tag:theconversation.com,2011:/au/topics/national-commission-of-audit-8679/articlesNational Commission of Audit – The Conversation2016-06-09T20:08:40Ztag:theconversation.com,2011:article/606922016-06-09T20:08:40Z2016-06-09T20:08:40ZWhy the voice of Big Business is facing its biggest test<p><em>We see their spokespeople quoted in the papers and their ads on TV, but beyond that we know very little about how Australia’s lobby groups get what they want. This series shines a light on the strategies, political alignment and policy platforms of eight <a href="https://theconversation.com/au/topics/australian-lobby-groups">lobby groups that can influence this election</a>.</em></p>
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<p>If the Coalition loses this election there will be some insiders pointing fingers at the Business Council of Australia.</p>
<p>There have been times in the last three years when the Coalition has held the line on policies that looked to experienced observers like political suicide. To understand the power behind the throne a good place to start is the advocacy of Australia’s most powerful business lobby. </p>
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<p>The Business Council of Australia is the quintessential big business lobby. It is made up of the CEOs of about 100 of Australia’s largest companies and membership is by invitation. </p>
<p>It was established in the 1980s in the Hawke Keating era to present a big business case for economic reform. In the early days it eschewed direct lobbying on its members’ interests. Instead it operated more like a think tank focused on lifting the quality of public debate. It invested in blue sky research and developing a rigorous case for opening up and deregulating the Australian economy. </p>
<p>The BCA sought to influence policy elites rather than the general public. The Council spoke through its most prominent CEOs. It got business leaders to speak directly with politicians and bureaucrats to influence decision makers and shift the political paradigm. </p>
<p>Its greatest achievements were the introduction of enterprise bargaining under the Hawke-Keating government and the introduction of the GST under the Howard government. As the energy for free market reforms dwindled in the middle years of the Howard government reports began to emerge that the BCA was losing its influence.</p>
<p>Part of the BCA’s challenge was that like all associations the nature of the organisation is shaped by its membership. <a href="http://hdl.handle.net/2299/2570">A 2006 study by Stephen Bell</a> revealed how the changing nature of Australian business was forcing the BCA to transform to survive. </p>
<p>In the study BCA insiders observed that globalisation had increasingly made Australia a “branch office economy”, where many of our largest companies are the local operations of large multinationals. In many cases the CEOs were internationals doing brief stints in Australia on short term contracts. They were less interested in committing time to Australia’s long term economic policies. When invited to join the Council they were more likely to ask the question “what’s in it for me?”. </p>
<p>According to the study, by 2006 the Council had accepted that to survive it needed to take on a much larger role in advocating the direct interests of its members. </p>
<p>During the Rudd/Gillard Labor government, senior economic ministers lamented that it had become much harder to engage business in broad discussions about the national interest. </p>
<p>Wayne Swan argued that it no longer seemed possible to engage business in the give-and-take cooperative enterprise that is complex, large scale reform. Swan argued that instead the business community seemed hellbent on aggressively pursuing their short term interests in a way that made real reform almost impossible. </p>
<p>While the members of the BCA became a dangerous enemy for Labor, they appear to have become an even more toxic friend to the Coalition. The Abbott government made a number of early missteps that left voters with the impression they were backing the big end of town at the expense of ordinary people. The BCA was an advocate for many of those moves.</p>
<p>The Coalition’s <a href="http://www.ncoa.gov.au/">National Commission of Audit</a> that provided the blueprint for its notorious 2014 budget was conducted by the former head of the BCA, Tony Shepherd. The BCA also backed the miners in the wind-back of the mining tax and opposed high income earners levy even though the federal budget was known to be in a structural deficit.</p>
<p>Prominent BCA members have also had unpopular wins, though it is not clear what the BCA’s role was on all these issues. BCA board members lobbied heavily for the roll back of laws requiring financial advisers to act in the best interests of their clients. BCA regular, Telstra’s interests were also served in the downgrading of the NBN to fibre to the node. </p>
<p>This year the BCA has had a number of setbacks as the political turmoil within the Coalition and the need to shore up Turnbull’s leadership has trumped meeting their demands. They have been defeated in their calls to raise the GST to fund a business tax cut, and in their opposition to the “effects test” in competition laws aimed at reigning in the power of the big supermarkets. </p>
<p>Liberal Party powerbroker Michael Kroger has also publicly rebuked BCA leadership for their lack of political judgement. Kroger called the resignation of CEO Jennifer Westacott when the BCA continued to campaign on the GST, attacking Turnbull’s credibility for failing to meet their demands, after the party had decided pursuing the issue was not politically viable. </p>
<p>The BCA has fallen back into line and is now coordinating a campaign of business lobby groups to support the Coalition’s business tax cuts policy. It is demonstrating its ability to roll out the big guns of Australian business to lend authority to Coalition policies. </p>
<p>However they are also fighting a rear guard action against a problem they helped create. It was its early policy missteps that tilled the soil for Labor to be able to run its election campaign on “fairness”. </p>
<p>Now it is doing its best to turn that around and paint Labor’s position as “anti-business” - but it is not clear whether that will wash with the electorate.</p>
<p>It appears that the BCA and its members have pushed the government hard this term, but at least some in the Coalition are now wary of the costs of kowtowing to them. It will remain to be seen whether it is allowed as much influence in a re-elected Coalition.</p>
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<p><em>Read the other instalments in The Conversation’s Australian lobby groups series <a href="https://theconversation.com/au/topics/australian-lobby-groups">here</a>.</em></p><img src="https://counter.theconversation.com/content/60692/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lindy Edwards 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 Business Council of Australia speaks for the big end of town - but does it still have the ear of government?Lindy Edwards, Senior Lecturer in Politics, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/416642015-05-12T23:28:30Z2015-05-12T23:28:30ZINFOGRAPHIC: Lessons in budget politics<figure class="align-center ">
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The Commission of Audit set the high water mark for reform designed to protect Australia against an economic downturn. One year on, little of it has made it into policy.Charis Palmer, Deputy Editor/Chief of StaffEmil Jeyaratnam, Data + Interactives Editor, The ConversationDiana Hodgetts, EditorLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/356672014-12-25T19:40:13Z2014-12-25T19:40:13Z2014, the year that was: Business + Economy<figure><img src="https://images.theconversation.com/files/67775/original/image-20141219-31557-1iurwfz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Amidst the hugging of cuddly animals, G20 leaders talked growth.</span> <span class="attribution"><span class="source">Andrew Taylor/G20 Australia/AAP</span></span></figcaption></figure><p>In April, Treasurer Joe Hockey set the tone for his economics policies <a href="http://www.joehockey.com/media/speeches/details.aspx?s=128">in a speech</a> in New York on what he referred to as ending the “entitlement culture”.</p>
<p>Hockey, who had <a href="http://australianpolitics.com/2012/04/17/hockey-speech-end-of-age-of-entitlement.html">given a defining speech in 2012</a> about ending the age of entitlement, outlined his mission:</p>
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<p>Waste and inefficiency in government spending must be rooted out. Government must live within its means.</p>
<p>Government benefits must be sustainable, fair and targeted to those in genuine need.</p>
<p>Welfare must be a safety net, not a cargo net. We cannot allow vast numbers in society to remain in an entitlement culture.</p>
</blockquote>
<p>Thus the script was set. But it has not exactly gone to to plan.</p>
<p>Recommendations of a wide-ranging <a href="https://theconversation.com/au/topics/national-commission-of-audit">Commission of Audit</a> set the scene for what many presumed would be a bloody May budget. Hockey announced a <a href="https://theconversation.com/infographic-federal-budget-at-a-glance-26658">A$29.8 billion deficit</a>; but it was clear few in the government realised how unpopular proposed cuts to <a href="https://theconversation.com/low-earners-do-most-in-budget-lifting-says-natsem-modelling-26981">family payments</a>, <a href="https://theconversation.com/federal-budget-2014-health-experts-react-26577">health reform</a>, programs targeting the unemployed (<a href="https://theconversation.com/regressive-measures-wont-help-youth-into-work-or-training-26700">particularly young people</a>) and measures affecting pensioners would prove to be.</p>
<p>With the budget quickly defined as unfair, the following six months would be marked by intense political gridlock and disastrous electoral fallout. Australians clear valued their entitlements.</p>
<p>December’s Mid-Year Economic and Fiscal Outlook (MYEFO) <a href="https://theconversation.com/government-reveals-40-billion-budget-deficit-clings-to-surplus-hope-35492">revealed a A$40.4 billion deficit</a>, which Hockey attributed to plunging iron ore prices leading to Australia’s worst terms of trade in 50 years, and a recalcitrant Senate blocking many of the government’s key spending cuts. </p>
<p>The government had managed to push through a number of measures, such as a <a href="https://theconversation.com/government-gets-round-senate-on-fuel-33538">fuel tariff</a>, the axing of Labor’s <a href="https://theconversation.com/carbon-tax-axed-how-it-affects-you-australia-and-our-emissions-28895">carbon</a> and <a href="https://theconversation.com/mining-tax-repealed-but-compulsory-super-increase-delayed-31181">mining</a> taxes and the implementation of a 2% deficit levy on high income earners. After a backflip from the Palmer United Party, the Coalition scrapped a planned increase in superannuation contributions and axed the low income super contribution, agreeing to dealy this a year. </p>
<p>However, other key initiatives such as $7 GP co-payment have been dropped (reintroduced as a cut to the Medicare rebate); redrafted, such as deregulation of the education sector, defeated before being put straight back onto the agenda by Education Minister Christopher Pyne; or in flux, such as the proposal to force jobseekers under 30 to wait six months to access welfare payments.</p>
<p>Nevertheless, the Coalition is still clinging to <a href="https://theconversation.com/government-reveals-40-billion-budget-deficit-clings-to-surplus-hope-35492">hopes of a surplus</a>, however distant - even as Australians learned a new economic term: <a href="https://theconversation.com/myefo-projections-signal-a-deepening-income-recession-35539">income recession</a>.</p>
<p>The government’s message has this year consistently been that of <a href="https://theconversation.com/au/topics/is-there-a-budget-crisis">budget crisis</a>, led by unsustainable government spending and debt.</p>
<p>But experts such as <a href="https://theconversation.com/australia-needs-higher-taxes-not-spending-cuts-34657">Professor Max Corden argue</a> that what Australia faces is a revenue crisis, which needs to be addressed through taxation. Despite calls for the <a href="https://theconversation.com/why-its-time-to-hike-the-gst-and-levy-an-inheritance-tax-35496">GST to be raised</a> and a re-think of generous tax measures for property owners such as <a href="https://theconversation.com/explainer-why-negative-gearing-is-bad-policy-21882">negative gearing</a> and tax subsidies for superannuants, <a href="https://theconversation.com/abbott-says-tax-and-federalism-changes-will-be-a-long-fight-33562">the government</a> is so far standing firm.</p>
