tag:theconversation.com,2011:/au/topics/advice-to-government-29202/articlesAdvice to government – The Conversation2016-07-18T20:05:51Ztag:theconversation.com,2011:article/625542016-07-18T20:05:51Z2016-07-18T20:05:51ZA realistic strategy for federal budget repair<p><em>A federal election is an opportunity to take stock of how Australia is doing, where it’s going, and what governments can do about it. <a href="https://theconversation.com/au/topics/advice-to-government">This series</a>, written by program directors at the Grattan Institute, explores the challenges facing Australia. In this last piece of the series: budget repair.</em></p>
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<p>The persistent budget deficit is one of the re-elected Turnbull Government’s biggest challenges. But as revealed by the <a href="https://theconversation.com/where-are-they-now-tracking-down-the-promises-of-budgets-past-58627">long list of zombie measures</a> that the last government proposed and the Senate refused to pass, the politics of budget reform is never easy. Success will require tough decisions, and powerful public persuasion.</p>
<p>As the government <a href="https://theconversation.com/the-policy-agenda-what-the-government-should-do-now-61518">chooses its budget priorities</a>, inevitably it will look for measures that can be implemented without parliamentary approval or that other parties in the Senate are likely to approve. But given the scale of the budget problem, it will also have to identify reforms that other parties do not support (at least initially), and then carry the day by making the case for them with the public. </p>
<h2>The size of the budget problem</h2>
<p>In building that public support, the first step is to come clean about the scale of the problem. Successive Commonwealth governments have relied on <a href="http://grattan.edu.au/news/budget-2016-both-parties-budget-plans-are-simply-hoping-for-the-best/">over-optimistic projections</a> that expect revenues to recover quickly, and spending to grow only slowly. The May 2016 budget was the seventh to project a drift back to near surplus, primarily as a result of bracket creep, over the following four years. It was also the seventh budget in which the actual outcome for the current year showed minimal improvement over the year before. For eight years, budget deficits have persisted at about 2-3% of GDP. </p>
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<p>Most analysts believe that current budget projections are unduly optimistic. Over the last eight years, such projections have been used to justify a softly-softly approach to budget repair with few net savings. Both sides of politics have introduced significant savings measures, then used pretty much all the proceeds to fund new priorities rather than to reduce the budget deficit.</p>
<p>To build public support for actual budget repair, the <a href="http://grattan.edu.au/news/rose-tinted-budget-outlook-does-neither-party-any-favours/">Government needs a more realistic set of economic projections</a>. These should assume that Australia’s future will reflect the experience of most developed economies since before the global financial crisis, with corporate investment, real economic growth and inflation all lower. To counter optimism bias, the slowdown should be presumed to be permanent until proven otherwise. With such projections, the government has a chance of persuading the public that tougher budget measures that impose net costs are needed.</p>
<h2>The need for budget repair</h2>
<p>The Government will also have to explain why budget repair matters. Again this needs plainer speaking. Australia is exposed to a downturn in the global economy – and there are plenty of reasons to fear it will happen. Budget repair now will make it easier for governments to employ fiscal defence in a downturn. If they want to use deficit funding to lift economic activity in difficult times, as the Rudd Government did in 2009, then they must deliver surpluses when growth has recovered. </p>
<p>The budget deficit is also unfair to future generations. About <a href="https://theconversation.com/young-australians-set-to-pay-for-government-policy-mistakes-35250">half of it</a> is a result of increases over the last decade in net transfers to households aged over 65. Spending per older household on health and the Age Pension has grown faster than the economy; income taxes per older household have fallen in real terms as a result of superannuation tax breaks. Every year we run a deficit at current levels, <a href="https://grattan.edu.au/report/the-wealth-of-generations/">younger households will have to pay an additional $10,000 in tax</a> over their lives to pay back the principal and interest.</p>
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<p>Finally, government should highlight the mounting cost of interest on the accumulating debt – at present 4% of Commonwealth income, or as much as it spends on public hospitals. </p>
<h2>What is achievable?</h2>
<p>The Government’s slim majority in the House of Representatives, and a large and diverse crossbench in the Senate, will not make budget repair easy. Worthwhile spending reductions that require legislative change are unlikely to pass easily, since inevitably they will involve cutting services to someone, creating political opportunity for opposition parties. The Government could buy change by supporting the wish lists of minor parties, but experience from the Gillard years shows that such horse trading, while productive, can be expensive.</p>
<p>So the Government will need to build a budget repair strategy that puts a priority on the big things and makes the most of what is politically possible. It should progress measures that don’t require specific parliamentary approval, favour measures where Parliamentary approval is plausible, and build public support for important reforms. </p>
<p>Other changes should be deferred, or ditched outright to preserve political capital for winnable wars. The Government should abandon potential budget savings that are unlikely to win support from either other parties or the public. For example, there is little prospect of <a href="https://grattan.edu.au/report/a-gst-reform-package/">increasing the GST</a> this parliamentary term. Many of the “zombie” measures from the May 2014 budget should be put out of their misery.</p>
<h2>A realistic strategy for budget repair</h2>
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<img alt="" src="https://images.theconversation.com/files/130682/original/image-20160715-2127-tw5t9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/130682/original/image-20160715-2127-tw5t9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=364&fit=crop&dpr=1 600w, https://images.theconversation.com/files/130682/original/image-20160715-2127-tw5t9z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=364&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/130682/original/image-20160715-2127-tw5t9z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=364&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/130682/original/image-20160715-2127-tw5t9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=458&fit=crop&dpr=1 754w, https://images.theconversation.com/files/130682/original/image-20160715-2127-tw5t9z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=458&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/130682/original/image-20160715-2127-tw5t9z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=458&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Note: Excludes budget savings measures not yet legislated but likely to have bipartisan support, such as increases in tobacco excise. Medicare levy assumes a 0.5 percentage point increase. Improving hospital efficiency, such as such as by establishing a national efficient price for hospital procedures, assumes savings will be shared between the Commonwealth and the States. Raising Age Pension and superannuation access ages assumes savings once the policy changes are fully implemented. Source: Various Grattan Institute reports; Commonwealth Budget papers (various years); ALP election costing documents; Productivity Commission, Grattan analysis.</span>
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<h2>Changes that don’t require specific legislation</h2>
<p>First, the Government should reduce spending that does not require specific legislation. Healthcare, as the fastest-growing area of government expenditure, should be a particular focus. Its growth can be contained in ways that do not compromise the quality of care. For example, the Commonwealth <a href="https://theconversation.com/many-australians-pay-too-much-for-health-care-heres-what-the-government-needs-to-do-61859">can manage chronic disease better, and reduce waste by paying less for inefficient hospital care</a>. </p>
<p>There are also a myriad of spending programs, each benefiting a particular interest group, dangerously expensive as a whole. The election campaign has increased the size of the task, with its ample giveaways, often for <a href="https://theconversation.com/election-2016-will-the-infrastructure-promises-meet-australias-needs-61140">minor transport projects and sporting facilities</a>, <a href="http://www.theaustralian.com.au/business/opinion/bernard-salt-demographer/federal-election-2016-infrastructure-projects-in-marginals-overdone/news-story/7b77e5b98c4f348c38b14c7aae7a2abc">particularly in marginal electorates</a>. Ramping up the budget rhetoric should make it easier to resist such demands next time around.</p>
<h2>The political middle ground</h2>
<p>Second, the government should look for genuine political middle ground, as it did with the changes to the Age Pension means test passed by the last Parliament with support from the Greens.</p>
<p>Once the composition of the Senate is confirmed, government legislation will most likely need the support of either the ALP, or the Greens plus one or two independents, or virtually all the independent nine or 10 senators. Given the disparate backgrounds of the Senate crossbench, reaching across the aisle to the ALP, or the Greens, may be easier – and it might work. </p>
<p>With such a Senate, some of the new Turnbull Government’s best chances to improve the budget in this Parliament will be to increase taxes – such as by <a href="https://grattan.edu.au/report/hot-property/">reducing the capital gains tax discount</a>, or <a href="http://grattan.edu.au/news/election-2016-an-open-letter-to-malcolm-turnbull-on-medicare/">raising the Medicare Levy</a> to pay for rising spending on health services. The problem here will be with the Coalition party room, as illustrated by the backbench push to overturn the changes to superannuation tax breaks proposed in the May Budget reveals. </p>
<p>To succeed, the Government must abandon the fiction that there is no revenue problem. Both the politics of budget repair and the sheer size of the budget gap mean that the Commonwealth needs to both <a href="https://grattan.edu.au/report/balancing-budgets-tough-choices-we-need/">contain spending <em>and</em> boost revenues to return the budget to surplus</a>. Ironically, revenue increases – primarily through bracket creep – have been the <a href="https://theconversation.com/a-dull-and-routine-budget-that-relies-on-group-denial-41599">dominant plan for budget repair</a> under all Treasurers over the last eight years.</p>
<h2>Building public support</h2>
<p>Third, the Government could propose budget savings that are unlikely to obtain immediate bipartisan support, but may win out as public opinion and political reality force other parties to fold. For example, the Labor Party ultimately agreed to proposed changes to research and development tax incentives just before the election. </p>
<p>Surveys suggest that people understand the need for budget repair, and <a href="http://www.essentialvision.com.au/wp-content/uploads/2016/04/Essential-Report_160426.pdf">can be persuaded to slay sacred cows</a> such as negative gearing.</p>
<p>Among possible savings, Grattan Institute <a href="https://grattan.edu.au/report/balancing-budgets-tough-choices-we-need">reports</a> have identified increasing the age of access for the Age Pension and superannuation and including owner-occupied housing in the Age Pension assets test as being among the best opportunities to achieve Budget repair. </p>
<p>Other welfare priorities should include recovering more of the costs of aged care from those who benefit, and constraining the growth of carer payment, since these are among the fastest growing costs. Abolishing the Senior Australian and Pensioner Tax Offset (SAPTO), or just restricting its tax benefits to pensioners, could raise up to $700 million a year. In health, government needs to build the case for reforms to the <a href="https://theconversation.com/many-australians-pay-too-much-for-health-care-heres-what-the-government-needs-to-do-61859">Medicare schedule list, pathology pricing, and pharmaceutical pricing</a>.</p>
<p>Commonwealth funding for higher education is also increasing, and retaining a demand-driven system will require the Commonwealth to recover more of the growing HELP debt by <a href="https://grattan.edu.au/report/doubtful-debt-the-rising-cost-of-student-loans">lowering the income repayment threshold</a>, and <a href="https://grattan.edu.au/news/tackling-doubtful-debt-how-to-keep-the-student-loan-scheme-viable/">recovering debts from estates</a>.</p>
<p>Obviously, the public will need persuading on these reforms. Discussion papers and public argument should build popular momentum for change so compelling that the Labor Party or the Greens follow where the people led them.</p>
