tag:theconversation.com,2011:/africa/topics/tony-shepherd-5305/articlestony shepherd – The Conversation2015-05-12T23:28:30Ztag:theconversation.com,2011:article/416642015-05-12T23:28:30Z2015-05-12T23:28:30ZINFOGRAPHIC: Lessons in budget politics<figure class="align-center ">
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The Commission of Audit set the high water mark for reform designed to protect Australia against an economic downturn. One year on, little of it has made it into policy.Charis Palmer, Deputy Editor/Chief of StaffEmil Jeyaratnam, Data + Interactives Editor, The ConversationDiana Hodgetts, EditorLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/220592014-01-16T00:13:18Z2014-01-16T00:13:18ZAudit Commission’s secrecy and haste makes for bad policy<figure><img src="https://images.theconversation.com/files/39153/original/3hhrvpn5-1389823830.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Commissioners of the Abbott government's Commission of Audit Robert Fisher, Tony Shepherd, Amanda Vanstone and Peter Boxall faced a Senate hearing yesterday, but little was revealed.</span> <span class="attribution"><span class="source">AAP/Lukas Coch</span></span></figcaption></figure><p>Treasurer Joe Hockey expected yesterday’s public hearing into the Commission of Audit would be <a href="http://www.abc.net.au/news/2014-01-15/commission-of-audit-a-27show-trial272c-treasurer-joe-hockey-/5200620">a “show trial” and a “stunt”</a>.</p>
<p>And at face value he was right. Those who hoped Tony Shepherd or the other Commissioners would reveal their views on privatising Australia Post or a co-payment for doctors’ consultations were bound to be disappointed. </p>
<p>Shepherd’s repeated response to speculative questioning was that the Commission was “not ruling anything in or out”, and that it was up to the government to decide how to act on its recommendations.</p>
<p>Senators Richard di Natale, who chaired the hearing, Kate Lundy and Sue Lines made some progress in getting the Commissioners to reveal their processes and decision rules. </p>
<p>Others were in a partisan mood. Liberal senators David Bushby and Dean Smith wasted no opportunity to mention the Howard government’s budget surplus – <a href="https://theconversation.com/pbo-and-treasury-reports-confirm-it-the-deficit-is-unsustainable-14559">no mention of that government’s structural deficit</a> – while Labor’s Sam Dastyari posed a string of “gotcha” questions.</p>
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<span class="caption">Labor’s Sam Dastyari was determined to find new details about what the Commission of Audit’s Tony Shepherd had discussed with Abbott Government ministers.</span>
<span class="attribution"><span class="source">AAP/Lukas Coch</span></span>
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<p>Dastyari’s first “gotcha” was about the GST, making it clear Labor would vigorously oppose any hint of a GST rise. By contrast, di Natale, while not endorsing a GST rise, reasonably stressed the Commission’s brief, focussing on cost-cutting, was one-sided, and that ways to increasing revenue should also be on the table. </p>
<p>Shepherd ducked that issue, referring to the government’s plan to have a separate tax inquiry.</p>
<p>Unfortunately that questioning about revenue, which could have led the Committee into rich policy territory, was not pursued in any depth. Government processes tend to separate revenue from expenditure. The nation’s taxation capacity is taken as a “given” (particularly when politicians like Dastyari raise hell when there is any sniff of a new or higher tax), and expenditure has to fit within that constraint. </p>
<p>That’s why proposals for new initiatives generally have to be funded by cuts in other programs, almost regardless of the public good justifications of those programs.</p>
<h2>Time poor, scope rich</h2>
<p>Dastyari’s most telling “gotcha” concerned the Commission’s secrecy, seizing on a statement Shepherd had made in an <a href="http://www.bca.com.au/newsroom/article-on-economic-challenges-by-tony-shepherd-in-the-australian">article published last August</a>, when he wrote an audit into the “scope, size and efficiency of government” should be conducted “carefully and openly in a reasonable period with wide-ranging consultation and trade-offs made explicit”.</p>
<p>While there is nothing in the Commission’s <a href="http://www.ncoa.gov.au/docs/NCA_TERMS_OF_REFERENCE.pdf">terms of reference</a> prohibiting a more open process, it certainly does not have a “reasonable” period. It was appointed in late October, with reports required by the end of January and March. </p>
<p>Unlike standing bodies such as the Australian National Audit Office and the Productivity Commission which have ongoing capacity, the Commission had to pull together staff, and to operate within a A$1 million budget, which Dastyari reminded us contrasted with <a href="http://www.homeinsulationroyalcommission.gov.au/Pages/default.aspx">A$15 million for the Royal Commission into the Home Insulation Program</a>. </p>