<p>Integral to any decisions will be two important government white paper policy processes due to report next year, focusing on Australia’s <a href="https://theconversation.com/au/topics/renewing-federalism">system of federalism</a> - which among other things will tackle which tiers of government have fiscal responsibility for services - and taxation, now due next year.</p>
<p>Other key policies to look out for will be Professor Ian Harper’s final recommendations from the <a href="https://theconversation.com/harper-competition-review-seeks-widespread-change-experts-react-31963">Competition Policy Review</a>.</p>
<p>In business, there was much pain for Qantas this year as it sought to stem the bleeding caused by a savage domestic capacity war with Virgin and continuing losses in its international division. In February, the company announced it would cut 5000 jobs. Chief executive Alan Joyce was not one of those, despite <a href="https://theconversation.com/the-5000-qantas-job-losses-should-include-alan-joyce-23761">loud calls</a>. </p>
<p>In September the airline posted its largest ever loss - A$2.8 billion - that included a A$2.6 billion writedown on its fleet. Hamza Bendemra <a href="https://theconversation.com/did-qantas-bet-the-house-on-the-wrong-planes-30999">wondered at the time</a> whether it had invested in the wrong planes.</p>
<p>Meanwhile, Toyota joined Ford and Holden in <a href="https://theconversation.com/toyota-names-2017-end-australian-car-making-to-cease-experts-react-23037">announcing it would cease manufacturing cars in Australia</a> by 2017, leaving Australia without a local automotive industry. The move, while expected, <a href="https://theconversation.com/why-the-australian-economy-still-needs-manufacturing-31913">caused soul searching</a> over the future of Australia’s manufacturing industry more widely. </p>
<p>2014 was the year of the free trade agreement, with Australia finalising FTAs with <a href="https://theconversation.com/can-australia-win-from-ftas-in-the-asian-century-23295">South Korea</a> and <a href="https://theconversation.com/australia-japan-fta-finalised-after-long-gestation-25356">Japan</a> - and most notably <a href="https://theconversation.com/key-events-in-the-10-year-journey-towards-a-china-australia-fta-32328">China</a>, after a 10 year gestation.</p>
<p>Also on the international scene, in what many insiders dubbed a summit of two agendas, <a href="https://theconversation.com/au/topics/g20-brisbane">Australia’s first G20 summit</a> in Brisbane in November will be remembered for wrangling over climate change, and world leaders hugging koalas.</p>
<p>But beneath the superficial, there was news on the plan to crack down on tax cheats, and real movement to close the gender gap on female workforce participation.</p>
<p>G20 countries endorsed treasurer Joe Hockey’s 2.1% collective growth target with infrastructure and trade lead items. Achieving the US$2 trillion growth target by 2018 is far from certain, but by implementing a monitoring plan to keep G20 countries honest, Australia made accountability a key agenda item.</p>
<p>As the Australian economy is weaned off its reliance on the very much waning commodities boom, there is very much a wait-and-see sense about the future. Will there be further interest rate cuts? How will the newly inked free trade agreements, (notably that with Japan, which kicks off early next year) affect Australia’s economy? </p>
<p>Will Reserve Bank of Australia (RBA) governor Glenn Stevens be granted his wish for the Australian dollar to be at US75c by next December? We’ll bring it all to you in 2015. </p>
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<p><strong>Top five business and economy stories:</strong></p>
<ul>
<li><p><a href="https://theconversation.com/infographic-the-promises-vs-budget-measures-26660">Infographic: the promises vs budget measures</a></p></li>
<li><p><a href="https://theconversation.com/who-will-bear-the-60m-cost-of-the-search-for-mh370-26050">Who will bear the $60m cost of the search for MH370?</a></p></li>
<li><p><a href="https://theconversation.com/infographic-federal-budget-at-a-glance-26658">Infographic: federal budget at a glance</a> </p></li>
<li><p><a href="https://theconversation.com/a-thin-blue-line-how-facebook-deals-with-controversial-content-19966">A thin blue line: how Facebook deals with controversial content</a> </p></li>
<li><p><a href="https://theconversation.com/unemployment-coming-to-a-suburb-near-you-20762">Unemployment … coming to a suburb near you</a> </p></li>
</ul>
<hr><img src="https://counter.theconversation.com/content/35667/count.gif" alt="The Conversation" width="1" height="1" />
In April, Treasurer Joe Hockey set the tone for his economics policies in a speech in New York on what he referred to as ending the “entitlement culture”. Hockey, who had given a defining speech in 2012…Helen Westerman, Business + Economy EditorLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/295282014-07-29T04:08:20Z2014-07-29T04:08:20ZRich but untapped data resource will let us make policy work better<figure><img src="https://images.theconversation.com/files/55015/original/qx56gn5k-1406529341.jpg?ixlib=rb-1.1.0&rect=22%2C14%2C893%2C616&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The failure to publish collected data is hindering understanding of the effectiveness and failures of government programs.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/lod2/13432873994/in/photolist-mt1ZrL-msZC9M-mt2brw-mt2Pkm-mt2q1A-msZsYH-msZomB-mt1DXp-mt2wKN-msZMqp-mt12sv-mt1jwb-mt2cE3-msZ9zF-msZ54B-mt1986-msZVBH-msYSpK-mt23oC-msZPmr-mt1RRW-mt1akz-mt1o4S-msYD2n-mt19zZ-mt11aH-msZ4h6-msZ1gX-msZdWz-msYHYX-msZJKV-msZdPH-mt1SUh-msZpEP-msZ6q4-mt15Nv-msZLsF-mt1AXh-mt22om-mt1qvp-mt2CYu-mt2LSW-msZWoT-mt1iaJ-mt1JRn-mt1ipc-mt1bsM-msZCoX-mt12KM-mt159V">Flickr/LOD2project/European Data Forum</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>The <a href="http://www.dss.gov.au/our-responsibilities/review-of-australia-s-welfare-system">McClure Review of Welfare</a>, much like the <a href="http://www.ncoa.gov.au/">Commission of Audit</a> report, is unlikely to win the Abbott government many new fans in the social services sector. However, for those involved in social policy, it is worth noting the interim report’s findings on open data. Both reports offer an insightful way to inform public discussion of social policy while improving its effectiveness.</p>
<p>Opening government data involves making it freely available for use in a machine-readable format and permitting re-use without restrictions. The McClure review’s <a href="http://www.dss.gov.au/our-responsibilities/review-of-australia-s-welfare-system/a-new-system-for-better-employment-and-social-outcomes-full-version-of-the-interim-report">interim report</a> finds that: </p>
<blockquote>
<p>Improving data collection nationally, together with evaluation of services, will assist in designing effective services for disadvantaged groups and targeting those services to those most in need.</p>
</blockquote>
<p>The Commission of Audit points out that the failure to publish collected data is:</p>
<blockquote>
<p>… hindering insights into whether some of the fastest-growing government programmes are meeting their objectives or being delivered effectively.</p>
</blockquote>
<h2>Squandering the power of knowledge</h2>
<p>Current legislation in Australia greatly restricts the data available for social policy research. While special exemptions allow for the use and disclosure of health information where necessary for some research (into public health, for instance), this does not generally apply for social policy research. </p>
<p>We can study how soft-drink dependence is transmitted between generations more readily than studying the intergenerational transmission of welfare dependence. We can study how someone catches a cold in a way that we can’t study how they lose their job or their family. We can study what causes someone to pass on an illness in a way that we can’t study how they fall into crime.</p>
<p>The <a href="http://www.alrc.gov.au/inquiries/invasions-privacy">Australian Law Reform Commission</a> recognised this when it reviewed privacy legislation. The commission recommended extending public health exemptions to human research more generally. Importantly, technology that allows data to be disaggregated and de-identified exists, ensuring that we also address important privacy concerns.</p>
<p>As <a href="http://en.wikipedia.org/wiki/Daniel_Patrick_Moynihan">Daniel Patrick Moynihan</a> put it so eloquently, everyone is entitled to their own opinion, but not to their own facts. The trouble is there are lots of facts sitting in government data that the public cannot access. Often enough, not even the bureaucrats can.</p>
<p>These facts, were they available to everyone, could help us investigate the effectiveness of programs. They will help us discover what programs work and why, and how to further improve them. And they may also reveal ineffective programs, whereupon we should improve them or change approach.</p>
<h2>The pay-off continues for decades</h2>
<p>As Professor <a href="http://en.wikipedia.org/wiki/James_Heckman">James Heckman’s</a> work reveals through his analysis of data over numerous interventions, a whole lot of social programs might be justified as forms of redistribution but they were not necessarily efficient – they don’t increase total economic output. By contrast, Heckman <a href="http://jenni.uchicago.edu/human-inequality/papers/Heckman_final_all_wp_2007-03-22c_jsb.pdf">shows</a> that well-designed early childhood interventions make huge contributions not just to equity but to the economy more generally. </p>
<p>They are the gift that keeps on giving, rescuing at-risk kids from poor prospects. This pays dividends for decades afterwards in the form of higher employment, higher incomes, better educational outcomes, lower crime and on it goes.</p>
<p>Heckman’s research, among other studies in this field, has helped shape our understanding of the importance of early childhood interventions and improved our ability to make the case for investing in this area.</p>
<p>Open data gives us the tools to do the same kind of investigation in many other areas. It enables the identification of what works and what isn’t working. Both outcomes allow us to continuously improve. </p>
<p>Do we really want ineffective programs to continue? Do we really want to make short-term budgetary savings only to see total costs rise as poor educational, employment and other social outcomes hit the budget balance for decades to come?</p>
<h2>Are we to be a dumb or smart country?</h2>
<p>Those who do the difficult job of providing social services for little reward or thanks are increasingly evaluating program effectiveness. Their evaluations could be made much easier and cost-effective with greater access to existing data.</p>
<p>Speaking at the recent launch of a report by Lateral Economics, <a href="http://www.omidyar.com/insights/open-business">Open For Business: How Open Data Can Help Achieve the G20 Growth Target</a>, Commission of Audit chair Tony Shepherd made some pertinent points on the need for open data. Among them was the fact that a country as sophisticated as Australia should be more advanced in making data available. </p>
<p>As the Commission of Audit notes: </p>
<blockquote>
<p>Unlike many other countries, Australia makes relatively little use of its public data resources even though the initial costs of making data available would be low relative to the future flow of benefits … A failure to exploit this evidence would be a missed opportunity given Australia’s demographic and structural budget challenges.</p>
</blockquote>
<p>This is why the less sensational recommendations on open data should see the light of day. We need to be driving every effort to improve the evaluation of support services and programs so that we can demonstrate what is working and where it isn’t, fix it.</p>
<p>Making data more available for social policy research is a relatively non-contentious way to improve the effectiveness of social programs. It would have the added benefit of informing the policy debate. We can’t afford not to.</p>
<hr>
<p><em>This piece was co-authored by Amanda Robbins, Director of Equity Economics and previously a Treasury official and political adviser.</em></p><img src="https://counter.theconversation.com/content/29528/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nicholas Gruen is CEO of Lateral Economics and Chairman of the Centre for Social Innovation. This piece was co-authored by Amanda Robbins, a Director of Equity Economics and previously a Treasury official and political adviser.</span></em></p>The McClure Review of Welfare, much like the Commission of Audit report, is unlikely to win the Abbott government many new fans in the social services sector. However, for those involved in social policy…Nicholas Gruen, Fellow, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/288572014-07-09T20:13:58Z2014-07-09T20:13:58ZGP co-payments: why price signals for health don’t work<p>Arguments against health co-payments proposed in May’s federal budget will come to the fore again shortly as the Senate considers whether it will pass the necessary legislation. </p>