<p>This approach increases the importance of outside stakeholders: media, think tanks, and peak lobby groups. It increases the importance of following the evidence – it is pretty difficult to win over the public when even the experts are opposed.</p>
<h2>Institutional changes</h2>
<p>Institutional changes can also help to build the public argument for budget repair. Amending the <a href="http://www.austlii.edu.au/au/legis/cth/consol_act/cobha1998258/sch1.html"><em>Charter of Budget Honesty</em></a> to force governments to bring down budgets that produce a surplus within the forward estimates would counter the “long-termism” that defers difficult decisions. Governments should also be required to produce long-term projections that spell out the impact of long-term decisions, countering the tendency to hide the impact of significant decisions just outside the forward estimates period.</p>
<h2>A budget strategy</h2>
<p>Hoping for the best is not a budget management strategy: it simply shifts the costs and risk of budget repair onto future generations. To make more progress than its predecessors, this Turnbull government will need to prioritise ruthlessly, make tough calls, compromise with other parties, and persuade the public where it matters.</p><img src="https://counter.theconversation.com/content/62554/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities.</span></em></p><p class="fine-print"><em><span>Brendan Coates 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>Hoping for the best is not a budget management strategy: but Australia can set realistic goals.John Daley, Chief Executive Officer, Grattan InstituteBrendan Coates, Fellow, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/618082016-07-14T20:03:05Z2016-07-14T20:03:05ZThree schools reforms that will lift student outcomes<figure><img src="https://images.theconversation.com/files/128632/original/image-20160629-15292-1ns427k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Education policy should focus on making sure that every student makes great progress, rather than accountability for test scores or teacher performance pay.</span> <span class="attribution"><span class="source">from www.shutterstock.com</span></span></figcaption></figure><p><em>A federal election is an opportunity to take stock of how Australia is doing, where it’s going, and what governments can do about it. <a href="https://theconversation.com/au/topics/advice-to-government">This series</a>, written by program directors at the Grattan Institute, explores the challenges that Australia faces and advocates policy changes for budgets, economic growth, cities and transport, energy, school education, higher education and health.</em></p>
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<p>Australia’s schools are not keeping up with the best in the world. There is a real problem, and governments must act. But the newly elected Coalition government must tread a fine line: good Commonwealth policy will not save Australia’s schools, but poor policy will damage them further.</p>
<p>A big challenge for any Commonwealth education minister is that state governments hold key responsibilities in the areas that will lift student outcomes. Many of the ideas in the Coalition’s education policy <a href="https://docs.education.gov.au/system/files/doc/other/quality_schools_acc.pdf">“Quality Schools, Quality Outcomes”</a> will go nowhere without agreement from state and territory counterparts. </p>
<p>The best approach for the Commonwealth is to play a <a href="http://grattan.edu.au/wp-content/uploads/2014/04/187_jensen_oped_weekendaustralian_schooled.pdf">modest role</a>, focusing its efforts in areas where national scale or consistency is a genuine advantage, or where current arrangements mean it must be involved. Overreach creates confusion, duplication and regulatory burden.</p>
<h2>The focus of the last three years</h2>
<p>At the 2013 election, the big issue was school funding – specifically the <a href="https://theconversation.com/explainer-what-is-a-gonski-anyway-13599">Gonski reforms</a>. </p>
<p>After the election, the Coalition government tried to play down the importance of funding, by re-litigating what it appeared to promise before the election. </p>
<p>It has not worked: school funding is still the <a href="http://grattan.edu.au/news/pay-up-or-take-a-chance-on-education/">festering sore that infects all our education discussions</a>.</p>
<p>Instead, the <a href="https://theconversation.com/policy-primers-what-you-need-to-know-before-election-day-61680">Coalition focused</a> on four pillars: teacher quality (predominantly through initial teacher education); school autonomy; parental engagement; and a stronger curriculum. </p>
<p>The impact of this approach was mixed. </p>
<p>Reforming initial teacher education will and should continue. Incentives for school autonomy interferes with what should be a state-level decision. Parental engagement matters, but the Commonwealth government is poorly placed to drive change. Strengthening and streamlining the national curriculum had value but the costs of continued tinkering outweigh the benefits.</p>
<p>Overall, the four pillars <a href="http://grattan.edu.au/news/public-vs-private-school-funding-a-distraction-from-what-matters/">failed to address the seriousness of the problems</a> facing Australian schooling. And the problems are substantial.</p>
<h2>Slipping standards</h2>
<p>Australia’s reading performance in the Programme for International Student Assessment <a href="https://www.oecd.org/pisa/aboutpisa/">(PISA) tests</a> has declined by the equivalent of almost <a href="https://www.acer.edu.au/documents/PISA-2012-Report.pdf">six months worth of learning</a> since 2000, while other countries have shot ahead.</p>
<p>Family background strongly affects outcomes: between Years 3 and 9, similarly capable students from families with limited education fall <a href="http://grattan.edu.au/wp-content/uploads/2016/03/937-Widening-gaps.pdf">up to two years behind</a> their peers.</p>
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<img alt="" src="https://images.theconversation.com/files/128639/original/image-20160629-15292-1lhlatn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/128639/original/image-20160629-15292-1lhlatn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=206&fit=crop&dpr=1 600w, https://images.theconversation.com/files/128639/original/image-20160629-15292-1lhlatn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=206&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/128639/original/image-20160629-15292-1lhlatn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=206&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/128639/original/image-20160629-15292-1lhlatn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=258&fit=crop&dpr=1 754w, https://images.theconversation.com/files/128639/original/image-20160629-15292-1lhlatn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=258&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/128639/original/image-20160629-15292-1lhlatn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=258&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Students with the same Year 3 score make much less progress to Year 9 if their parents have limited education.</span>
<span class="attribution"><span class="source">From Widening gaps: what NAPLAN tells us about student progress, Grattan Institute 2016</span></span>
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<p>Roughly one in four students <a href="http://www.mitchellinstitute.org.au/wp-content/uploads/2015/11/Educational-opportunity-in-Australia-2015-Who-succeeds-and-who-misses-out-19Nov15.pdf">will not finish Year 12 by age 19</a>, and many of these will leave school without the reading and maths capabilities they will need to stand on their own feet as adults. </p>
<p>The national minimum standards for the National Assessment Program – Literacy and Numeracy (NAPLAN) do not highlight those falling far behind. A Year 9 student at the national minimum standard for reading operates <a href="http://grattan.edu.au/wp-content/uploads/2016/03/937-Widening-gaps.pdf">well below</a> the level of an average Year 5 student.</p>
<p>Australia’s strongest students must also do better. Only <a href="http://grattan.edu.au/wp-content/uploads/2015/07/827-Targeted-Teaching.pdf">15% reach</a> the highest levels of mathematical proficiency in PISA, compared to 40% in the five best systems in the world.</p>
<p>These educational failings at both ends of the achievement spectrum limit <a href="http://grattan.edu.au/wp-content/uploads/2014/04/057_report_education_investing_teachers.pdf">productivity, innovation and economic growth</a>.</p>
<h2>Three key reforms that will lift student outcomes</h2>
<p>The reforms to lift student outcomes are well known. Each requires a shift in focus for policymakers at all levels of government – but the key levers are largely within the remit of state governments.</p>
<h2>1) Focus on progress, not just achievement</h2>
<p>School education policy should explicitly aim to lift the progress (that is, learning growth) of all students, not just their achievement at a point in time. </p>
<p>Schools and teachers cannot control what their students know when they start the school year in January, but they can dramatically influence how much they learn by December. Yet our A to E grading system focuses on students’ achievement, and <a href="https://grattan.edu.au/news/achievement-matters-but-what-about-tracking-learning-progress/">largely ignores their progress</a>.</p>
<p>Students learn faster through “<a href="http://grattan.edu.au/wp-content/uploads/2015/07/827-Targeted-Teaching.pdf">targeted teaching</a>”, when teachers identify what each individual student is ready to learn next, teach them accordingly and track their progress.</p>
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<img alt="" src="https://images.theconversation.com/files/128647/original/image-20160629-15263-natt48.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/128647/original/image-20160629-15263-natt48.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=275&fit=crop&dpr=1 600w, https://images.theconversation.com/files/128647/original/image-20160629-15263-natt48.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=275&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/128647/original/image-20160629-15263-natt48.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=275&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/128647/original/image-20160629-15263-natt48.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=345&fit=crop&dpr=1 754w, https://images.theconversation.com/files/128647/original/image-20160629-15263-natt48.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=345&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/128647/original/image-20160629-15263-natt48.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=345&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Targeted teaching is a positive feedback loop that improves teaching and student learning.</span>
<span class="attribution"><span class="source">From Targeted teaching: how better use of data can improve student learning, Grattan Institute 2015</span></span>
</figcaption>
</figure>
<p>Targeted teaching is vital because student achievement varies widely. For example, in a typical school the top Year 9 students are <a href="http://grattan.edu.au/wp-content/uploads/2016/03/937-Widening-gaps.pdf">seven years ahead</a> of the bottom students in literacy and numeracy. Yet targeted teaching is not the norm in Australian schools today.</p>
<h2>2) Invest in improving teaching practice, not narrow accountability or incentive schemes</h2>
<p>Outside the home, nothing influences student outcomes more than <a href="http://grattan.edu.au/wp-content/uploads/2014/04/081_report_teacher_appraisal.pdf">effective teaching</a>. </p>
<p>Teaching works best when teachers embrace their collective professional responsibility; when they collaborate and observe each other, rather than <a href="http://www.theatlantic.com/national/archive/2012/04/alone-in-the-classroom-why-teachers-are-too-isolated/255976/">working in isolation</a>; when they rigorously discuss and use data; and when they receive <a href="http://grattan.edu.au/wp-content/uploads/2014/04/081_report_teacher_appraisal.pdf">feedback and meaningful appraisal</a>. </p>
<p>High-performing education systems <a href="http://grattan.edu.au/wp-content/uploads/2014/04/129_report_learning_from_the_best_main.pdf">have learned these lessons</a>. They relentlessly improve classroom practice by building teacher capability. Principals are central to this process.</p>
<p>Australia’s system leaders must invest more to improve teaching practice. A great example is the <a href="http://www.dec.nsw.gov.au/about-the-department/our-reforms/early-action-for-success">Early Action for Success</a> program in New South Wales, which is improving teaching in <a href="http://grattan.edu.au/wp-content/uploads/2015/07/827-Targeted-Teaching.pdf">over 300 disadvantaged government primary schools</a>.</p>
<p>By contrast, international experience shows big risks and limited gains from using test scores to <a href="http://grattan.edu.au/wp-content/uploads/2015/07/827-Targeted-Teaching.pdf">hold teachers accountable</a>. </p>
