the Federal Government, tend to have a macro view of the community informed by large data sets. But this doesn’t mean they should forget our communities are made up of individuals and families – each with their own lived experience.

A constrained budget may limit the Government’s ability to meet the needs of the disadvantaged or invest in education and health, but it shouldn’t be used as an excuse to run exclusive economies.

Governments should aim for policies focused on inclusive growth.

To achieve this, it must not forget the importance of modelling, testing and evaluating to create what is long overdue - a strong and deep evidence base to encourage effective and positive change in Australia.

This article is based on a chapter by Professor A. Abigail Payne and Dr Rajeev Samarage in the forthcoming Melbourne Institute Compendium. The Economic and Social Outlook Conference 2022, organised by the Melbourne Institute: Applied Economic and Social Research and The Australian, will be held on November 2 in Melbourne. State and Federal Government, researchers and industry experts will come together to tackle the critical issues facing Australia today. Learn more about the Conference.

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