<p>The government’s attempt to introduce a $7 compulsory co-payment for visits to doctors and pathology services has attracted strong criticism. The measure is fundamentally flawed because it’s a crude attempt at fitting an economic concept to an industry for which it’s inappropriate. </p>
<p>The health co-payments have been described by the government (and its National Commission of Audit) as a price signal. Both have indicated that they feel it’s needed to reduce “unnecessary” visits to the doctor and use of pathology services. </p>
<p>Price signals work by encouraging consumers to think about whatever it is they are about to buy, and whether it’s worth the cost. They assume some consumer knowledge of the product, and its value. We rely on prices right through the economy to temper consumption. </p>
<p>But this economic common device is inappropriate for primary care because health care is not a commodity or luxury service; it is an essential service that can create much greater downstream costs if not used at the right time.</p>
<h2>Excluding from care</h2>
<p>The <a href="http://whqlibdoc.who.int/whr/2010/9789241564021_eng.pdf">aim of modern health funding</a> is twofold: to ensure people have universal protection against the potentially large financial risk posed by sudden illness and that even people who are poor and sick are not excluded from beneficial health care.</p>
<p>That means co-payments have to have at least some exceptions, otherwise they will do what price signals traditionally do and keep some people out of the market. In other words, without exceptions for people who cannot afford this new cost, they will be excluded from care.</p>
<p>This makes health inequitable; the same co-payment will have a larger deterrent effect on low-income groups than it does for high-income groups. </p>
<p><a href="http://www.ncbi.nlm.nih.gov/pubmed/18006176">Evidence from Australia</a> and <a href="http://www.ncbi.nlm.nih.gov/pubmed/15259043">other countries</a> shows that low-income groups are much more likely to rely on general practitioners than visit more expensive specialists. But it is this less expensive and more accessible (and accessed) service that’s being targeted by the government’s proposal.</p>
<h2>Information asymmetry</h2>
<p>The <a href="https://theconversation.com/factcheck-does-the-average-australian-go-to-the-doctor-11-times-a-year-26242">chairman of the National Commission of Audit</a>, <a href="https://theconversation.com/federal-budget-2014-health-experts-react-26577">the treasurer</a> and the <a href="http://www.couriermail.com.au/news/queensland/health-minister-peter-dutton-100-per-cent-confident-7-medicare-copayment-would-pass-the-new-senate/story-fnihsrf2-1226963070250">health minister</a> have all claimed that Australians go to the doctor too often. They suggest the introduction of a price signal for health in the form of co-payments will only reduce trivial visits. </p>
<p>This leads to the second problem with the measure: relying on patients to judge which doctor visits and treatments are valuable. </p>
<p>Doctors have a lot more training and knowledge than their patients and so patients rely on them for advice. Thus the aphorism, you need to see the doctor to tell you whether you need to see a doctor. </p>
<p>This is particularly the case with primary care, which often acts as the gate keeper to other health-care services. Patients go to their primary-care provider for many and varied reasons, but the value of those visits is only apparent after the fact. </p>
<p>Co-payments cannot operate as an effective price signal if people can’t judge the quality of what they’re buying. They will simply stop going if they cannot afford to pay.</p>
<p>The aim of introducing co-payments is to reduce costs to government but <a href="http://www.ncbi.nlm.nih.gov/pubmed/19756797">repeated studies have shown</a> that lower overall costs do not necessarily follow. </p>
<p>The combination of being highly price sensitive (or being unable to afford care) and the inability to judge when care is required means people who are less well-off are put off from seeking necessary care. And this just ends up being more expensive in the long run as illness is not prevented from getting worse. </p>
<h2>A better way</h2>
<p>One alternative is that people who can afford it should make the co-payment, while the needy are protected by safety nets and other special arrangements. But safety nets require various tests for eligibility, which introduce more “red tape” (or administrative) costs. </p>
<p>Maybe instead of creating new charging procedures and administrative costs, payments could be collected through the tax system, via general taxation or the Medicare Levy. </p>
<p>This levy was first introduced in 1984, and most recently increased to cover the National Disability Insurance Scheme. Perhaps now is the time to increase it or make it more strongly progressive than it is now (that is, have people on higher incomes contribute more) so it provides the health-care budget with greater surety.</p>
<p>Health services are not like other services; going to the doctor can’t be compared to a visit to the hairdresser or servicing your car. </p>
<p>What may seem like a simple price signal to some is a financial barrier to effective and timely care for others. The consequences of introducing co-payments are not just a loss of fairness but also a false economy. </p>
<p>Government budgets should be instruments of efficiency and equity. Australia is lauded for exactly these things in its health system, it would be a pity to lose our international reputation because of mistaken understanding of an economic concept. </p><img src="https://counter.theconversation.com/content/28857/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jane Hall receives funding from the NHMRC and APHCRI.</span></em></p><p class="fine-print"><em><span>Richard De Abreu Lourenco receives funding from the NHMRC.</span></em></p>Arguments against health co-payments proposed in May’s federal budget will come to the fore again shortly as the Senate considers whether it will pass the necessary legislation. The government’s attempt…Jane Hall, Professor of Health Economics and Director, Centre for Health Economics Research and Evaluation, University of Technology SydneyRichard De Abreu Lourenco, Research Fellow, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/268232014-05-18T20:06:58Z2014-05-18T20:06:58ZFunding stoush between the states and feds not so new<p>The states have some justification in being annoyed about being stripped of $80 billion worth of federal funding for health and education funding. These programs were negotiated on the basis of shared costs, only to have Canberra unilaterally limit its commitment. It now leaves the states to deal with any funding shortfall and deal with the political problem of justifying the likely reduction of services that will result.</p>
<p>But cutting transfers to the states after a period of lavish federal spending has been standard practice for the federal government since the Fraser government had to limit the funding hemorrhage left by open-ended commitments by the Whitlam government. The Hawke and Howard governments followed the same script when the Commonwealth had financial problems.</p>
<p>This cycle of the rapid growth of Commonwealth expenditure in areas of state administrative responsibility followed by a painful — for the states — curtailing of federal transfers, is a symptom of a broader dysfunction. The Commonwealth has much wider scope for revenue raising, while the states are responsible for the great bulk of services that Australians expect of government.</p>
<p>The result is that many state activities are subsidised by transfers of federal funds, usually with strings attached. The current picture of self-funded and jointly funded government activities is beautifully set out in section <a href="http://www.ncoa.gov.au/report/phase-one/part-a/3-1-what-do-governments-do-and-who-does-what.html">3.1 the Report of the National Commission of Audit</a>. </p>
<p>The short version is that, apart from defence and foreign affairs, the function of the Commonwealth is to write cheques, while the states do everything else (<a href="http://www.ncoa.gov.au/report/phase-one/part-a/3-4-how-does-the-commonwealth-provide-and-fund-its-services.html">note NCA chart 3.5</a>).</p>
<p>There are some advantages in this arrangement, both financial and political. On the finance side, a uniform system of taxation for income and consumption taxes is easy to understand and simplifies the process of implementation for individuals and companies. From the standpoint of politics, the states get the benefit of revenue they don’t have to collect themselves, and the system of transfers enables the federal government to intervene in areas of settled state administration.</p>
<p>There is another benefit whenever the goods and service tax (GST) is raised. Although the Commonwealth likes to talk of the GST as a state tax — the states do indeed get all the revenue raised by the GST — it is, thanks to the baneful influence of the High Court, a Commonwealth tax. </p>
<p>This enables the Commonwealth to decide how the GST revenue is to be shared between the states, a decision suitably laundered by a ridiculously <a href="https://www.cgc.gov.au/index.php?option=com_content&view=article&id=36&Itemid=152">complicated formula</a> administered by the Commonwealth Grants Commission. The formula is designed to transfer disproportionately more funds to the poorer states at the expense of the wealthier ones. This process of equalisation has both its defenders and its critics, but the strongest defenders are the smaller states with more limited own-source revenues.</p>
<p>As might be expected, the strongest critics are those states, particularly Western Australia, whose growth in own-source revenue is substantially negatively impacted by smaller transfers under the GST formula. But there are many economists who argue that the current system of equalisation is inefficient because it penalises growth. This is part of a wider argument against the Commonwealth monopoly control of income and consumption taxes, and its heavy involvement in state-delivered services.</p>
<p>These have the effect of limiting the ability of state governments to respond to the political preferences of their communities, and generally creating a spurious uniformity where there should be diversity and experimentation in the provision of health and education services, for which there is never a single best solution.</p>
<p>Federal budgets always bring these federal-state issues into play. On some issues, all states will feel that the federal government has reneged on previous agreements with the states, as is the case with the 2014 budget. On other issues, the states will be divided as is currently the case with the GST. Some would be willing to increase the rate of the GST if some conditions were met, and others, like South Australia and Tasmania, want no change in the rate or the formula for distribution because they are clear winners under the current system.</p>
<p>It is this kind of division among the states that has helped the Commonwealth to keep the system substantially unchanged since the 1980s. For those who would like major changes to the pattern of federal finance, including greater independent access by the states to major revenue sources, the Commonwealth’s response is likely to be — as it has been to the recommendations of the National Commission of Audit — yes, but not just at the moment.</p><img src="https://counter.theconversation.com/content/26823/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors 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>The states have some justification in being annoyed about being stripped of $80 billion worth of federal funding for health and education funding. These programs were negotiated on the basis of shared…Campbell Sharman, Senior Honorary Research Fellow in Political Science, The University of Western AustraliaDavid Hodgkinson, Associate Professor, Law School, The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/263232014-05-08T20:38:33Z2014-05-08T20:38:33ZThe state of Australia: cultural economy<figure><img src="https://images.theconversation.com/files/47831/original/2qmn5j9s-1399337504.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The state of culture in Australia? Basically, it’s in rude health</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/arselectronica/4308925550/in/photolist-7yLnrQ-7yN6nb-7BtLcP-7Bun38-7Bxzm5-7yGA2p-7yGA1k-7yNTJS-7BtLca-7yK7yR-7yK7xt-7Bybey-7Bun4V-7BuBXK-7Bybhy-7BybfC-7BuBVB-7BtLba-7BuyxV-7By4Vy-7By4Wo-7BuBWR-7By4Y9-7BuyzV-7By4Xj-7BA1om-7yLnmw-7Bwcn2-7yGA4i-7yGzWi-7Bwckp-5j1Q5m-5j1VAb-7yGzZH-7yN6uj-7BuyAT-7yGA2R-7BwciK-7yGA52-5j6Es1-7Buqgi-7yGzYX-7yGzY8-7yN6sj-7yNTP7-5j1KJw-7yN6tj-5j1TLj-5j1HBW-7BAJPd">Ars Electronica</a></span></figcaption></figure><p><em>In the lead-up to the budget, the story of crisis has been hammered home, but there’s more to a country than its structural deficit. So how is Australia doing overall? In this special series, ten writers to take a broader look at the State of Australia; our health, wealth, education, culture, environment, well-being and international standing.</em></p>