<p>The evidence behind <a href="https://theconversation.com/pupil-power-time-to-ditch-teacher-%20bonuses-and-focus-on-student-learning-6862">performance pay schemes for teachers</a> is also mixed. It is hard to measure performance with sufficient accuracy, and paying teachers for student performance may erode the intrinsic rewards of teaching and undermine morale. A <a href="http://www.rand.org/pubs/research_briefs/RB9649/index1.html">randomised trial of performance pay in Texas</a> found no significant effects on student test scores or teacher practices and attitudes. </p>
<p>No one doubts that performance and accountability matter. But narrowly-designed incentive schemes do more harm than good.</p>
<h2>3) Make trade-offs to improve how and where money is spent</h2>
<p>Trade-offs are needed to direct funding and resources where the evidence shows they will make the most difference.</p>
<p>In particular, teachers need <a href="http://grattan.edu.au/wp-content/uploads/2014/03/808-making-time-for-great-teaching.pdf">time for great teaching</a>. In Shanghai, <a href="http://grattan.edu.au/wp-content/uploads/2014/04/129_report_learning_from_the_best_main.pdf">teachers have larger but fewer classes</a> to give them more time to collaborate and improve their practice.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/128664/original/image-20160629-15277-1r4jbms.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/128664/original/image-20160629-15277-1r4jbms.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=334&fit=crop&dpr=1 600w, https://images.theconversation.com/files/128664/original/image-20160629-15277-1r4jbms.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=334&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/128664/original/image-20160629-15277-1r4jbms.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=334&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/128664/original/image-20160629-15277-1r4jbms.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=420&fit=crop&dpr=1 754w, https://images.theconversation.com/files/128664/original/image-20160629-15277-1r4jbms.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=420&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/128664/original/image-20160629-15277-1r4jbms.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=420&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Teachers in Shanghai have larger but fewer classes.</span>
<span class="attribution"><span class="source">From Catching up: learning from the best school systems in East Asia, Grattan Institute, 2012</span></span>
</figcaption>
</figure>
<p>Time, and therefore money, could also be saved by scaling up investment in tools that help teachers understand what students know and what they need to learn next (classroom-based formative assessment tools and learning continuums). Teachers and schools could then spend far less time reinventing the wheel. </p>
<h2>Three policy suggestions for the Turnbull government</h2>
<p>In school education, as elsewhere, the Turnbull government should focus on changes that can be implemented administratively or with bi-partisan support, or where public support can be built. Policies that will not make it through the Senate should simply be ditched.</p>
<p><strong>Better evidence</strong></p>
<p>A core policy should be to <a href="http://www.pc.gov.au/__data/assets/pdf_file/0008/199979/sub061-education-evidence.pdf">strengthen the evidence base</a> in school education. More rigorous research is needed, including systematic evaluation of major educational investments and policies. Commonwealth support would bring benefits of scale and independence.</p>
<p>The beauty of this goal is that it only requires modest investment, and should attract bi-partisan support. </p>
<p><strong>Fairer funding</strong></p>
<p>A more challenging goal is to finally realise the goal of a simple, fair and transparent funding system. To do so, the Coalition must invest time and political capital to build public support for a compromise model with elements of Gonski but not the full price tag. </p>
<p>The <a href="http://www.appa.asn.au/wp-content/uploads/2015/08/Birmingham-Launch-of-the-AISNSW-Institute-Oct-2015.pdf">principles outlined by Simon Birmingham</a> last October provide a good basis for discussion. </p>
<p>But hard decisions are required, because funding is not currently allocated to where it will make the most difference. </p>
<p>The most disadvantaged students need relatively more funding, and <a href="http://grattan.edu.au/news/pay-up-or-take-a-chance-on-education/">most are in government schools</a>. To keep the cost down, special deals for <a href="http://apo.org.au/files/Resource/parliamentarylibrary_ausgovfundingforschools_march2013.pdf">“funding-maintained” schools</a> (which receive more funding than their socioeconomic mix warrants) should be removed. </p>
<p>Only the Coalition can safely make this trade-off: remember the backlash to Mark Latham’s <a href="http://www.theage.com.au/articles/2004/09/14/1094927584033.html">“hit-list” of private schools</a>. </p>
<p><strong>Better teaching not stronger markets</strong></p>
<p>The Coalition should ditch its Independent Public Schools policy, which pushes school autonomy without providing <a href="https://journal.anzsog.edu.au/publications/21/EvidenceBase%202015Issue1Version1.pdf">the support to make autonomy work</a>. </p>
<p>It should also avoid policies based on a flawed belief that <a href="http://www.nytimes.com/2016/06/29/us/for-detroits-children-more-school-choice-but-not-better-schools.html">more competition and choice means better schools</a>. </p>
<p>Market-oriented policies will struggle to pass the Senate, and there is a better way. Stronger outcomes will come from the hard yards of making teaching more professional and more rigorous, not the seductive simplicity that underpins the <a href="http://grattan.edu.au/wp-content/uploads/2014/04/myth_of_markets_in_school_education.pdf">myth of markets</a>.</p><img src="https://counter.theconversation.com/content/61808/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Goss is School Education Program Director of Grattan Institute, an independent non-profit think tank.</span></em></p>Focusing on progress – not just achievement – and investing in improving teaching practice will help to lift slipping standards in Australian schools.Peter Goss, School Education Program Director, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/618002016-07-14T20:03:01Z2016-07-14T20:03:01ZFinding ways forward when higher education reform options are limited<figure><img src="https://images.theconversation.com/files/130333/original/image-20160713-12366-awt5nh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Both sides of politics agree that student funding rates need reviewing.</span> <span class="attribution"><span class="source">from www.shutterstock.com</span></span></figcaption></figure><p><em>A federal election is an opportunity to take stock of how Australia is doing, where it’s going, and what governments can do about it. <a href="https://theconversation.com/au/topics/advice-to-government">This series</a>, written by program directors at the Grattan Institute, explores the challenges that Australia faces and advocates policy changes for budgets, economic growth, cities and transport, energy, school education, higher education and health.</em></p>
<hr>
<p>With the Liberals returned to office, their <a href="https://www.education.gov.au/news/consultation-future-higher-education-reform">higher education review process</a> will almost certainly continue. But any hope that the election would smooth the path to higher education reform is now gone. The government has less room to move than before. </p>
<h2>The budget and the parliament limit reform options</h2>
<p>At best, there will be no new public money, just shuffling funds between programs. At worst, as seems more likely, higher education will help reduce the budget deficit.</p>
<p>Politically, the new Senate cross-benchers seem less likely to support difficult decisions than those they replace. </p>
<p>The government needs higher education policy options that do not need parliamentary approval, or which Labor could support over the medium term (we saw in June that Labor’s <a href="https://theconversation.com/how-the-two-major-parties-shape-up-on-debate-around-student-loan-reform-60861">pragmatism increases with proximity to government</a>).</p>
<p>In this political environment, the Liberal idea of “flagship” undergraduate courses for which universities could charge more than <a href="http://studyassist.gov.au/sites/studyassist/helppayingmyfees/csps/pages/student-contribution-amounts#2016">standard student contributions</a> will struggle. </p>
<h2>Both sides of politics agree that student funding rates need reviewing</h2>
<p>But both sides of politics are open to reviewing the standard total per student funding rates – that is, <a href="https://docs.education.gov.au/system/files/doc/other/2016_allocation_of_units_of_study_revised_without_ed.pdf">the student contribution plus the Commonwealth contribution</a>. </p>
<p>Current per student funding rates have their origins in a university expenditure study done more than 25 years ago. There is little dispute, in the higher education sector or in politics, that the time to revise has arrived. </p>
<p>To help this process along, the government could require universities to <a href="https://grattan.edu.au/report/the-cash-nexus-how-teaching-funds-research-in-australian-universities/">report more useful information about how they spend their money</a>. This can be done by ministerial direction. </p>
<p>A good review process will not just consider historical expenditure patterns. The review needs to cost the standards higher education providers must meet. These include <a href="https://www.legislation.gov.au/Details/F2015L01639">general government rules</a> applying to all higher education providers, along with <a href="http://www.amc.org.au/">accreditation</a> and <a href="https://www.cpaaustralia.com.au/">professional admission</a> requirements affecting particular disciplines.</p>
<h2>Should research be included in student funding rates?</h2>
<p>The biggest policy issue is whether a research component should officially be included in student funding rates. </p>
<p>Profits on teaching are essential to university research output. <a href="https://grattan.edu.au/report/the-cash-nexus-how-teaching-funds-research-in-australian-universities/">Grattan research published last year</a> found that at least 20% of the money spent on research comes from teaching profits. This conclusion was based on conservative calculations – the true number could easily be higher. </p>
<p>Universities want to increase research output. After a long boom, university research expenditure <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/8111.0">stalled at just over $10 billion between 2012 and 2014</a>. Research is shrinking as a share of all university expenditure. <a href="https://www.education.gov.au/staff-data">Research staff</a> and <a href="https://www.education.gov.au/data-used-research-block-grant-rbg-funding-formulae">research publications</a> are both in slight decline. </p>
<p>There are several possible causes for less research activity: slower <a href="http://www.industry.gov.au/innovation/reportsandstudies/Pages/SRIBudget.aspx">growth in government research grants</a> and <a href="https://www.education.gov.au/portfolio-budget-statements-2016-17">a decline in 2015</a>, subdued <a href="https://internationaleducation.gov.au/research/International-Student-Data/Pages/InternationalStudentData2016.aspx#Pivot_Table">international student numbers from 2010 to 2014</a> reducing teaching profits, and <a href="https://app.heims.education.gov.au/HeimsOnline/IPInfo/Payment/IndexSearch">indexation of university grants</a> not keeping pace with wage increases.</p>
<p>Higher per student funding rates would help universities increase research activity. But this is not necessarily an ideal way to fund research. </p>
<p>Other government research funding is <a href="https://www.education.gov.au/research-block-grants-calculation-methodology">based on research performance</a>, not on student numbers. The universities that enrol the most students aren’t necessarily the best at research.</p>
<p>If research activity benefited teaching, that might be another reason to fund research via student numbers. But <a href="http://grattan.edu.au/report/taking-university-teaching-seriously/">the empirical evidence on this teaching-research nexus is inconclusive</a>. It’s not a strong enough basis for major public or student investment.</p>
<h2>Caution is needed on teaching-only student funding rates</h2>
<p>Although we lack a clear case for extending research funding via per student grants, we should be cautious about entirely separating existing teaching and research funding. </p>
<p>In 2015, <a href="https://www.education.gov.au/selected-higher-education-statistics-2015-staff-data">32,000 academics were employed as teachers and researchers</a>. Financially supporting these joint-function roles requires some alignment of teaching and research funding sources. </p>
<p>Even if academic work should become more specialised into teaching or research, this can only feasibly happen over time. It would be reckless to do it via a quick policy change.</p>
<p>In the medium term at least, we will need some allowance for research in new per university student funding rates. This would not prevent a lower teaching-only rate in higher education providers that don’t do research, as proposed by the Liberals in 2014 and more recently by Labor for their election-promise <a href="http://www.100positivepolicies.org.au/commonwealth_institutes_for_higher_education_fact_sheet">Commonwealth higher education institutes.</a></p>