<p>It doesn’t have time for a more open process. The first we will know of its recommendations will be at Budget time, by which point Hockey <a href="http://www.abc.net.au/news/2014-01-15/treasurer-joe-hockey-dismisses-senate-inquiry-into/5200754">has said</a> he’d “expect that the government will adopt a vast number of recommendations”.</p>
<p>That lack of openness, be it a reflection of this government’s secrecy or of time constraints, could result in a set of recommendations and budgetary decisions which prove to be costly in both economic and political terms.</p>
<p>Successful economic reform, particularly if it involves difficult trade-offs, cannot be done hastily. Gary Banks, former chair of the Productivity Commission, <a href="http://www.pc.gov.au/speeches/gary-banks/successful-reform">explained the success of the difficult reforms of the 1980s</a>:</p>
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<p>Acceptance that reform was needed did not come about overnight. It emerged over time, with mounting awareness of the costs of the status quo and the potential gains from doing something about them. This in turn resulted from research and evidence on the deficiencies of existing policies, and deliberate efforts to communicate that information to the community.</p>
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<h2>Why transparency matters</h2>
<p>While the Productivity Commission does not always get its recommendations over political hurdles, it does have a process to smooth that path. It releases discussion papers, helping people see issues in their wider context and broadening options for solutions. It holds public hearings, and issues draft reports. </p>
<p>Only its final reports are kept confidential pending government decisions. It’s a process with three distinct benefits.</p>
<p>First, it often reveals unintended consequences of proposals which at first glance look like good ideas. No such reality check applies to the Commission of Audit.</p>
<p>Second, it helps expose the motives of rent-seekers and others who would profit from particular policies – supplicants who couch their submissions in terms of supposed public interest. It’s a fair bet that the Commission of Audit has many elegantly-drafted submissions urging privatisation of government enterprises which conveniently gloss over or ignore the economic reasons for public ownership.</p>
<p>Third, it gives parties a hearing. Public hearings assure people that even if they don’t get what they want, their interests have been considered. They get their “day in court”, and are more likely to accept the outcome.</p>
<p>Without proper process, even if proposals clear political hurdles and become enacted in legislation, they may have a short lifetime. The textbook case is the Whitlam government’s 25% tariff cut, a precipitate decision which put further tariff reform off the agenda for ten years.</p>
<p>The subsequent success of the Hawke-Keating government in economic reform owes much to good process – use of the Industry Commission, which later became the Productivity Commission, establishment of standing consultative bodies such as the Economic Planning Advisory Council, and generally a patient and consultative approach to reform. </p>
<p>It’s a model this government could emulate if it seeks enduring reform rather than a vehicle to discredit the previous government.</p><img src="https://counter.theconversation.com/content/22059/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ian McAuley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Treasurer Joe Hockey expected yesterday’s public hearing into the Commission of Audit would be a “show trial” and a “stunt”. And at face value he was right. Those who hoped Tony Shepherd or the other Commissioners…Ian McAuley, Lecturer, Public Sector Finance , University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/135742013-04-18T03:48:02Z2013-04-18T03:48:02ZBusiness lobby yearns for a long-term view, but offers a contradictory wish list<figure><img src="https://images.theconversation.com/files/22599/original/4mw2gf72-1366254633.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Business Council of Australia's call for long-term thinking is moving in the right direction, but wants both expensive spending programs and lower taxes.</span> </figcaption></figure><p>There is much to consider when thinking about our future as a nation. We are a small, resource-rich, open economy facing a volatile global environment. We are particularly vulnerable to the impact of climate change. As in other developed countries, our population is ageing, which will have significant implications for taxation, public spending and the labour market. </p>
<p>We realise that the prosperity brought about by the latest mining boom will not last forever. However, the impact of the high Australian dollar partly caused by the boom will have a lasting effect on the economy with the loss of manufacturing jobs and major structural adjustments. </p>