<hr>
<p>Naturally, federal budgets are fretful times for economic sectors underwritten by discretionary public expenditure. The arts and cultural sector is composed of parts that rely heavily on public funding (such as heritage, museums), parts that are a mixture of public and private (such as film, television, radio), and parts that are largely private (fashion, design, video games). Obviously, some parts of this sector therefore have more reason for trepidation than others.</p>
<p>The recent report from the <a href="http://www.ncoa.gov.au/">Commission of Audit</a> makes clear that there is indeed a budget crisis – although <a href="https://theconversation.com/australias-economy-is-healthy-so-how-can-there-be-a-budget-crisis-26036">not everyone</a> would see things that clearly. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/47835/original/ys3xmv6j-1399338216.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47835/original/ys3xmv6j-1399338216.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47835/original/ys3xmv6j-1399338216.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=905&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47835/original/ys3xmv6j-1399338216.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=905&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47835/original/ys3xmv6j-1399338216.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=905&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47835/original/ys3xmv6j-1399338216.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1137&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47835/original/ys3xmv6j-1399338216.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1137&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47835/original/ys3xmv6j-1399338216.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1137&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="source">Neal Sanche</span></span>
</figcaption>
</figure>
<p>But if we can accept for a moment there <em>is</em> such a crisis, political reality indicates it will need to be met with expenditure cuts as well as tax increases (although the Abbott government did make an election promise not to do this). As <a href="https://theconversation.com/commission-of-audit-and-the-arts-cuts-are-not-galore-26211">I previously noted on The Conversation</a>, those spending cuts – come May 13 – will probably not have much impact on arts and culture in this budget cycle (although the Commission did recommend that <a href="https://theconversation.com/proposed-merger-of-screen-australia-and-australia-council-spells-incoherence-26178">Screen Australia face funding cuts</a>).</p>
<p>So what then is the state of culture in Australia? Basically, it’s in rude health. We know this from government data itself. The Australian Bureau of Statistics collects a variety of statistics, although as with most aggregate economic data, there are several years of lag between gathering and reporting. </p>
<p>In February of this year the ABS released an experimental set of <a href="http://www.abs.gov.au/AusStats/ABS@.nsf/Latestproducts/5271.0Main%20Features12008-09?opendocument&tabname=Summary&prodno=5271.0&issue=2008-09&num=&view=">cultural and creative activity satellite accounts</a>. These are for 2008-9.</p>
<h2>How we’re doing now</h2>
<p>The ABS Satellite account for 2008-9 shows the contribution of the cultural and creative economy to Australian GDP was A$86 billion, which is almost 7%. Cultural activity makes up A$50b of that, and creative activity is larger, at A$80b (a A$42b overlap of cultural and creative explains how these numbers add up to A$86b).</p>
<p>Public cultural spending was A$7.6b. Some A$2.3b of this was from federal spending, about half of which was for public broadcasting.</p>
<p>A <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Main+Features40Jun+2011">2010 survey</a> carried out by the ABS indicates that Australians get a regular fix of culture, with about 85% reporting attending a cultural event, the most popular being cinema, but with music festivals, parks, and museums and galleries not too far behind.</p>
<p>Private cultural spending in 2010 was just under A$20b, with television, books and film capturing the bulk of that spending. According to the <a href="https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Tax-statistics/Taxation-statistics-2010-11/">Australian Tax Office</a>, just A$28 million was donated to cultural organisations from tax-deductible private ancillary funds.</p>
<p>By industrial sector, gross value added (GVA) estimates run to A$65b, the majority of which was broken down as:</p>
<ul>
<li>design (A$26b)</li>
<li>literature and print media ($13bn)</li>
<li>fashion ($12bn)</li>
<li>broadcasting, digital media and film ($8bn). </li>
</ul>
<p>The cultural and creative sector produces more GVA than health care, but less than construction.</p>
<p>There were about 1 million employees in this sector, with a quarter of those working in cultural and creative occupations outside the cultural and creative industries. There are more than 160,000 business or non-profit organisations in the cultural and creative industries sector.</p>
<p>International comparisons are plagued by definitional consistencies, but the ABS reports that Australia’s cultural and creative sector is very similar to that of Canada, Finland, Spain and the UK by most measures. (The largest, on a per-capita measure, is <a href="http://arts.gov/sites/default/files/nea_guide_white_paper.pdf">the US</a>.)</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/47834/original/gjn7r4sq-1399338094.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47834/original/gjn7r4sq-1399338094.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/47834/original/gjn7r4sq-1399338094.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47834/original/gjn7r4sq-1399338094.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47834/original/gjn7r4sq-1399338094.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47834/original/gjn7r4sq-1399338094.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47834/original/gjn7r4sq-1399338094.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47834/original/gjn7r4sq-1399338094.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&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="source">Yu Shibao</span></span>
</figcaption>
</figure>
<h2>How we got here</h2>
<p>There is much more detail that we could report from the above statistics. Yet we don’t need to worry too much about the lags in the data or the crude aggregations because a few overarching findings and long-run trends stand out.</p>
<p>The first is that the cultural and creative industries are large, vibrant and growing, and it is the creative, market-facing parts that are doing most of the heavy lifting.</p>
<p>That is entirely unsurprising, and nor – I will stress to add – is it an ideological point. These sectors can grow because they face not just millions of Australians but billions of global consumers. </p>
<p>The single most important factor driving and shaping the Australian cultural and creative economy is the global marketplace. And within that, Australia’s single greatest advantage is that we are a multi-cultural English-speaking nation, meaning that we have a comparative advantage in cultural content production for a global market.</p>
<p>The factor most accelerating this is the rise and spread of digital and computational technologies into all corners of cultural and creative production. This lowers the cost of production and distribution, increases access and variety, creates new platforms, and makes possible new business models.</p>
<p>A further significant trend is the long-run <a href="http://www.step.org/global-wealth-report">growth in household wealth globally</a>, not just in Australia. This increases the quantity of household spending and, consequentially, demand for cultural and creative content. Furthermore, <a href="http://www.theatlantic.com/international/archive/2013/07/does-art-help-the-economy/277842/">as demonstrated recently in the UK</a>, a strong case can be made connecting the growth of the arts and cultural sector with GDP growth. </p>
<p>These three factors – globalisation, technology and wealth – are not the only things that matter, but to a first order of approximation they are most of the story of how we got here.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/47833/original/m6h2qmzg-1399337844.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47833/original/m6h2qmzg-1399337844.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/47833/original/m6h2qmzg-1399337844.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=379&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47833/original/m6h2qmzg-1399337844.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=379&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47833/original/m6h2qmzg-1399337844.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=379&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47833/original/m6h2qmzg-1399337844.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=476&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47833/original/m6h2qmzg-1399337844.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=476&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47833/original/m6h2qmzg-1399337844.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=476&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">National Museum of Australia.</span>
<span class="attribution"><span class="source">Sam Ilić </span></span>
</figcaption>
</figure>
<h2>The next ten years</h2>
<p>The most important policy forces affecting the cultural and creative economy in Australia are not those from within Australian cultural and creative industry policy. They are the factors affecting Australia’s position <em>vis-à-vis</em> the global economy, digital technology development and adoption, as well as the factors affecting household wealth.</p>
<p>These are factors relating to bilateral trade agreements (and the intellectual property provisions written into these), the state of the National Broadband Network, Australian tax policy, the vibrancy of the mining sector, and so on, will likely continue to have a far greater impact on the state of Australia’s cultural economy than, say, specific details pertaining to the funding of the National Gallery.</p>
<p>What is likely to change? We might usefully distinguish among the cultural economy between those parts that are more in the manner of <a href="http://en.wikipedia.org/wiki/Public_good">public goods</a> (such as national galleries, museums, and so on) from those that are subsidised industries (such as public support to the film industry).</p>
<p>Public goods suffer <a href="http://www.standard.net/topics/opinion/2011/01/14/free-rider-problem">free-rider problems</a>, and are best supplied through public funding. We can expect that Australian cultural public goods will continue to be funded, and maybe even receive greater funding as Australian wealth grows.</p>
<p>But the subsidised industries part of the cultural sector will face a tougher time. These can survive through lobbying and scare campaigns. But they also tend to be eventually defeated by innovative competition and new technologies.</p>
<p>It’s unclear where, for example, <a href="https://theconversation.com/topics/the-future-of-public-broadcasting">Australia’s public broadcasters</a> fall on this spectrum. In the early years they very clearly were a public good. They still are in the case of some remote and regional broadcasting. But they are a purely subsidised industry in most urban markets and many media segments.</p>
<hr>
<p><strong>Further reading:</strong> <a href="https://theconversation.com/topics/state-of-australia">The State of Australia series</a></p><img src="https://counter.theconversation.com/content/26323/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jason Potts is affiliated with the Institute of Public Affairs.</span></em></p>In the lead-up to the budget, the story of crisis has been hammered home, but there’s more to a country than its structural deficit. So how is Australia doing overall? In this special series, ten writers…Jason Potts, Professor of Economics, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/262142014-05-06T04:15:04Z2014-05-06T04:15:04ZCommission of Audit’s poverty traps for low wage earners<figure><img src="https://images.theconversation.com/files/47836/original/wwtt4dqk-1399338543.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Commission of Audit's minimum wage recommendation shows no understanding of issues facing the low paid.</span> <span class="attribution"><span class="source">'No understanding anytime': artist: Richard Tipping, from the Signed Signs series, Brisbane Powerhouse, 2001. </span></span></figcaption></figure><p>There was nothing in the Commission of Audit’s terms of reference inviting it to make recommendations on the minimum wage. The Commission was asked to produce a report on “government expenditure”.</p>