<h2>A funding review is a way forward when options are limited</h2>
<p>A review of per student funding rates won’t settle disagreement over the mix of public and private funding. But a review is something both major political parties can agree on to clarify the debate: we will know how much we need to spend to get a good higher education system. It is a way forward when options seem limited.</p><img src="https://counter.theconversation.com/content/61800/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities.</span></em></p>At best, there will be no new public money, just shuffling funds between programs. At worst, higher education will help reduce the budget deficit.Andrew Norton, Program Director, Higher Education, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/616682016-07-13T19:40:19Z2016-07-13T19:40:19ZHow to make cities work better – here’s what the government needs to do<p><em>A federal election is an opportunity to take stock of how Australia is doing, where it’s going, and what governments can do about it. In a series of articles written by the Grattan Institute’s program directors, we explore the pressing policy challenges facing Australia in terms of economic growth, budgets, cities, transport, energy, health, school education and higher education.</em></p>
<hr>
<p>Every decade or two, Australia focuses on cities. Leading into the election, the government talked of smart cities, innovative cities, productive cities. But somehow there’s been no trade-off of costs and benefits – just more expensive infrastructure promised in the cities and <a href="https://theconversation.com/election-2016-will-the-infrastructure-promises-meet-australias-needs-61140">in the regions</a> too. </p>
<p>What’s missing is an explanation of how to support productivity in cities – to help regional people as much as city dwellers themselves. Will it be different this time?</p>
<p>Australia’s prosperity depends on managing cities well. Contrary to our myths about rugged outback pioneers, Australia is <a href="http://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS?year_high_desc=true">highly urbanised</a>, with the <a href="http://www.smh.com.au/comment/the-problem-with-sydney-and-melbourne-20151106-gksy2p.html">biggest share of population in its two largest cities</a>, Sydney and Melbourne, of any developed nation.</p>
<p>This is a good thing for our prosperity. Cities have more productivity growth than towns, and bigger cities more than smaller ones. When a city doubles in size, wages, output and innovation per capita <a href="http://www.pnas.org/content/104/17/7301.full">more than double</a>. All the benefits of human interaction play out in a more productive and dynamic economy.</p>
<p>But as cities grow, the negative impacts of interaction grow too. These include more pollution and more congestion per person. Governments need to make sure the positive impacts of cities outweigh the negatives.</p>
<h2>Well-connected cities work best</h2>
<p>Cities work best when they actually operate as cities – with all the choice of jobs and employers and goods and services that are available as long as the city is not simply a series of disconnected villages.</p>
<p>The trend to greater urbanisation is set to continue. Even during the mining boom, most economic activity occurred in Australian capital cities, as the chart below shows.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/130319/original/image-20160713-17976-s9uyng.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/130319/original/image-20160713-17976-s9uyng.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/130319/original/image-20160713-17976-s9uyng.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=433&fit=crop&dpr=1 600w, https://images.theconversation.com/files/130319/original/image-20160713-17976-s9uyng.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=433&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/130319/original/image-20160713-17976-s9uyng.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=433&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/130319/original/image-20160713-17976-s9uyng.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=544&fit=crop&dpr=1 754w, https://images.theconversation.com/files/130319/original/image-20160713-17976-s9uyng.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=544&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/130319/original/image-20160713-17976-s9uyng.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=544&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Not only are most existing jobs in the cities, so too are most new jobs. <a href="https://bitre.gov.au/publications/2013/files/report_142.pdf">More than one-quarter of all jobs</a> are located within five kilometres of the CBDs of the major capital cities. Around 40% are within ten kilometres.</p>
<p>At the same time, people who live in growing cities face real pressures. While job growth is strongest in the CBD, most housing growth occurs on the outer fringes. </p>
<p>This mismatch between where the people are and where the jobs are makes us all less prosperous if people decide it’s too hard to commute to work, or commute to a job that best suits their skills, and instead settle for something that they’re less suited to, or work less, or don’t work at all.</p>
<h2>Better use of the infrastructure dollar</h2>
<p>Governments try periodically to make cities easier to get around, generally by announcing major new transport infrastructure. The growth in the big capital cities has led many people to feel that the transport infrastructure we have is no longer up to the job, and will only struggle more over time.</p>
<p>So the government made plenty of transport infrastructure <a href="http://grattan.edu.au/wp-content/uploads/2016/06/Transport-Infrastructure-Promises.pdf">promises in the election campaign</a> – A$5.4 billion worth. </p>
<p>Yet, of this, only $800 million was for projects that Infrastructure Australia had fully <a href="https://theconversation.com/election-2016-will-the-infrastructure-promises-meet-australias-needs-61140">assessed as nationally significant</a> and worth doing. One-quarter was for projects that sit nowhere on Infrastructure Australia’s list – because they’re not nationally significant, because they’re not worth doing, or because nobody has even asked Infrastructure Australia whether they justify public money.</p>
<p>With the federal budget under pressure, a more disciplined approach to investment is vital. The Commonwealth should defer funding for any project until Infrastructure Australia has assessed it as nationally significant and worth doing. </p>
<p>In other words, a large number of campaign promises to fund specific projects should be deferred. If these promises are allowed to override disciplined project assessment – as they have over the last decade – then vested local interests override the public interest.</p>
<p>To institutionalise this approach, the National Land Transport Act and the Federal Financial Relations Act should be amended so that the minister may commit public money only after an independent evaluation of the project and the business case (by Infrastructure Australia, for example) has been tabled in parliament.</p>
<h2>A cost-effective alternative to building roads</h2>
<p>Before building more roads, which will only fill up soon with more cars, there is unexplored potential to improve the use of what already exists.</p>
<p>The existing road network could work much harder for us. Within cities, every driver who sets out onto a congested road imposes costs on all the other drivers through his or her contribution to overall congestion. </p>
<p>Over and above the financial costs of buying a car and filling up with fuel, congestion represents a further cost to our time and convenience. This cost is real, and it’s larger than it needs to be.</p>
<p>Governments could consider changing this from a time cost to a money cost. In other words, instead of sitting in traffic jams, people could pay to drive on freer-flowing roads. The choices we would face would be: pay to use key roads at peak hour; take our trip at another time; take a different route; or avoid the trip altogether. Some people will take one option; others will take another.</p>
<p>A small change in the number of cars on a stretch of road can make a big change to congestion on that road. The <a href="http://www.mynrma.com.au/blog/2014/01/29/did-you-know-a-5-decrease-in-trips-during-school-holidays-increases-travel-speeds-by-50/">NRMA estimates</a> that when traffic volume drops by 5%, speeds increase by 50%.</p>
<p>The federal government could encourage states to take two small preliminary steps. First, it could require states to include an in-principle application of road pricing on any new urban transport proposal seeking Commonwealth funding. Second, it could provide policy support and funding to any state willing to trial congestion pricing in its capital cities.</p>
<p>With these small and reversible steps, city dwellers and governments could start to find out whether the benefits of congestion charging are worth it. We may find, as the designer of the highly successful Stockholm congestion charge <a href="https://www.ted.com/talks/jonas_eliasson_how_to_solve_traffic_jams/transcript?language=en">said</a>:</p>
<blockquote>
<p>If you do it right, people will actually embrace the change, and if you do it right, people will actually even like it.</p>
</blockquote>
<hr>
<p><em>Tomorrow in the <a href="https://theconversation.com/au/topics/advice-to-government">series</a>: schools and higher education.</em></p>
<p><em>Read more: <a href="https://theconversation.com/a-snapshot-of-the-challenges-facing-the-new-turnbull-government-51661">A snapshot of the challenges facing the new Turnbull government</a>.</em></p><img src="https://counter.theconversation.com/content/61668/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marion Terrill 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>Bigger cities increase wages, output and innovation, but also problems of congestion and pollution. Congestion charges can minimise these problems by dramatically improving traffic flows.Marion Terrill, Transport Program Director, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/618022016-07-13T19:39:10Z2016-07-13T19:39:10ZAustralia’s energy sector is in critical need of reform<p><em>A federal election is an opportunity to take stock of how Australia is doing, where it’s going, and what governments can do about it. This <a href="https://theconversation.com/au/topics/advice-to-government">series</a>, written by program directors at the Grattan Institute, explores the challenges that Australia faces and advocates policy changes for budgets, economic growth, cities and transport, energy, school education, higher education and health.</em></p>
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<p>Over the next few decades Australia, like many countries, faces the prospect of an energy transformation that will challenge every aspect of stationary and transport energy: from production, transmission and distribution to consumption and exports.</p>
<p>The ultimate imperative is to move our economy to a low-carbon footing, while ensuring that consumers don’t pay unnecessarily high costs. The <a href="http://www.scer.gov.au/">COAG Energy Council</a>, the decision-making body of federal and state energy and resources ministers, formally recognised the <a href="http://www.scer.gov.au/sites/prod.energycouncil/files/publications/documents/Energy%20Council%20Communique%20-%2023%20July%202015%20-%20FINAL_1.pdf">critical connection between energy and climate policy</a> last July. Later that year the world’s governments brokered the <a href="https://unfccc.int/resource/docs/2015/cop21/eng/l09r01.pdf">Paris climate agreement</a>, with Australia promising to cut emissions to <a href="http://www4.unfccc.int/submissions/INDC/Published%20Documents/Australia/1/Australias%20Intended%20Nationally%20Determined%20Contribution%20to%20a%20new%20Climate%20Change%20Agreement%20-%20August%202015.pdf">26-28% below 2005 levels by 2030</a>. </p>
<p>Yet this need for wholesale transformation has emerged at a time when Australia’s policy structures are already struggling to maintain the delivery of affordable and reliable electricity, after the reforms of the 1990s lost momentum in the 2000s.</p>
<p>It also comes at the end of a three-year period in which the Coalition government’s actions to address these challenges made modest progress at best. Tony Abbott’s administration <a href="https://theconversation.com/obituary-australias-carbon-price-29217">repealed the carbon price</a>, <a href="https://theconversation.com/renewable-energy-deal-gives-no-certainty-over-coming-decades-42329">wound back the Renewable Energy Target</a> and established the <a href="https://theconversation.com/au/topics/emissions-reduction-fund">Emissions Reduction Fund</a> (ERF), which has contracted for more than 100 million tonnes of CO₂ emission reductions at less than A$14 per tonne. But it largely sidestepped the reforms needed to address emerging energy trends such as low demand growth, the rise of distributed wind power generation, the boom in domestic solar power and the dramatic growth of coal seam gas. </p>
<p>The upshot was that 2013-16 has left the energy industry with huge uncertainty about what is in store, at a time when it craves reassurance more than ever.</p>
<p>This leaves the new government with three key priorities. As elsewhere, its capacity to deliver will be constrained by the reality of the new parliament. </p>