<p>The looming federal election could provide a timely opportunity for a debate about the future. Unfortunately the political debate seems to be characterised by a government that changes policy direction with the news cycle and an opposition following an “as small as possible target” strategy. </p>
<p>In this context, the Business Council of Australia’s campaign on the long-term reforms needed for Australia is welcome.</p>
<p><a href="http://www.bca.com.au/Content/102138.aspx">Outlined</a> by BCA President, Tony Shepherd, at the National Press Club in Canberra, the plan identifies nine key areas: taxation and fiscal policy, population, sustainability, infrastructure, innovation, education, the workplace, regulation, foreign investment and energy.</p>
<p>There is much to agree with in the reforms proposed by the BCA. Some important examples include requiring mandatory regulatory impact statements for all new regulations, improving numeracy and literacy skills for our kids, removing inefficient state taxes, and promoting a broad debate on alternative sources of energy (including nuclear). </p>
<p>There are also reasons to agree with the general view that governments should remove themselves from the production of goods and services that can be more efficiently produced by the private sector, that there is a need for better infrastructure planning, and that a link exists between improved public infrastructure and increased productivity. </p>
<p>There are, however, many sources of potential disagreement. A key example is the suggestion to reopen the discussion on tax reform from scratch. The options for tax reform are clearly laid out in the Henry Review. What is missing is not yet another list of vague ideas about tax reform, but rather more extensive analysis of the various options canvassed in the Henry Review — such as the choice between the introduction of an Allowance for Corporate Equity versus a reduction in the corporate tax rate — and political will to pursue these options.</p>
<p>The emphasis on the size of the government is also misplaced. Instead the focus should be on ensuring that “the business of government” is undertaken in an efficient manner. This means reviewing not only what goods and services should be directly provided by governments but also how they should be financed (taxes versus users pay). Government procurement reform should be a big part of reforming the government agenda. </p>
<p>More broadly, the BCA vision has many inherent contradictions. In ten years’ time, the BCA wants a cutting edge education system for our kids, a National Disability insurance scheme, an unemployment benefit that allows people to live in dignity, effective employment services so that unemployed workers can get back to work quickly and avoid long-term unemployment, new public infrastructure, support for SMEs through government procurement and incentives for firms to pursue Research and Development. These are all very costly undertakings requiring substantial public funds. </p>
<p>At the same time, the BCA wants both debt to be repaid and the government to be running consistent budget surpluses in ten years’ time. The only way to accomplish this is to either raise taxes or significantly cut government expenditures, and there are no hints on how such an ambitious task can be undertaken. It seems that the BCA wants to have its cake and eat it too! </p>
<p>Importantly, there are no economic reasons that justify a need to repay all debt or to consistently produce budget surpluses. In fact, a more efficient tax system might act as an automatic stabiliser for the economy so that the government fiscal position deteriorates in a recession, which might result in a budget deficit and increased government borrowings For example, a tax system that allows carry back of losses would automatically reduce tax outlays and improve businesses’ cash flows during economic downturns. This is likely to produce better outcomes than stimulus packages that target particular areas favoured by the government of the day.</p>
<p>All in all, the BCA’s contribution is most welcome. It might help elicit the public’s views on these important issues. The public debate might uncover a very different vision for Australia from that offered by the BCA. This was the case, for example, in the recent public reaction to the opposition’s NBN proposal with many favouring instead a larger, publicly funded, nation building fibre to the home network for all. Either way, it is time for a more informed debate. </p><img src="https://counter.theconversation.com/content/13574/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Flavio Menezes does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There is much to consider when thinking about our future as a nation. We are a small, resource-rich, open economy facing a volatile global environment. We are particularly vulnerable to the impact of climate…Flavio Menezes, Professor of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.