<p>Yet the commission has <a href="http://www.ncoa.gov.au/report/phase-one/part-b/7-11-unemployment-benefits-and-the-minimum-wage.html">recommended fundamental changes</a> to the fixing of the minimum wage including, over time, cuts averaging 21% across the workforce, and up to 31% for South Australian workers and 33% for Tasmanians. (Minimum wages should fall, it recommends, from 56% to 44% of average weekly earnings, and vary between states.)</p>
<p>It also recommends (but <a href="http://www.ncoa.gov.au/report/appendix-vol-1/9-11-unemployment-benefits-minimum-wage.html">in an Appendix</a>, not the main volume of recommendations on which journalists focus) that the responsibility for fixing minimum wages be removed from the independent tribunal, the Fair Work Commission, and be made “administrative”; that is, put in the hands of government.</p>
<p>With minimum wage fixing transformed in this way, the setting of award wages for all workers on classifications above the minimum wage would also be affected, as award wage relativities are integrally related to minimum wages.</p>
<p>Indeed, it is difficult to see an independent industrial relations tribunal surviving such change. Other aspects of pay, such as penalty rates, overtime and allowances – previously the <a href="http://www98.griffith.edu.au/dspace/bitstream/handle/10072/29660/59864_1.pdf?sequence=1">target of the WorkChoices legislation</a> – would eventually be in the hands of government wage setters. The tribunal might end up just handling unfair dismissals and other disputes, as permitted by statute.</p>
<p>The recommendation is all the more peculiar because, other things being equal, a cut in minimum wages will lead to an increase in Commonwealth expenditures. At any given level of benefits, spending on benefits or pensions is higher when minimum wages are lower. This is because people on a lower minimum hourly wage, especially those working only part-time hours, would likely be eligible for higher partial pensions or benefits.</p>
<p>This would increase, not reduce, the deficit - counter to the stated purpose of the Commission.</p>
<p>The Commission cites one reason for abandoning independent minimum wage fixing – that cutting minimum wages would reduce unemployment. It cites one piece of evidence in support of this claim – that minimum wages are higher in Australia than in most other countries. It demonstrates this with a chart (below) depicting 2012 minimum wages in US dollar purchasing power parities in six countries chosen by the Commission.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=385&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=385&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=385&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=484&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=484&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=484&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Commission of Audit report, page 147.</span>
</figcaption>
</figure>
<p>Yet Australia has one of the lowest unemployment rates amongst developed countries – and the lowest amongst the six countries in the Commission’s selected comparison group, as shown below. Australia’s <strong><em>youth</em></strong> unemployment rate is also the lowest of the six. </p>
<p>The USA, with the lowest minimum wage, had the second highest unemployment rate among the six. There, over 600 economists, including seven Nobel laureates, <a href="http://www.epi.org/minimum-wage-statement/">petitioned for an increase in minimum wages</a>. The chart suggests no significant relationship between unemployment and minimum wages in the countries chosen by the Commission.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=428&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=428&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=428&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=538&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=538&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=538&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>So the Commission comes up with an idea that is outside its formal mandate, without supporting evidence and with deficit-increasing effects contrary to its stated objectives. How does it deal with the budgetary consequence?</p>
<p>By recommending a tightening of the withdrawal rate for pensions and benefits.</p>
<p>That is, if you are on a pension or benefit and working part-time, the Commission proposes that the government claw back 75% of each extra dollar you earn (rather than the present 50% or 60%). It would mean pensioners and beneficiaries pay <a href="http://www.theage.com.au/comment/hockeys-commission-of-audit-anything-but-responsible-20140505-zr4nz.html">much higher</a> “effective marginal tax rates” than even millionaires.</p>
<p>The situation where you lose most of the additional income you earn is often referred to as a “<a href="http://keithrankin.co.nz/kr_uws1991.pdf">poverty trap</a>” and seen as a <a href="http://www.civitas.org.uk/pdf/workDependencyBriefingApr05.pdf">barrier to labour force participation</a>.</p>
<p>After all, why would you work an extra five hours a week if, after the government clawed back its take, you only got to keep $3 per hour? It wouldn’t cover transport costs, let alone child care.</p>
<p>The Commission claims that these increased barriers to working will <a href="http://www.ncoa.gov.au/report/phase-one/part-b/7-11-unemployment-benefits-and-the-minimum-wage.html">“improve incentives to work”</a>. Yet earlier in its report it recognises that withdrawing family tax benefits as you earn more, along similar lines, <a href="http://www.ncoa.gov.au/report/phase-one/part-b/7-5-family-tax-benefits.html">“reduces the incentive to work”.</a> Such self-contradiction is breathtaking.</p>
<p>This is just one of several aspects of the Commission report which would tend to increase poverty, including amongst the low paid. Others include the Medicare co-payment, charging for access to public hospitals, increased co-payments for pharmaceuticals, raising the pension age, cutting wage subsidies for the long-term unemployed, cutting unemployment, sickness and widows benefits for those aged over 60, abolishing vocational education programs and reducing funding for affordable housing and homelessness.</p>
<p>When the Commission makes recommendations well outside its terms of reference, with outcomes contrary to its objectives, it tells you that the driving motivation is not really public finance. It is much more about ideology.</p>
<p>That should not surprise. The review was headed by the then president of the <a href="http://www.smh.com.au/federal-politics/political-news/commission-of-audit--who-what-why-and-where-20140501-zr2af.html">Business Council of Australia</a> (BCA). Its secretariat was also headed by a <a href="http://www.theguardian.com/world/2014/jan/15/australias-budget-deteriorating-audit-head">BCA secondee</a>.</p>
<p>The BCA has long railed against <a href="http://www.bca.com.au/docs/426B6865-33EA-462E-98F3-357D463EE2F2/workplace_relations_action_plan_for_future_prosperity_15-2-2005-pdf.pdf">minimum wages</a> and was an <a href="http://www.aph.gov.au/%7E/media/wopapub/senate/committee/eet_ctte/completed_inquiries/2004_07/wr_workchoices05/submissions/sub045_pdf.ashx">enthusiastic supporter</a> of WorkChoices.</p>
<p>The Coalition had to offer a <a href="http://www.smh.com.au/federal-politics/federal-election-2013/liberals-ire-as-abetz-goes-freelancing-20130822-2seh8.html">minimalist target on industrial relations</a> before the election, but needed an <a href="https://theconversation.com/just-how-much-can-we-really-expect-from-the-national-commission-of-audit-22310">“independent”</a> justification for major action after it.</p>
<p>The mutual interest in having a BCA-led “Audit” Commission after the election deal with such issues was inescapable. But it was certainly not in the interests of low paid workers, for whom the Commission shows no understanding.</p><img src="https://counter.theconversation.com/content/26214/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Peetz receives funding from the Australian Research Council and, as a university employee, has undertaken research over many years with occasional financial support from governments from both sides of politics, employers and unions.</span></em></p>There was nothing in the Commission of Audit’s terms of reference inviting it to make recommendations on the minimum wage. The Commission was asked to produce a report on “government expenditure”. Yet…David Peetz, Professor of Employment Relations, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/259202014-05-05T20:35:44Z2014-05-05T20:35:44ZThe state of Australia: health<p><em>In the lead-up to the budget, the story of crisis has been hammered home, but there’s more to a country than its structural deficit. So how is Australia doing overall? In this special series, ten writers take a broader look at the State of Australia; our health, wealth, education, culture, environment, well-being and international standing.</em></p>
<hr>
<p>In the lead up to this year’s <a href="https://theconversation.com/topics/federal-budget-2014">federal budget</a>, the government has been telling us short-term budget pain is needed to secure our long-term economic future. </p>
<p>The release of the National Commission of Audit <a href="http://www.ncoa.gov.au/">report</a> last week reinforced the government’s message that we need to do something more than tinker around the edges to get our economy back into shape. </p>
<p>But is Australia’s health system so bad it needs some kind of shock therapy to ensure it meets our future needs? </p>
<h2>How are we doing now?</h2>
<p>In 2011-12, Australia <a href="http://www.aihw.gov.au/publication-detail/?id=60129544658&tab=2">spent</a> 9.5% of GDP on health, just higher than the <a href="http://www.oecd.org/health/health-systems/oecdhealthdata2013-frequentlyrequesteddata.htm">OECD</a> average of 9.3%. Twenty years ago, Australia spent 7.1% of GDP on health, which was about the OECD average. These figures somewhat undermine the argument that we have a <a href="https://theconversation.com/rationing-care-vs-increasing-taxes-the-health-system-sustainability-myth-24774">crisis</a> in health spending. </p>
<p>When you take a look at the headline indicator for health status, life expectancy, Australians are doing fairly well by global standards. In 2011, the average <a href="http://www.compareyourcountry.org/health/index.php">life expectancy</a> for all Australians was 82 years, making us the seventh longest-living people among OECD nations. </p>
<p>There are some concerns, however, that we might not be living such long lives in the future. In 2011, <a href="http://www.oecd.org/els/health-systems/Health-at-a-Glance-2013-Chart-set.pdf">Australians drank</a> a little more alcohol than the OECD average (ten versus 9.3 litres per person per year). And we’re also a lot fatter: 21% of the population report being obese, compared with an OECD average of 15%. </p>
<p>While these indicators and global comparisons are useful high-level measures of our health system’s effectiveness, we need to get beyond averages to find the true picture. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/47634/original/dv4k7jkf-1399009976.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47634/original/dv4k7jkf-1399009976.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=849&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47634/original/dv4k7jkf-1399009976.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=849&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47634/original/dv4k7jkf-1399009976.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=849&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47634/original/dv4k7jkf-1399009976.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1066&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47634/original/dv4k7jkf-1399009976.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1066&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47634/original/dv4k7jkf-1399009976.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1066&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">More Australians are obese than the OECD average.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-117272272/stock-photo-bathroom-scale-overloaded-with-the-pointer-pointing-over-one-hundred-and-twenty-five-kg.html?src=aXQ4bCiNGYor23T6EWsg9w-1-25">Olivier Le Moal/Shutterstock</a></span>