<p>The first priority will be to build on its current climate change policy to create a stable, long-term approach that will lead the transition to a low-emissions economy. The government will be able to do this through a combination of administrative action and bipartisan support. </p>
<p>The second priority is to revive energy market reform through the COAG Energy Council. The third is to maximise the value of Australia’s gas resources and ensure continuity of supply. </p>
<p>These are not politically partisan issues but they do require galvanising cooperation across state and territory governments.</p>
<p>In addition, the government should develop a renewed reform agenda for the COAG Energy Council – one that addresses all these issues with a focus on outcomes, rather than being mired in process as it has been so far.</p>
<h2>Climate policy</h2>
<p>For most of this century Australia has lacked a <a href="http://grattan.edu.au/wp-content/uploads/2016/04/870-Climate-Phoenix.pdf">credible, long-term climate policy</a>. Instead we have had toxic debate, <a href="https://theconversation.com/carbon-tax-axed-how-it-affects-you-australia-and-our-emissions-28895">policy bonfires</a> and a mishmash of unstable and unpredictable <a href="http://grattan.edu.au/report/sundown-sunrise-how-australia-can-finally-get-solar-power-right/">federal and state policies</a> that have threatened industry investment, not to mention the environment itself. </p>
<p>Existing government policy (the ERF and its new <a href="https://www.environment.gov.au/climate-change/emissions-reduction-fund/publications/factsheet-erf-safeguard-mechanism">safeguard mechanism</a>, plus the reduced Renewable Energy Target) is likely to be enough to meet Australia’s 2020 emissions target – a 5% reduction on 2000 levels by 2020 – but far from enough to meet the stronger 2030 target, or indeed to get us to zero net emissions thereafter.</p>
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<a href="https://images.theconversation.com/files/130337/original/image-20160713-12372-1waxoou.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/130337/original/image-20160713-12372-1waxoou.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/130337/original/image-20160713-12372-1waxoou.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=452&fit=crop&dpr=1 600w, https://images.theconversation.com/files/130337/original/image-20160713-12372-1waxoou.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=452&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/130337/original/image-20160713-12372-1waxoou.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=452&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/130337/original/image-20160713-12372-1waxoou.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=568&fit=crop&dpr=1 754w, https://images.theconversation.com/files/130337/original/image-20160713-12372-1waxoou.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=568&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/130337/original/image-20160713-12372-1waxoou.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=568&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>An economy-wide carbon market is the best way to cut emissions and <a href="http://grattan.edu.au/wp-content/uploads/2014/05/077_report_energy_learning_the_hard_way.pdf">meet Australia’s targets without excessive cost to the economy</a>. But in the absence of the political will to implement this, we must work with what we have. </p>
<p>The government should therefore <a href="https://www.environment.gov.au/climate-change/emissions-reduction-fund/publications/factsheet-erf-safeguard-mechanism">strengthen the safeguard mechanism</a>, which puts pollution limits on 140 of Australia’s biggest-emitting businesses, so that it becomes an <a href="http://grattan.edu.au/wp-content/uploads/2016/04/870-Climate-Phoenix.pdf">effective market mechanism</a>. This approach has the potential to gain the bipartisan support that energy companies seek as they consider investments in long-lived assets.</p>
<p>Technologies that might produce plentiful low-emission electricity will still be expensive and risky in the short term. To overcome these market barriers, the government will need to expand its existing clean energy research funding to <a href="http://grattan.edu.au/wp-content/uploads/2014/04/Building_the_bridge_report.pdf">reduce the costs of moving to a low-emissions economy</a>.</p>
<h2>Electricity reform</h2>
<p>Energy market reform began in the early 1990s but stalled in the 2000s. Privatisation became politicised and governments baulked at introducing electricity prices that more closely reflect the costs of producing power. Meanwhile, prices climbed by <a href="http://grattan.edu.au/wp-content/uploads/2014/03/804-shock-to-the-system.pdf">60% in real terms for all customers</a>.</p>
<p>The government should work through the COAG Energy Council to <a href="http://grattan.edu.au/wp-content/uploads/2014/04/178_energy_putting_the_customer_back_in_front.pdf">push for network privatisation</a> and <a href="http://grattan.edu.au/wp-content/uploads/2014/03/804-shock-to-the-system.pdf">tariff reform</a>, with the goal of delivering fairer and cheaper electricity bills.</p>
<p>In reforming power networks, two issues come first. </p>
<p>The process for defining the costs that networks can recover from customers takes too long and encourages networks to overspend. It must be overhauled. </p>
<p>Second, governments must decide who will pay for surplus network infrastructure that was built to meet overly cautious reliability standards and exaggerated demand forecasts. This “gold-plating” is one of the main causes of power price rises over the past decade.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/130338/original/image-20160713-12377-1kqvnle.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/130338/original/image-20160713-12377-1kqvnle.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/130338/original/image-20160713-12377-1kqvnle.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=516&fit=crop&dpr=1 600w, https://images.theconversation.com/files/130338/original/image-20160713-12377-1kqvnle.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=516&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/130338/original/image-20160713-12377-1kqvnle.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=516&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/130338/original/image-20160713-12377-1kqvnle.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=649&fit=crop&dpr=1 754w, https://images.theconversation.com/files/130338/original/image-20160713-12377-1kqvnle.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=649&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/130338/original/image-20160713-12377-1kqvnle.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=649&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Network infrastructure has been built to meet the peak demand that occurs only once every summer in most states, yet customers are charged on their year-round use. Pricing to reflect the cost of meeting this peak would make electricity prices <a href="http://grattan.edu.au/wp-content/uploads/2014/07/813-fair-pricing-for-power.pdf">fairer and cheaper for all consumers in the long term</a>.</p>
<p>Federal and state governments have <a href="https://scer.govspace.gov.au/files/2014/05/COAG-Energy-Council-Communique-11-Dec-2014-FINAL2.pdf">agreed</a> to introduce new network tariffs from the start of 2017. But progress is slow, as the losers from policy changes have loud voices that have deterred risk-averse state ministers.</p>
<p>This lack of tariff reform is one of the factors (alongside the large subsidies on offer) that have prompted so many Australian households to install solar panels. By our analysis, the benefits have <a href="http://grattan.edu.au/wp-content/uploads/2015/05/822-sundown-sunrise5.pdf">fallen far short of the costs</a> so far. </p>
<p>Yet as solar panels and battery storage continue to get cheaper, cost-reflective network tariffs will encourage consumers to combine them fairly and effectively.</p>
<p>Since its creation in 1998, the <a href="https://theconversation.com/au/topics/national-electricity-market">National Electricity Market</a> has helped to provide affordable, reliable and secure electricity supplies. But now it faces new challenges that were not envisaged when it was established.</p>
<p>Thanks to the surge in household solar and other factors, more and more electricity is now generated at zero or even negative marginal cost. A similar situation in European markets has led to <a href="https://www.theguardian.com/business/2016/mar/09/eon-blames-losses-on-power-price-slump-and-german-renewable-push">serious financial losses for major energy companies in Germany</a>. This is forcing governments in Britain, Germany and elsewhere to introduce supplementary markets for generation capacity even if it is not used. </p>
<p>Although Australia is not yet in this situation, the government should initiate a review of the National Electricity Market to avoid such threats arising.</p>
<h2>Gas markets</h2>
<p>Opening the east coast domestic gas market to international buyers has <a href="https://theconversation.com/heading-north-how-the-export-boom-is-shaking-up-australias-gas-market-52963">pushed up prices</a>. These pressures are exacerbated by the lack of progress toward a transparent and liquid wholesale market and by patchwork regulation of <a href="http://grattan.edu.au/wp-content/uploads/2014/04/189_getting_gas_right_report.pdf">unconventional extraction such as fracking</a>.</p>
<p>The government should lead the implementation of recommendations from the recent Australian Competition and Consumer Commission’s <a href="https://www.accc.gov.au/system/files/1074_Gas">East Coast Gas Inquiry</a> to create a more effective and efficient market. Reverting to protectionism by reserving a proportion of gas for domestic use is not the answer; in the long run this would reduce the availability of domestic gas and drive up prices, while also <a href="http://grattan.edu.au/wp-content/uploads/2014/10/817-gas-at-the-crossroads.pdf">reducing export revenue</a>.</p>
<h2>Fixing the COAG Energy Council</h2>
<p>A <a href="https://scer.govspace.gov.au/workstreams/energy-market-reform/review-of-governance-arrangements/">recent review</a> of how Australia’s energy markets are governed identified problems with the COAG Energy Council and the operation of the government agencies that implement its decisions. </p>
<p>In a way this serves as a neat illustration of the problems facing the government if it is going to get energy policy right. Governance, rules, regulations and policy settings are desperately dry issues. But if Australia gets them right, the problems people really care about – like expensive energy bills and climate change – will be much easier to solve.</p>
<hr>
<p><em>Tomorrow in the <a href="https://theconversation.com/au/topics/advice-to-government">series</a>: schools and higher education.</em></p>
<p><em>Read more: <a href="https://theconversation.com/a-snapshot-of-the-challenges-facing-the-new-turnbull-government-51661">A snapshot of the challenges facing the new Turnbull government</a></em></p><img src="https://counter.theconversation.com/content/61802/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tony Wood owns shares in several energy and resources through his superannuation fund. </span></em></p>Australia’s energy policy has lost its way over the past couple of decades, which is unfortunate because the challenges – to move to a low-carbon economy without high prices – have never been tougher.Tony Wood, Program Director, Energy, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/618592016-07-12T19:45:03Z2016-07-12T19:45:03ZMany Australians pay too much for health care – here’s what the government needs to do<figure><img src="https://images.theconversation.com/files/130163/original/image-20160712-13847-8qrbqx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australians contribute almost a fifth of all health care spending through fees.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-185740/stock-photo-man-pulling-money-out-of-wallet.html?src=ImAwC4nvLvaHqSUBIDf5zQ-1-106">Cre8tive Images/Shutterstock</a></span></figcaption></figure><p><em>A federal election is an opportunity to take stock of how Australia is doing, where it’s going, and what governments can do about it. <a href="https://theconversation.com/au/topics/advice-to-government">This series</a>, written by program directors at the Grattan Institute, explores the challenges that Australia faces and advocates policy changes for budgets, economic growth, cities and transport, energy, school education, higher education and health.</em></p>
<hr>
<p>Health policy was an important factor in the election outcome, but one of the most important issues in the health sector – out-of-pocket costs – was mostly ignored.</p>
<p>Labor made health policy a battleground at this election, claiming the poll was a “<a href="http://www.6minutes.com.au/News/Latest-news/Shorten-describes-poll-as-a-Medicare-referendum">referendum on Medicare</a>”. The ALP tried to whip up alarm by <a href="https://theconversation.com/is-medicare-under-threat-making-sense-of-the-privatisation-debate-61308">highlighting the risks of “privatisation”</a>, bringing out former prime minister <a href="https://theconversation.com/alp-uses-bob-hawke-to-boost-its-campaigning-on-health-60918">Bob Hawke as part of its campaign</a>.</p>
<p>The Coalition naturally tried to keep health off the front page, even <a href="https://theconversation.com/liberals-shielding-minister-sussan-ley-from-debate-about-health-61309">avoiding the normal National Press Club debate</a> between the health minister and her shadow. </p>
<p>In health policy, <a href="https://theconversation.com/the-policy-agenda-what-the-government-should-do-now-61518">as elsewhere</a>, the second Turnbull government’s wafer-thin majority constrains what is possible. Some changes can be implemented administratively or with immediate bipartisan support. Some will only occur if the government takes the time and political capital to build public support for the proposal. Other changes should simply be ditched.</p>
<p>In the first basket of “can dos” are reforms to help the health system adapt to emerging needs. Examples of these reforms include better <a href="https://theconversation.com/more-australians-can-stay-healthier-and-out-of-hospital-heres-how-55746">managing chronic diseases</a> such as diabetes and improving <a href="https://theconversation.com/a-good-death-australians-need-support-to-die-at-home-32203">end-of-life care</a>. </p>
<p>The Coalition has started down this path with its <a href="https://theconversation.com/time-for-better-chronic-disease-management-in-primary-care-57035">“health care homes”</a> initiative in the 2016 budget, but <a href="http://insidestory.org.au/reshaping-medicare">more needs to be done</a>. </p>
<p>Other “can dos” include reducing waste in the health system, such as <a href="https://theconversation.com/public-hospital-efficiency-gains-could-save-1-billion-a-year-23779">excessive hospital costs</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/130165/original/image-20160712-9285-1mkhg2a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/130165/original/image-20160712-9285-1mkhg2a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/130165/original/image-20160712-9285-1mkhg2a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/130165/original/image-20160712-9285-1mkhg2a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/130165/original/image-20160712-9285-1mkhg2a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/130165/original/image-20160712-9285-1mkhg2a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/130165/original/image-20160712-9285-1mkhg2a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Reducing unnecessary hospital admissions will cut costs and improve efficiency.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-392468545/stock-photo-comfortable-hospital-bed.html?src=RbdFUjYKfpUXVvPGRSQNyg-1-58">inomasa/Shutterstock</a></span>
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<p>Other reforms to improve efficiency may be harder but are achievable with a campaign to build public support. Examples include reducing <a href="https://theconversation.com/australians-are-undergoing-unnecessary-surgery-heres-what-we-can-do-about-it-46089">unnecessary hospital admissions</a>, addressing <a href="https://theconversation.com/blood-money-pathology-cuts-can-reduce-spending-without-compromising-health-54834">high pathology payments</a> (for blood and tissue tests), <a href="http://grattan.edu.au/report/premium-policy-getting-better-value-from-the-pbs/">reducing pharmaceutical prices</a> in line with the additional benefit from the drug and <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/EDD3D98E14376FC8CA257F5E00186D45/$File/Consultation-paper-public-submissions_MBS-review-final.pdf">updating the Medicare schedule</a> to remove outdated and inappropriate items.</p>
<p>Finally, some measures need to be ditched. Removing <a href="https://theconversation.com/election-factcheck-has-the-coalition-cut-bulk-billing-for-pathology-and-scans-to-make-patients-pay-more-61360">bulk-billing incentives</a> for pathology and diagnostic imaging (such as X-rays and MRIs) is destined to join increased Pharmaceutical Benefits Scheme (PBS) co-payments as a zombie measure in the Senate. </p>
<p>If the government recognises political reality and takes these measures off the table, it would leave room to build support to address an emerging issue in health care: over-reliance on out-of-pocket costs.</p>
<h2>Out-of-pocket costs are high and rising</h2>
<p>In most countries, universal coverage, especially for medical care, meant the end of all financial barriers to access, including out-of-pocket payments. </p>
<p>In Australia, by contrast, consumers contribute almost a fifth of all health care spending through fees. <a href="http://www.oecd-ilibrary.org/social-issues-migration-health/out-of-pocket-expenditure-on-health_oopexphtl-table-en">Among wealthy countries</a>, we have the third-highest reliance on out-of-pocket payments. </p>
<p><strong>The proportion of health expenditure met by out-of-pocket payments in Australia is high compared to other advanced economies (2011 or nearest year)</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/130154/original/image-20160712-9307-p6uu3d.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/130154/original/image-20160712-9307-p6uu3d.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/130154/original/image-20160712-9307-p6uu3d.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=645&fit=crop&dpr=1 600w, https://images.theconversation.com/files/130154/original/image-20160712-9307-p6uu3d.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=645&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/130154/original/image-20160712-9307-p6uu3d.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=645&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/130154/original/image-20160712-9307-p6uu3d.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=810&fit=crop&dpr=1 754w, https://images.theconversation.com/files/130154/original/image-20160712-9307-p6uu3d.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=810&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/130154/original/image-20160712-9307-p6uu3d.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=810&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><span class="source">Grattan Institute</span></span>
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<p>Since 2007, the average out-of-pocket payment across all Medicare out-of-hospital services where a payment is required has risen by 61% in real terms; about 5.5% above inflation every year. </p>
<p>Fees have grown <a href="http://grattan.edu.au/wp-content/uploads/2014/07/Grattan_Institute_submission_-_inquiry_on_out-of-pocket_costs_-_FINAL.pdf0.">fastest in very remote areas</a>.</p>
<h2>Out-of-pocket costs stop people receiving care</h2>
<p>While Australia <a href="https://theconversation.com/australian-health-care-where-do-we-stand-internationally-30886">has a more efficient health system than most countries</a>, rising health costs are a big source of our budget woes.</p>
<p>For the last government, increasing co-payments seemed like an easy solution. The Abbott government introduced a <a href="https://theconversation.com/higher-health-co-payments-will-hit-the-most-vulnerable-29590">A$7 GP co-payment</a> and a <a href="https://theconversation.com/hidden-cost-of-increasing-drug-co-payment-poses-a-high-risk-37482">A$5 PBS co-payment</a>. Neither was popular. </p>
<p>The latter measure is still stuck in the Senate and the former was substituted by a <a href="http://www.abc.net.au/news/2015-03-05/duckett-we-still-have-a-gp-co-payment-by-stealth/6282094">GP co-payment by stealth</a>: a six-year <a href="https://theconversation.com/confused-about-the-medicare-rebate-freeze-heres-what-you-need-to-know-59661">freeze on Medicare Benefits Schedule fees</a> that will push GPs to eventually increase co-payments themselves. </p>
<p>However, raising co-payments is unlikely to save Australia money in the long run. Moving an expense from the Commonwealth budget to household ones just reallocates costs, it does not reduce them. </p>
<p>There is <a href="http://link.springer.com/article/10.1007/s10198-013-0526-8">strong evidence</a> from Australia and around the world that co-payments stop people seeking health care. This can save money when it prevents unnecessary visits, but it costs patients, the health system and the broader economy <a href="https://theconversation.com/higher-health-co-payments-will-hit-the-most-vulnerable-29590">much more</a> when simple health problems become complex ones. Worse still, out-of-pocket costs hit poorer people hardest.</p>
<p><strong>About one in every 20 people who needed to see a GP skipped the visit or delayed it because of cost (2014-15)</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/130311/original/image-20160713-17957-14ykkpr.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/130311/original/image-20160713-17957-14ykkpr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/130311/original/image-20160713-17957-14ykkpr.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=426&fit=crop&dpr=1 600w, https://images.theconversation.com/files/130311/original/image-20160713-17957-14ykkpr.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=426&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/130311/original/image-20160713-17957-14ykkpr.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=426&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/130311/original/image-20160713-17957-14ykkpr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=535&fit=crop&dpr=1 754w, https://images.theconversation.com/files/130311/original/image-20160713-17957-14ykkpr.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=535&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/130311/original/image-20160713-17957-14ykkpr.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=535&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
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<span class="attribution"><span class="source">Grattan analysis of ABS survey, Patient Experiences in Australia: Summary of Findings, 2014–15</span></span>
</figcaption>
</figure>
<h2>Fixing the out-of-pocket problem</h2>
<p>Government regulates out-of-pocket costs for some services, but for others they are set at the whim of the provider. Safety nets mitigate the cumulative impact for some health care costs but not others. </p>
<p>The result is a confusing situation where consumers cannot be sure of the total costs they face in a year. General practitioners generally do not know the costs their patients face from specialists they refer to, and have no way of knowing what costs safety nets are meeting for their patients.</p>
<p>Safety nets are supposed to keep total out-of-pocket expenses from getting too high. Yet some people have health needs in several different areas, covered by separate Medicare and PBS safety nets, or in areas with no safety net at all, such as dental care. These people often face high out-of-pocket costs simply because they have many health problems.</p>
<p>There are only two tiers for our safety nets: general patients and concession card holders. Rather than smoothly tapering support, the cut-off between categories affects many lower and middle-income households. </p>
<p>In addition, eligibility for support isn’t always tied to ability to pay. About 80% of mature-age households with a million dollars in net assets receive welfare benefits, which often makes them eligible for concession card rates.</p>
<p>The first step in reducing the impact of out-of-pocket costs is to rationalise the confusing array of safety nets and out-of-pocket policies. </p>
<p>On average, every visit to a general practitioner is associated with <a>at least one prescription</a>, and about half also have further diagnostic tests ordered. One set of these costs – the prescriptions – have defined and known co-payments; the doctor and diagnostic visits do not. </p>
<p>These costs should be harmonised so that patients do not suffer a double whammy of having to meet separate, significant out-of-pocket thresholds for different health care interactions.</p>
<p>The second step should be to put pressure on out-of-pocket costs through transparency. Patients and general practitioners should know what specialists charge for common procedures. Medicare already holds information about the fees that specialists and general practitioners charge for each consultation or procedure. It should publish this.</p>
<h2>Time to get rid of financial barriers</h2>
<p>Medicare was designed to eliminate financial barriers to access to medical care. It has been a great success in some ways with about 85% of all visits bulk-billed. </p>
<p>Yet we should <a href="https://www.mja.com.au/insight/2016/21/bulk-billing-indicator-no-longer-useful">no longer measure affordability just with bulk-billing rates</a>. These rates vary across the country and do not measure the cost barriers faced by people where bulk-billing rates are low. And a focus on bulk-billing ignores the other areas of health care where people may have to pay out-of-pocket.</p>
<p>Improving health care access by improving safety net arrangements and transparency about who charges what will be a major challenge for the new government. With careful attention to system waste, and maybe by increasing the Medicare levy a little, Medicare can fulfil its mission of providing access to health care without breaking the budget.</p>
<p><em>Tomorrow in the <a href="https://theconversation.com/au/topics/advice-to-government">series</a>: energy and cities.</em></p>