</figcaption>
</figure>
<p>Most people know – whether from personal experience or just watching the news – that our health system does not serve us all equally well. Some people cannot get access to essential health care, such as pharmaceuticals, general practitioners or dentists, when they need it simply because of cost. </p>
<p>Other people, especially those living in rural and remote areas, struggle to get access to services close to home. </p>
<p>And with some types of elective surgery and cancer services now predominately done in private hospitals, people without private health insurance can find themselves waiting for an excessively long time for treatment. </p>
<p>If the care you get depends to some extent on where you live, what you earn or whether or not you have private insurance, we have a problem with equitable access to care. And it’s a serious one too because there is strong <a href="http://www.aihw.gov.au/socio-economic-disadvantage-and-health/">evidence</a> showing the people in most need of health care are the ones least able to afford it. </p>
<p>Getting timely access to care is one thing, but the quality of it matters too. In an <a href="http://www.commonwealthfund.org/%7E/media/Files/Publications/Fund%20Report/2010/Jun/1400_Davis_Mirror_Mirror_on_the_wall_2010.pdf">international survey by the Commonwealth Fund</a>, Australia’s performance was patchy on a series of quality measures. </p>
<p>When compared with seven other developed countries (including the United States, United Kingdom and New Zealand), Australia ranked sixth overall on a series measures looking at medical errors. </p>
<p>We ranked fourth on how well care was coordinated between different health professionals and third on how well care was centred around patient’s needs and preferences. </p>
<h2>How we got here - past reforms</h2>
<p><a href="https://theconversation.com/explainer-what-is-medicare-and-how-does-it-work-22523">Medicare</a> is the foundation of the Australian health system. The scheme, now 30 years old, is funded partly through our progressive tax system, and this is one of the key reasons our health system is considered to be <a href="http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2560789/pdf/10916912.pdf">relatively equitable</a>. While Medicare has served us well, the time is right to consider reforms. </p>
<p>Medicare was originally developed to help people get access to basic medical and hospital care; in the 1960s when the scheme was conceived, most people suffered from relatively straightforward acute health conditions (infections, for instance, and traumatic injuries). Treatment from GPs, medical specialists and public hospitals was often all people needed to be cured.</p>
<p>Now, with more than <a href="http://www.aihw.gov.au/chronic-diseases/">seven million</a> Australians having at least one chronic disease, people’s health needs are more complex. For some, a basic level of care might mean being treated by a GP, physiotherapist, dietitian, occupational therapist and an array of medical specialists. Medicare now funds a limited range of non-medical services, but much of what people need still falls outside its scope. </p>
<p>Medicare also works on an insurance model, with patients reimbursed for each visit to the doctor, and doctors paid largely on a fee-for-service basis. This model works reasonably well for one-off visits to the GP, but provides few <a href="https://theconversation.com/phase-out-gp-consultation-fees-for-a-better-medicare-13690">incentives</a> for health-care providers to work co-operatively and ensure patients receive coordinated care. </p>
<p>Over the last 20 years or so, federal and state governments have tried many different ways of improving the coordination of care. Some focused on reforms to financing health care, for example, the <a href="http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/CIB/cib9899/99CIB11">coordinated care trials</a> of the 1990s. </p>
<p>Others have tried to improve coordination by making changes to the governance of the health system at the local level – the more recent establishment of <a href="https://theconversation.com/let-medicare-locals-find-their-feet-and-improve-primary-care-22008">Medicare Locals</a> is an example. </p>
<p>In some <a href="http://sydney.edu.au/medicine/public-health/menzies-health-policy/research/homd.php">areas</a>, the long struggle to improve the coordination of care is starting to pay off, but these successes have yet to be replicated cross the country. </p>
<h2>What’s next?</h2>
<p>The National Commission of Audit <a href="http://www.ncoa.gov.au/">report</a> recommended some major changes to the structure and operation of our health system, and a 12-month period to review some of the proposals it outlined. But before the government looks at them in any detail, it’s important to recognise the limits of what Medicare, or any health system, can do to improve the length and quality of people’s lives.</p>
<p>It is well established that health services are just one of many factors that influence health outcomes. Other important <a href="http://www.who.int/hia/evidence/doh/en/">determinants</a> of health include the social, economic and physical environment, and people’s individual characteristics and behaviours. To improve the health of Australians, governments will also need to make gains in some of these other areas that determine health outcomes.</p>
<p>Health systems, however, do have an influence on health outcomes. A large <a href="http://www.globalizationandhealth.com/content/7/1/42">study</a> of 136 countries found that there was a correlation between rates of death and certain health system variables. Countries with more doctors, lower out-of-pocket costs, and higher total expenditure, for example, had lower premature death rates at the national level. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/47636/original/q3ph2s7k-1399010602.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47636/original/q3ph2s7k-1399010602.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47636/original/q3ph2s7k-1399010602.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47636/original/q3ph2s7k-1399010602.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47636/original/q3ph2s7k-1399010602.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1130&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47636/original/q3ph2s7k-1399010602.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1130&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47636/original/q3ph2s7k-1399010602.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1130&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">When you take a look at the headline indicator for health status, life expectancy, Australians are doing fairly well.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/mercyhealth/7142786421">Mercy Health/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>While this study includes many less wealthy countries than Australia, it shows that the design and operation of our health system does matter, even to headline indicators such as mortality. </p>
<p>The Australian health system clearly has some problems that need to be addressed, but they are long-standing ones, and ones shared by most other <a href="http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2560789/pdf/10916912.pdf">OECD countries</a>. </p>
<p>We are unlikely to solve persistent challenges, such as ensuring equitable access to well-coordinated care, with quick fixes (we have tried most of them before). Nor are they likely to be solved by reforms naïvely borne out of economic theory, or imported holus bolus from other countries. </p>
<p>To improve Australia’s health system, we need to carefully consider a range of reforms and evaluate their potential to solve the most important problems we face (and this is not overall health expenditure). </p>
<p>If we don’t, we will simply add to the growing pile of overly ambitious reform proposals that have fallen by the wayside and made no difference at all. </p>
<hr>
<p><strong>Further reading:</strong> <a href="https://theconversation.com/topics/state-of-australia">The State of Australia series</a></p>
<p><a href="http://www.informa.com.au/conferences/health-care-conference/future-of-medicare-conference">The Future of Medicare Conference</a> opens on 13th August in Sydney.</p><img src="https://counter.theconversation.com/content/25920/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anne-marie Boxall works for the Australian Healthcare and Hospitals Association</span></em></p>In the lead-up to the budget, the story of crisis has been hammered home, but there’s more to a country than its structural deficit. So how is Australia doing overall? In this special series, ten writers…Anne-marie Boxall, Director, Deeble Institute for Health Policy Research, Australian Healthcare and Hospitals Association; Adjunct Lecturer, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/262392014-05-05T20:34:32Z2014-05-05T20:34:32ZResearch and innovation in Australia need a long-term strategy<figure><img src="https://images.theconversation.com/files/47789/original/zcj46r7x-1399265101.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There's no quick fix for the research industry in Australia, it needs a considered approach.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/rdecom/7336836234/in/photolist-cbkcNs-61RzAi-dZkZRR-c1fSuU-cbkhcJ-CNDr8-hTFdWJ-dkGUFg-5xWaQn-8LuaaJ-hGNQcX-54ejGE-cbksLQ-8gNyD8-8L8u1c-CNE98-61RzgT-mdKHUB-5dx5pW-cbkuyo-5ooCkt-de2VEt-7EJYMw-92Bik-jceKs8-9woJRQ-de2VcJ-efALsR-9WhgHt-7a7guo-c1fFGy-hTFJT6-c9ckbb-mdKJvg-64b2Ej-6UAEnd-6GzzsS-f3kCeU-5mg6xJ-9wkQuR-5WR98-eyhMFM-6scU4W-6scT1Q-hTFEt4-98XNSC-eykPHf-9qDRub-5EhqB8-7bHRv8">Flickr/US Army RDECOM</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Most researchers would agree with the <a href="http://www.ncoa.gov.au/">Commission of Audit’s</a> finding that “given overall budget constraints, it is important to take a strategic, whole-of-government approach to where Australia’s research dollars are spent”. </p>
<p>Indeed, I think researchers would go further and say that this must be part of an ongoing conversation between the research sector, industry, government and the community. </p>
<p>For the Commission of Audit process to have a positive impact, the report must be seen as a first step in a broader long-term, strategic, whole-of-government plan for the entire research and innovation sector – something Australia has not had for many years.</p>
<p>The report’s recommendations fall into three groups: merging previously distinct funding bodies and cutting entire programs; reducing “red tape”; and structural reform of funding to create more certainty.</p>
<h2>Merging and cutting</h2>
<p>Merging smaller agencies that fund research into larger bodies makes some sense. Savings can potentially be made by reducing duplicated administration and the possibility of a single overarching research strategy, rather than fragmented goals, is alluring.</p>
<p>The risk in these proposals is that the culture of successful niche programs will be lost in monolithic super-agencies. As with so many of the commission’s recommendations, the devil will be in the detail.</p>
<p>For example, the recommendation to combine the National Health and Medical Research Council, Cancer Australia and the Australian National Preventative Health Agency into a National Health and Medical Research Institute appears sound, provided the crucial role preventative health research plays in the long-term sustainability of the health system is enhanced, not eroded.</p>
<p>Likewise, the Co-operative Research Centres program is rightly seen as one of the success stories of Australian research and innovation, bridging the gulf between academics and end users of research in industry and the community. The risk of rolling this funding into a Super-Australian Research Council (recommendation 34) is that the collaborative industry focus of Co-operative Research Centres will be lost.</p>
<p>International indicators show that Australia produces high-quality research, but is less good at developing research results to capture economic benefit. Over the last decade support for development has eroded. In 2008, the previous government scrapped the widely regarded <a href="http://www.australianinstituteforinnovation.org.au/Why-was-the-Commercial-Ready-Program-shut-down-A-story-of-a-damaging-Tyranny-of-Distance/">Commercial Ready program</a> without providing an alternative. As a result innovation has languished. </p>
<p>The Commission of Audit recommends abolishing the Industry Innovation Precincts Program, Industry Collaboration Fund and the Australian Research Council Linkage - Industrial Transformation Research Program, yet how it intends to better develop Australia’s smart ideas is not clear. </p>