<p><em>Read more: <a href="https://theconversation.com/a-snapshot-of-the-challenges-facing-the-new-turnbull-government-51661">A snapshot of the challenges facing the new Turnbull government</a></em></p><img src="https://counter.theconversation.com/content/61859/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Duckett 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>Health policy was an important factor in the election outcome, but one of the most important issues in the health sector – the impact of out-of-pocket costs – was mostly ignored.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/516612016-07-12T05:51:55Z2016-07-12T05:51:55ZA snapshot of the challenges facing the new Turnbull government<p><em>With a federal election outcome, it’s time to take stock of how Australia is doing, where it’s going, and what governments can do about it. In partnership with the Grattan Institute, we explore the pressing policy challenges facing Australia in terms of economic growth, budgets, cities, transport, energy, health, school education, and higher education.</em></p>
<p><em>The infographic below sets out these challenges at a glance.</em></p>
<hr>
<p><iframe id="tc-infographic-209" class="tc-infographic" height="400px" src="https://cdn.theconversation.com/infographics/209/bd9332da5bfa19f626eb93bc5d8b5a8b05f7e514/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p><img src="https://counter.theconversation.com/content/51661/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>In the late 1990s, Andrew Norton was a policy adviser to a Liberal education minister. He was also appointed by a Liberal minister in 2013 as co-reviewer of the demand driven funding system for higher education.</span></em></p><p class="fine-print"><em><span>Through his superannuation fund, Tony Wood owns shares in several energy and resources companies that would have an interest in the topic covered by this article.</span></em></p><p class="fine-print"><em><span>Jim Minifie, John Daley, Marion Terrill, Peter Goss, and Stephen Duckett do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>What are the key policy challenges facing the new Turnbull government in terms of economic growth and budgets, cities, transport, energy, school education, higher education and health?John Daley, Chief Executive Officer, Grattan InstituteAndrew Norton, Program Director, Higher Education, Grattan InstituteJim Minifie, Productivity Growth Program Director, Grattan InstituteMarion Terrill, Transport Program Director, Grattan InstitutePeter Goss, School Education Program Director, Grattan InstituteStephen Duckett, Director, Health Program, Grattan InstituteTony Wood, Program Director, Energy, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/615182016-07-11T19:40:38Z2016-07-11T19:40:38ZThe policy agenda: what the government should do now<figure><img src="https://images.theconversation.com/files/129966/original/image-20160711-24101-1e9xd5v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Malcolm Turnbull sets about the business of his returned government with the Secretary of Prime Minister and Cabinet, Martin Parkinson.</span> <span class="attribution"><span class="source">AAP/Lukas Coch</span></span></figcaption></figure><p><em>A federal election is an opportunity to take stock of how Australia is doing, where it’s going, and what governments can do about it. This series, written by program directors at the Grattan Institute, explores the challenges that Australia faces and advocates policy changes for budgets, economic growth, cities and transport, energy, school education, higher education and health.</em></p>
<hr>
<p>Australia has a new government. After an eight-week campaign, and a week of watching the count, its members will doubtless be delighted to switch from electioneering to governing. Their first and most important task is to choose their priorities. </p>
<p>What problems and opportunities face the government? And what can it do about them? This article, the first in a series for <em>The Conversation</em>, draws on the Grattan Institute’s recently released <a href="http://grattan.edu.au/report/orange-book-2016-priorities-for-the-next-commonwealth-government/">Orange Book 2016</a> to identify priorities for policy reform.</p>
<p>Above all, the government needs to promote economic growth in a sluggish global economy, and bring the budget back under control. Government should put a priority on those reforms that will make the biggest difference to the economy, to peoples’ lives, and to the budget. Priorities also need to take account of political realities. Top of the list should be those measures that either don’t require parliamentary approval, or where there is some chance of support from either the Labor Party or the Greens, given that mustering a Senate majority from among the independent Senators will mostly prove impossible.</p>
<h2>The new government faces some tough tasks</h2>
<p>After nearly 25 years of uninterrupted economic growth the economy risks running out of steam. The end of the mining investment boom and falling commodity prices have pushed down <a href="https://theconversation.com/election-factcheck-has-the-coalition-presided-over-the-most-sustained-fall-in-australian-living-standards-since-records-began-60327">per capita national incomes</a> over the last five years. GDP growth is subdued, although there’s a good chance that Australia will complete a mining cycle without ending in recession, for the first time in its history, as Grattan Productivity Growth Program Director Jim Minifie argues today in <a href="http://theconversation.com/what-the-government-should-do-now-economic-growth-61517">his article on the economic outlook</a>. </p>
<p>But the prospects for faster economic growth are dim. Economic growth has tended to be slower across the developed world since before the global financial crisis. Although opinions differ on the causes, many believe that growth will be slower for longer.</p>
<p>Irrespective of what <a href="https://grattan.edu.au/news/budget-2016-both-parties-budget-plans-are-simply-hoping-for-the-best/">it may have argued during the election campaign</a>, the incoming government won’t be able to put off the task of budget repair for much longer. Commonwealth budgets haven’t come close to balancing for eight years. Interest on the accumulating debt now consumes 4% of government income, or as much as the Commonwealth spends on public hospitals. Younger generations will be taxed more to pay for today’s spending. Every $40 billion deficit, the norm for each of the last eight years, <a href="https://grattan.edu.au/report/the-wealth-of-generations/">forces households aged 25 to 34 to pay an extra $10,000 in tax over their working lives</a>.</p>
<p>Our large capital <a href="https://theconversation.com/sydneys-stuck-in-traffic-putting-the-brakes-on-women-and-the-west-38047">cities, transformed in recent years by economic success, have growing pains</a>. House prices are very high relative to incomes. Home ownership is falling for all households aged under 55. Most new housing is far from the city centres where most new jobs are being created. More people spend longer in traffic getting to work. The physical divide between rich and poor is growing.</p>
<h2>Our political system is not dealing well with these challenges</h2>
<p>The incoming government must face the challenges of reviving our economy and fixing the budget against a backdrop of growing community anxiety towards globalisation and distrust of political leaders. About 26% of the electorate voted for minor parties in the House of Representatives, and about 34% in the Senate. Australia’s swing away from mainstream politics is a milder form of the UK vote for Brexit and the US Presidential bid of Donald Trump. Yet it shows that progress is not inevitable towards the more open economy and flexible markets that have increased prosperity over recent decades.</p>
<p>The pace of economic reform has already slowed in Australia. There have been fewer economy-wide reforms over the last two decades than in the 1980s and 1990s, perhaps because many have largely been completed, and because there was less impetus for reform while the mining boom buoyed the economy. </p>
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<img alt="" src="https://images.theconversation.com/files/129965/original/image-20160711-24105-hf214a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/129965/original/image-20160711-24105-hf214a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/129965/original/image-20160711-24105-hf214a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/129965/original/image-20160711-24105-hf214a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/129965/original/image-20160711-24105-hf214a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/129965/original/image-20160711-24105-hf214a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/129965/original/image-20160711-24105-hf214a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>In the absence of genuine reform, politicians are often creating <a href="https://www.quarterlyessay.com/essay/2012/06/great-expectations">great expectations</a> that far exceed what government can do. Meanwhile, they are failing to act on the things that they can control. </p>
<p>At the same time, vested interest groups, emboldened by past successes, are more vocal than ever in protecting their interests. This election campaign saw at least two major industry-sponsored scare campaigns against policies of the major parties – on <a href="https://www.theguardian.com/commentisfree/2016/feb/24/the-property-industrys-mining-tax-style-negative-gearing-campaign-is-a-test-for-democracy">negative gearing</a> and cuts to <a href="https://theconversation.com/how-pathology-australia-advocates-for-patient-care-to-achieve-big-corporate-profits-60568">public subsidies for pathology services</a> – while the debate on <a href="http://www.smh.com.au/federal-politics/federal-election-2016/conservative-bedfellows-divided-over-superannuation-changes-20160510-gortf6.html">superannuation tax breaks</a> is sure to heat up again after the election. Often the public interest has few friends.</p>
<h2>A way forward</h2>
<p>But politics doesn’t make reform impossible. Many reforms don’t require legislation at all. For example, the Commonwealth could change how it accounts for higher education HELP loans so that the costs of the scheme are more transparent - along with the benefits of reform. </p>
<p>Other reforms, such as strengthening markets for electricity generation and distribution, require support from states and territories, but not from the Commonwealth Parliament. </p>
<p>Where legislation is required, negotiating with the Labor Party or the Greens is likely to matter more than negotiating with the cross-bench in the new parliament. On current counting, the Coalition will be able to pass legislation if either the Labor Party or the Greens support it. Without their support, legislation will only pass if the Coalition lines up eight out of 10 of the minor party senators – a formidable task, given their disparate views of life.</p>
<p>Some measures will fit with the ideological predispositions of the Labor Party or the Greens. Often the real obstacle for such reforms will be the Coalition party room. For example, the government should tighten the <a href="https://www.environment.gov.au/climate-change/emissions-reduction-fund/publications/factsheet-erf-safeguard-mechanism">Direct Action safeguard mechanism</a> so that it evolves into a carbon pricing scheme, but that will be unpopular with many Coalition MPs.</p>
<p>Other measures won’t immediately win opposition support, but it’s possible to imagine the government building the public case for reform, and then using public support to encourage at least one of the Labor Party or the Greens to play ball. For example, the government might be able to build the case to revise the Medicare schedule so that it pays less for operations where technology has reduced the cost, and practitioners are just reaping extra profits. Yet this won’t be easy. In 2009, the Labor Party proposed just such a reform – and then <a href="http://www.smh.com.au/national/roxon-takes-a-step-back-on-cataract-rebates-20091028-hl33.html">abandoned it</a> in the face of vigorous lobbying by medical practitioner groups.</p>
<p>Ironically, though, the public seems to be up for making tough choices. <a href="http://www.essentialvision.com.au/wp-content/uploads/2016/04/Essential-Report_160426.pdf">Surveys suggest</a> that people understand the need to take on big challenges such as budget repair, and are even prepared to contemplate slaying sacred cows such as negative gearing. A government that is prepared to forcefully articulate the public interest could stare down interest groups and win public support for a brave and powerful reform agenda.</p>
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<img alt="" src="https://images.theconversation.com/files/128933/original/image-20160701-30625-1hnvjie.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/128933/original/image-20160701-30625-1hnvjie.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/128933/original/image-20160701-30625-1hnvjie.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/128933/original/image-20160701-30625-1hnvjie.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/128933/original/image-20160701-30625-1hnvjie.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/128933/original/image-20160701-30625-1hnvjie.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/128933/original/image-20160701-30625-1hnvjie.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<h2>Reform priorities</h2>
<p>So what should the new government do? There are many reforms that can contribute to economic growth, improve the quality and reduce the cost of government services, and bring budgets back into balance</p>
<p>The remainder of this series will discuss the growing evidence base that shows what reforms would work in tax and budgets, economic growth, cities and transport, energy, school education, higher education and health. We will focus on those changes that would make the biggest difference to the lives of Australians, and where the politics are at least tractable, even if they are not going to be easy.</p>
<p>Our politics can implement this reform agenda by using the evidence that has been assembled, and robustly articulating the public interest in the face of interest groups. Australia has a proud history of enlightened public policy. Many countries would be delighted to swap our problems for theirs. Australia can continue to be the lucky country. This series will show how we can make our own luck.</p>
<hr>
<p><em><strong>Key challenges facing the government</strong></em></p>
<p><iframe id="tc-infographic-175" class="tc-infographic" height="5200" src="https://cdn.theconversation.com/infographics/175/da7bb00597951bea2bf89cb39b291e42f27304e8/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p><img src="https://counter.theconversation.com/content/61518/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities.</span></em></p>With nearly 25 years of uninterrupted economic growth at risk of coming to an end, the new government must make budget repair a priority.John Daley, Chief Executive Officer, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/615172016-07-11T19:39:03Z2016-07-11T19:39:03ZWhat the government should do now: economic growth<p><em>With a federal election outcome, it’s time to take stock of how Australia is doing, where it’s going, and what governments can do about it. In partnership with the Grattan Institute, we explore the pressing policy challenges facing Australia in terms of tax and budgets, cities, transport, energy, school education, higher education and health.</em></p>
<hr>
<p>The Coalition has scraped into a second term. How credible is its economic growth program, and what else should it do to strengthen growth?</p>
<p>The good news is that the transition from the mining boom is proceeding about as well as <a href="http://grattan.edu.au/report/the-mining-boom-impacts-and-prospects/">should have been expected</a>. It is true that national income per person is lower than five years ago (see figure below) and that wages are also stagnating. But these changes are mostly due to falling resource prices. GDP growth, while subdued in recent years, has been fast enough to <a href="http://abs.gov.au/AUSSTATS/abs@.nsf/Lookup/6202.0Main+Features1May%202016?OpenDocument">keep unemployment in check</a> (though average hours per worker have declined), and it even <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/5206.0Mar%202016?OpenDocument">shows signs of picking up</a>. And while non-mining investment has remained flat despite record low interest rates, it’s not unrealistic to hope that Australia will, for the first time in our history, complete a mining cycle without ending in recession. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=415&fit=crop&dpr=1 600w, https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=415&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=415&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=522&fit=crop&dpr=1 754w, https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=522&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/129994/original/image-20160711-24092-14g0i3s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=522&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>But deeper economic challenges persist. Global growth remains weak, with China’s economy likely to slow, and the European Union more fragile since the UK’s Brexit vote. Slow growth and rising inequality helped drive the populist anger and political instability we now see in the EU and US.</p>
<h2>The first term leaves a mixed legacy</h2>
<p>The Coalition’s first term economic policy achievements were a mixed bag. The <a href="https://theconversation.com/turnbull-seeks-ideas-boom-with-innovation-agenda-experts-react-51892">2015 innovation package</a> and the decision to <a href="https://theconversation.com/harper-response-is-good-economics-and-smart-politics-51191">implement most of the Harper Review competition policy recommendations</a> were standout initiatives. <a href="http://dfat.gov.au/about-us/publications/Documents/economic-modelling-of-australias-north-asia-ftas.pdf">Free trade agreements</a> with China, Japan and South Korea will offer <a href="http://dfat.gov.au/about-us/publications/Documents/economic-modelling-of-australias-north-asia-ftas.pdf">real, if modest, benefits</a>. Others, such as signing the Trans-Pacific Partnership (TPP) and <a href="https://theconversation.com/greg-hunt-approves-adanis-carmichael-coal-mine-again-experts-respond-49227">accelerated environmental project approvals</a>, carry risks and costs that could outweigh their benefits. </p>
<p>And some initiatives, such as <a href="https://theconversation.com/direct-action-not-giving-us-bang-for-our-buck-on-climate-change-59308">scrapping a broad-based carbon price</a>, were outright mistakes. Critically, in its first term the Coalition <a href="https://theconversation.com/three-critical-tests-for-budget-2016-how-does-it-fare-58144">failed to get the budget under control</a>. </p>
<h2>Growth plans leave many good ideas off the table</h2>
<p>The coalition campaigned on jobs and growth, but in reality its growth program is patchy. The signature policy – phased cuts in the company tax rate – would ultimately <a href="http://www.treasury.gov.au/%7E/media/Treasury/Publications%20and%20Media/Publications/2016/TWP2/Downloads/PDF/Treasury-Working-Paper-2016-02.ashx">increase national income by about 0.6%</a>. But business tax cuts could drag on national income for up to a decade, as foreign investors pay less tax from the beginning, while benefits from greater investment take time. </p>
<p>Other parts of the coalition plan are far from being fleshed out. The government will seek to implement its already announced innovation and competition policy agendas. It plans to ratify the TPP, though the TPP itself may now be doomed to fail, as neither of the likely US presidential candidates supports it. </p>
<p>The Turnbull government also plans to pursue further trade agreements with the European Union, India, and Indonesia. On the downside, its Smart Cities Plan, which aims to finance improvements in urban transport and housing, lacks detail. And its plan to slowly reduce the budget deficit relies mostly on revenue increases that may not materialise. </p>
<p>Overall, the plan for jobs and growth is far from complete. The government should consider five further options to increase economic growth. </p>
<h2>Taxes and work</h2>
<p>First, the government should shift the tax base towards taxes that do less to discourage investment and work. For example, cutting the capital gains discount to 25%, and limiting negative gearing, would create space to reduce other more distorting taxes. So would <a href="http://grattan.edu.au/publications/reports/post/game-changers-supporting-materials/">broadening the GST base and/or increasing the GST rate</a> (while cutting income tax and adjusting welfare payments), though benefits may be modest. </p>
<p>General property taxes should replace stamp duties, which deter people from moving to a home that suits their current needs. A 0.5% levy on unimproved land values could raise enough to replace stamp duties nationwide, would provide a more stable tax base for states, spread the tax burden more fairly, and <a href="https://grattan.edu.au/report/property-taxes/">add up to $9 billion a year to GDP</a>. While these are state matters, the Commonwealth could consider providing incentive payments to states to make the switch, since its revenues will ultimately rise as the reforms increase incomes.</p>
<p>Second, government should help people stay in work, or get back to work. Female labour force participation in Australia is below that of many high-income economies. Low rates of take-home pay deter some women from <a href="http://grattan.edu.au/wp-content/uploads/2015/12/melbourne-economic-forum-size-of-gvt-CORRECTED.pptx.pdf">joining the labour force or working full-time</a>. The system of family payments and childcare support needs an overhaul to encourage greater female labour force participation.</p>
<p>Older Australians, too, are less likely to work than in many comparable economies. The age at which people can access superannuation or the age pension <a href="https://grattan.edu.au/report/game-changers-economic-reform-priorities-for-australia/">affects when some workers decide to retire</a>. Australia is already increasing the pension eligibility age from 65 to 67, and phasing up from 55 to 60 the age at which people can begin to draw down their superannuation. Government should further increase pension and superannuation access ages.</p>
<h2>Flexibility and innovation</h2>
<p>Third, government should remove remaining impediments to flexibility in the economy. <a href="http://grattan.edu.au/publications/reports/post/game-changers-supporting-materials/">Reforms over the past 30 years</a> (including a floating exchange rate, low barriers to trade and capital flows, and the shift to enterprise bargaining) have helped the economy adjust through the mining boom. But many policies, including a <a href="http://grattan.edu.au/publications/reports/post/game-changers-supporting-materials/">wide array of regulation</a>, <a href="http://grattan.edu.au/publications/reports/post/game-changers-supporting-materials/">occupational licensing</a>, and industry support such as <a href="http://www.pc.gov.au/research/completed/antidumping-developments">anti-dumping tariffs that delay the exit of less efficient firms</a>, still limit flexibility. </p>
<p>Fourth, government should remove barriers to innovation, while only funding programs that are supported by evidence that they actually help innovators at a reasonable cost. The National Innovation and Science Agenda will cut barriers to new business creation and improve research-business collaboration. </p>
<p>The vast majority of innovations used in Australia are produced elsewhere. Government should remove barriers to the local spread of global innovations such as cloud computing and <a href="https://grattan.edu.au/report/peer-to-peer/">peer-to-peer business models</a> such as Uber and Airbnb. States are responsible for barriers such as taxi regulation, while labour regulation and tax are largely Commonwealth responsibilities. Intellectual property rules <a href="http://www.pc.gov.au/inquiries/current/intellectual-property#report">can also impede the spread of productive ideas</a>. </p>
<h2>Sector-specific reforms</h2>
<p>Fifth, if much of the low-hanging fruit of economy-wide reform has been picked, many opportunities in individual sectors remain. The superannuation industry charges fees of more than $16 billion a year, or about 1% of GDP. Government should <a href="http://grattan.edu.au/wp-content/uploads/2015/04/821-super-savings2.pdf">introduce tougher competition, close excess accounts, and push subscale funds to close</a>. </p>
<p>More generally, <a href="http://www.ppge.ufrgs.br/giacomo/arquivos/regulacao2/stigler-1971.pdf">regulated industries can “capture” the government agencies that regulate them</a>, so it can be valuable to bolster institutions that provide countervailing pressure. The Harper <a href="http://competitionpolicyreview.gov.au/files/2015/03/Competition-policy-review-report_online.pdf">Competition Policy Review</a> recommended creating a new national competition body, the Australian Council for Competition Policy, to advocate policy reform to increase competition. </p>
<p>Finally, investment in high quality infrastructure (along with rules such as user charging to encourage efficient use) promotes growth. Yet governments have already spent large amounts of money, <a href="http://grattan.edu.au/wp-content/uploads/2015/07/824-Fiscal-challenges-for-Australia2.pdf">not always wisely</a>, on new public infrastructure over the past decade. </p>
<h2>Political realities</h2>
<p>To enact any of these policies, the coalition will likely first seek support in the Senate from Labor or the Greens, rather than from the 10 or so independent and small party senators. Some policies are very unlikely to pass the Senate: for example, the proposed broad corporate tax cut is probably dead (though an alternative like an investment allowance might get up). </p>
<p>But some policies have a fighting chance, such as the City Deals, <a href="https://theconversation.com/will-budget-2016-deliver-a-new-deal-for-australian-cities-58581">borrowed from the UK</a> and new initiatives to cut superannuation costs. If many other policies (including family payments reform and the flexibility initiatives) are to have a chance of making it into law, the Coalition will first have to make a case for them and win public support. </p>
<p>The Coalition campaigned on its ability to provide jobs and growth. But its campaign platform for jobs and growth was far too narrow. To turn talk into action, it will need to win support for a much more expansive and ambitious agenda.</p><img src="https://counter.theconversation.com/content/61517/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jim Minifie 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>The government should consider five options to increase economic growth.Jim Minifie, Productivity Growth Program Director, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.