<h2>Reducing red tape</h2>
<p>The time it takes Australian researchers to apply for funding and to review funding applications has grown substantially in the last 20 years. This is now a <a href="http://www.ncbi.nlm.nih.gov/pubmed/23793700">major barrier to productivity</a>. The Commission of Audit identifies a number of ways to cut, or streamline, the administrative red tape that binds researchers.</p>
<p>An obvious suggestion made by the commission is to increase the duration of grants so that researchers have to apply less often. This and other recommendations should be considered as part of a broader overhaul of the grant funding processes. This is something that is needed not just in Australia but is <a href="http://www.pnas.org/content/early/2014/04/09/1404402111">recognised as an international problem.</a></p>
<p>In ensuring an efficient and responsive grant allocation system, we should be mindful that both the National Health and Medical Research Council and the Australian Research Council operate with a core secretariat that is extremely lean. While there is no doubt that processes can be refined, there is also an argument that administration funding should be enhanced, rather than cut.</p>
<h2>Funding to create more certainty</h2>
<p>The commission makes two key suggestions which should be adopted quickly and fully.</p>
<p>The first is proper long-term funding of critical research infrastructure such as genome centres, the Synchrotron and Antarctic research vessels. The on-again, off-again funding of these facilities creates uncertainty and erodes the effectiveness of the Australian research endeavour. </p>
<p>The entire research sector would breathe a sigh of relief should long-term funding for essential infrastructure be supported in a bipartisan way that enabled both academic and industry groups to access these scientific facilities and services on affordable terms. To do this requires that highly qualified people be viewed by government as an essential part of our national infrastructure network, with funding provided not just for equipment but also for the highly specialised technologists.</p>
<p>The second involves looking at better alignment of funding for the direct and indirect costs of research. The current system of funding for the indirect costs of research (including costs to run research organisations, such as power, support staff and laboratory equipment) is inefficient, inequitable and burdened with red tape.</p>
<p>Funding for the indirect costs of research is arguably the number one issue affecting the productivity of the research sector. The current system has been recognised as being worse than ineffective by every government review of research and innovation in the last 20 years (<a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/hmrsr.htm">The Wills Review</a>, <a href="https://www.health.gov.au/internet/main/publishing.nsf/Content/health-hsid-investreview/$FILE/Final_Report.pdf">Grant Review</a> and <a href="http://www.mckeonreview.org.au/downloads/Strategic_Review_of_Health_and_Medical_Research_Feb_2013-Summary_Report.pdf">McKeon Review</a>), yet little has changed. </p>
<p>If the Commission of Audit manages to bring about funding for the indirect costs of research, then many in the sector will view the exercise as a success, but it’s only the first step.</p><img src="https://counter.theconversation.com/content/26239/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Douglas Hilton works for the Walter And Eliza Hall Institute Of Medical Research and The University Of Melbourne, and is president-elect of the Association of Australian Medical Research Institutes. He advises a range of medical research institutes, collaborates with CSL and founded and owns shares in the privately owned company, Murigen Therapeutics. Doug was the director of CRC Growth Factors, and the Walter and Eliza Hall Institute receives funding from CRCs including the HEARing-CRC, and Cancer Therapeutics CRC.
Doug receives funding from the NHMRC, the Australian Research Council, CSL, National Collaborative Research Infrastructure Strategy (NCRIS), National Institute of Health (USA), CSIRO via the Science and Industry Endowment Fund, and various philanthropic trusts and foundations.</span></em></p>Most researchers would agree with the Commission of Audit’s finding that “given overall budget constraints, it is important to take a strategic, whole-of-government approach to where Australia’s research…Douglas Hilton, Director, Walter and Eliza Hall Institute & Professor of Medical Biology , Walter and Eliza Hall InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/262232014-05-04T20:36:58Z2014-05-04T20:36:58ZDivided we fall: federal government pits universities against students<figure><img src="https://images.theconversation.com/files/47630/original/tkhw7ppy-1399008040.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C764%2C524&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">If the government won't pay, then students will have to. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/pabuk/5244273600">Flickr/Paul Wolfenden</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>The principle of <em>divide et impera</em> (divide and conquer) has been a political staple for centuries and the Commission of Audit’s recommendations regarding higher education are a salient example. Both universities and student bodies are concerned at the sector’s fiscal situation since cuts made by the previous government.</p>
<p>In response, the commission recommends further reducing the average government per-student contribution, increasing the student’s own contribution and opening the door to fee deregulation. The result is to divide the universities’ interests from those of their students. As Glyn Davis, the Vice-Chancellor of Melbourne University, <a href="https://theconversation.com/facing-the-hard-questions-on-university-funding-25915">observed</a> last week, “Do public universities walk away from all other options because students will not like the alternatives?”</p>
<p>On the face of it, universities can look to students to provide the funding the federal government says it cannot, or continue to suffer a death from a thousand cuts.</p>
<h2>The impact on students: rising costs and reduced returns</h2>
<p>The commission recommends decreasing the average proportion of higher education costs paid by the Commonwealth from 59% to 45%, commensurately increasing the average proportion of costs paid by students from 41% to 55%. </p>
<p>Figure 1 below shows the recommended average student contribution compared to current student contributions per funding cluster (or discipline). It is possible, therefore, that the cost to law and commerce students will fall. However it is more likely that the government will achieve the average student contribution proportionately, meaning most will see a rise and at best some will stay as they are. For example, socially-sensitive courses such as education and nursing might be (at least partly) protected.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/47625/original/pjvqffsw-1399002418.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47625/original/pjvqffsw-1399002418.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/47625/original/pjvqffsw-1399002418.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=432&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47625/original/pjvqffsw-1399002418.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=432&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47625/original/pjvqffsw-1399002418.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=432&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47625/original/pjvqffsw-1399002418.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=543&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47625/original/pjvqffsw-1399002418.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=543&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47625/original/pjvqffsw-1399002418.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=543&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Figure 1: Funding rates for Commonwealth-supported places.</span>
<span class="attribution"><span class="source">Source: Review of the Demand Driven Funding System Report (Appendix B)</span></span>
</figcaption>
</figure>
<p>The commission also recommends that students start paying back their HELP debt when earning the minimum wage of $32,454, compared to the current average wage of $51,309. This, coupled with the proposed changes to the HELP repayment threshold and interest rates, will have a significant effect on student lifetime earnings. This is shown representatively in Figure 2. Students first incur a cost (the area below $0) and then pay it off. </p>
<p>The first impact of the proposed change is to increase the initial cost of education, shifting it from the blue to red line. Furthermore, the student starts paying off the debt earlier while earning less. The rate of repayment also rises as the interest will now be linked to a rate that reflects the full cost to the Commonwealth of making the loan. Currently it is just linked to the Consumer Price Index (CPI).</p>
<p>The result for the student is they start paying off the debt when less able to, pay more and realise the economic benefit of their education (the “payoff”) later in their life.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/47626/original/mwb6twdq-1399002698.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47626/original/mwb6twdq-1399002698.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/47626/original/mwb6twdq-1399002698.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=420&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47626/original/mwb6twdq-1399002698.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=420&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47626/original/mwb6twdq-1399002698.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=420&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47626/original/mwb6twdq-1399002698.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=527&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47626/original/mwb6twdq-1399002698.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=527&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47626/original/mwb6twdq-1399002698.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=527&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Figure 2: Impact of the Proposed Changes to HECS-HELP on Lifetime Income.</span>
</figcaption>
</figure>
<h2>Future fee deregulation</h2>
<p>The changes outlined in the figures above only benefit the government’s bottom line, with the student worse off. For universities it is a zero-sum game as they still end up with the same overall funding per student. Consequently the commission recommends investigating options for further fee deregulation. This is where the divide-and-conquer maxim really hits. Education minister, Christopher Pyne, <a href="http://www.pyneonline.com.au/speeches/policy-exchange-speech-freeing-universities-to-compete-in-a-global-education-market">wants to</a> “set our universities free” by allowing universities to charge even higher fees for premium courses, However freedom for one means, potentially, chains for another, with the additional cost borne by the student and not being eligible for support through a HELP loan.</p>
<p>How high fees would rise is unknown, but current international student tuition fees provides an indication. Australia is already the <a href="http://www.hsbc.com.au/1/2/about/news/13/130813">most expensive country</a> for international study, with average annual fees above $27,000. </p>
<p>Of course not all universities will be able to follow this route, meaning that an elite sub-set of institutions (most likely the Group of Eight) will probably end up offering high-demand, high-value courses at a cost that would make them unobtainable for many students. Key players in the Group of Eight are already on the front foot in this regards, <a href="https://theconversation.com/universities-should-be-able-to-charge-students-what-they-want-25861">arguing</a> that “top universities should be free to charge domestic students whatever they deem appropriate”. If so, Australia’s relatively egalitarian, mass education system will become a more hierarchical and, in some cases, excluding one. </p>
<p>Pyne has already encouraged Australian universities to adopt the “competitive nature of American tertiary education”. He is silent, however, on whether the government would provide many more scholarships for low-income students, as is the <a href="https://www.scholarships.com/financial-aid/federal-aid/federal-pell-grants/">case</a> in the US, or whether Australian universities would be required to provide increased student financial aid where necessary.</p>
<h2>The first step to a voucher system?</h2>
<p>The commission also recommends “streamlining the five current HELP schemes”. The explicit aim is removing <a href="http://studyassist.gov.au/sites/studyassist/helppayingmyfees/sa-help/pages/sa-help">SA-HELP</a>, which assists students to pay for their student services and amenities fee.</p>
<p>However, this recommendation might also represent the initial attempt to move towards an eventual flat rate for Commonwealth contributions. This would create, essentially, an education voucher system, <a href="http://files.eric.ed.gov/fulltext/ED536402.pdf">championed</a> by free-market economists as a means of improving competition and efficiency, usually at the school level but in this case for higher education. </p>
<p>It would also make certain courses (e.g. law) more attractive to universities due to their low cost of delivery and others (e.g. agricultural sciences) less attractive. Coupled with fee deregulation, this would result in many students finding their higher education opportunities restricted to fewer courses and/or fewer universities.</p>
<h2>Is there another way?</h2>
<p>As some commentators have <a href="http://www.theguardian.com/commentisfree/2014/may/01/commission-of-audit-a-recipe-for-a-poorer-nastier-and-more-brutish-australia?CMP=ema_632">observed</a>, the Commission of Audit has simply produced the report demanded by the government. There <em>are</em> alternative funding models and mixes, some of which are outlined <a href="https://theconversation.com/should-we-follow-the-german-way-of-free-higher-education-23970">here</a>. Not all create conflict between universities and students.</p>
<p>It is hoped that, in the ensuing months, detailed options will be put forward that demonstrate it is possible to increase funding to higher education in real terms, without the impost being unfairly borne by those least able to shoulder the burden.</p><img src="https://counter.theconversation.com/content/26223/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tim Pitman is a Senior Research Fellow with the National Centre for Student Equity in Higher Education</span></em></p><p class="fine-print"><em><span>Paul Koshy is employed by the National Centre for Student Equity in Higher Education</span></em></p>The principle of divide et impera (divide and conquer) has been a political staple for centuries and the Commission of Audit’s recommendations regarding higher education are a salient example. Both universities…Tim Pitman, Senior Research Fellow, National Centre for Student Equity in Higher Education, Curtin UniversityPaul Koshy, Research Fellow at the Natiional Centre for Student Equity in Higher Education , Curtin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/261822014-05-04T20:36:32Z2014-05-04T20:36:32Z‘Digital by default’ – efficient eGovernment or costly flop?<figure><img src="https://images.theconversation.com/files/47700/original/ndbm6vz6-1399190366.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Setting up an opt-out digital eGovernment is an expensive process ... it would want to be worth it.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/ishinelike/3500417450">~lauren/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span></figcaption></figure><p>The Australian federal government’s recently published <a href="https://theconversation.com/commission-of-audit-lays-path-for-deep-cuts-26172">National Commission of Audit</a>’s <a href="http://www.ncoa.gov.au/report/phase-one/recommendations.html">recommendation 62: e-Government</a> suggests the government accelerate its transition to online service delivery that:</p>
<blockquote>
<p>makes <a href="https://my.gov.au">myGov</a> the default means of engaging with government, supported by “opt-out” provisions; sets concrete savings targets; removes legislative barriers; and strengthens the myGov online credential; consolidating the e-Government effort through a single team under the leadership of a Chief Digital Officer; and appointing a senior minister to champion the digital by default agenda.</p>
</blockquote>
<p>Given the <a href="http://www.smh.com.au/federal-politics/political-opinion/commission-of-audit-be-afraid-but-only-mildly-so-20140501-zr2qn.html">politically charged nature</a> of this report, one fact that cannot and should not be ignored by the policy makers is any aggressive and wholesale move to a comprehensive eGovernment platform for all services should be carefully considered. </p>
<p>There are very real risks that an unduly aggressive approach to the implementation of an comprehensive eGovernment platform is likely to guarantee a high probability of project failure – not to mention the increased cost to the taxpayers.</p>
<h2>eGovernment is the objective: all agreed</h2>
<p>As an individual, the convenience of managing one’s interactions with a range of government agencies online, in your own time by using your PC or mobile device, as opposed to waiting in line at the various government agency offices between the hours of 9am-5pm weekdays with a fistful of paperwork cannot be understated.</p>
<p>As the penetration rate and uptake of smart mobile technologies reaches saturation rate for the Australian population in the coming years, it makes real sense to accelerate the move towards eGovernment.</p>
<p>Gone will be the days of a large cadre of government workers entering, checking and shepherding our tax, Medicare, social security and other transactions through the various organs of government. Without the automation and “hands free” backend processing capability, the near instantaneous, online customer experience would not be possible in our 24x7 world.</p>
<p>The numbers also stack up in favour of eGovernment. According to the 2013 Canadian <a href="http://www.oag-bvg.gc.ca/internet/English/parl_oag_201311_02_e_38796.html">auditor general’s report</a>, the per-transaction costs among 11 selected departments were CAN$28.80 in person, CAN$11.69 by telephone, and CAN$0.13 online. </p>
<p>The 2013 UK government’s <a href="https://www.gov.uk/government/collections/government-digital-strategy-reports-and-research">digital strategy report</a> has identified that: “by going digital by default, the government could save between £1.7 and £1.8 billion each year.”</p>
<p>Convenience at low cost – that’s enough to bring tears of joy to any government treasury official. Where’s the catch, then?</p>
<h2>Divide and conquer – or integrate and conquer?</h2>
<p>The <a href="http://unpan3.un.org/egovkb/">2012 UN E-Government Survey</a> should be mandatory bedtime reading for our politicians and policy makers – particularly section 3.2, which covers the challenges and opportunities of integrated e-service delivery.</p>
<p>First, the road to comprehensive, successful, secure and effective eGovernment is seeded with multiple <a href="http://en.wikipedia.org/wiki/Improvised_explosive_device">traps</a>, the most dangerous of which has little to do with technology, paradoxically.</p>
<p>Studying objectively and carefully the wash-up of previous failures is an effective antidote for policy delusion, but is unlikely to be the path taken by political ideologues of any persuasion.</p>
<p>The string of large, taxpayer-funded IT failures such as New Zealand’s <a href="http://www.justice.govt.nz/publications/global-publications/m/ministerial-inquiry-into-incis/historical-outline-of-incis">INCIS Police project</a>, <a href="http://delimiter.com.au/2013/06/20/future-it-project-fail-nsw-police-gets-cops-replacement-funding/">NSW COPS system</a>, Queensland Health’s A$1.2 billion <a href="http://www.healthpayrollinquiry.qld.gov.au">payroll disaster</a> and UK’s disastrous multi-billion pound <a href="https://www.gov.uk/government/news/dismantling-the-nhs-national-programme-for-it">National Health IT initiative</a> have been well reported, but oft repeated, unfortunately.</p>
<p>Second,the National Commission of Audit urges the government to follow a “digital by default” strategy with an “aggressive new approach”. It is this latter quote that should raise alarm bells.</p>
<p>While these, and similar high level statements of strategy and intent made by senior bureaucrats and our political elite are useful to set the pace, tone and direction of a move towards a comprehensive eGovernment platform, the reality is that the predominant challenge in achieving that goal is not technical. </p>
<p>Ultimate success of eGovernment (or any other <a href="http://rob-livingstone.com/2014/04/pssst-heard-one-successful-business-project/">enterprise-IT project</a>, for that matter) has a less to do with technology that may appear.</p>
<p>Anyone who has ever worked in an organisation of size – be that public, private or not for profit – knows all too well that the internal boundaries defining teams, departments, divisions and business units are the sheep’s pens that limit cross organisational collaboration and integration. </p>
<p>It is the continued reinforcing of these boundaries, glued together with policies, process and governance that inhibit the development of a government-wide culture of cooperative information and knowledge sharing, and it is this cross-functional and cross-agency collaboration that is a prerequisite for effective eGovernment.</p>
<h2>Data breach, privacy and short term thinking – the real risks</h2>
<p>Once operational, the obvious risks to eGovernment relate to data confidentiality and information security. Having a major data breach as a result of an human error, an <a href="https://theconversation.com/the-internet-after-snowden-what-now-20775">Edward Snowdon</a>-like event, or <a href="https://theconversation.com/when-data-privacy-goes-missing-will-the-regulators-hear-it-cry-23367">cyber crime</a> is a real and present danger for individual’s privacy and the potential integrity of the entire eGovernment.</p>
<p>The <a href="http://www.smh.com.au/national/former-hunter-valley-billionaire-nathan-tinkler-to-enlighten-nsw-corruption-inquiry-icac-20140503-zr3w7.html">ICAC uncovering</a> of systemic, undisclosed lobbying by vested (political or commercial) interests makes for great television and dinner conversation. The reality is that the coercive forces acting on governments at all levels from the cadre of local and globally dominant IT service providers and consulting firms on helping shape eGovernment policy should not be ignored. </p>
<p>It is important to acknowledge that the conventional approach to managing IT vendors may not be adequate in the delivery of new, emerging and disruptive technologies. A <a href="http://rob-livingstone.com/2013/07/smarter-it-vendor-management/">strategic rethink</a> of the vendor engagement and management processes should be considered.</p>
<p>It is imperative that governments internally retain the necessary levels of IT strategic expertise and process probity when engaging with external IT service providers. Taxpayers have a habit of helping strengthen the balance sheets of major IT and consulting organisations with no measurable benefit as a result of inappropriate decision making.</p>
<p>The eGovernment discussion is likely to be trumped by more hotly debated issues of social equity, tax, Medicare reform and other initiatives that affect all – but the importance of ensuring that the appropriate decisions are made with rigour and based in evidence when it comes to implementing a comprehensive eGovernment system on which our country will increasingly depend. And therein lies a real risk.</p><img src="https://counter.theconversation.com/content/26182/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rob Livingstone has no financial interests in, or affiliations with any organisation mentioned in this article. Other than his role at UTS, he is also the owner and principal of an independent Sydney based strategic IT advisory practice.</span></em></p>The Australian federal government’s recently published National Commission of Audit’s recommendation 62: e-Government suggests the government accelerate its transition to online service delivery that…Rob Livingstone, Fellow of the Faculty of Engineering and Information Technology, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/261832014-05-02T04:50:44Z2014-05-02T04:50:44ZPBS savings: two sides of the coin<figure><img src="https://images.theconversation.com/files/47615/original/mjz9vhn3-1398997888.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Pharmaceutical Benefits Scheme (PBS) is the tenth largest Commonwealth Government program, now costing over $9 billion a year.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/13519089@N03/4746654588">Taki Steve/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>When it comes to pharmaceuticals expenditure, the National Commission of Audit’s proposals rate highly on any policy change scale. </p>
<p>Its two main recommendations are designed to reduce the overall cost to the government by reducing the overall price paid for pharmaceuticals and to increase the out-of-pocket expenditure for patients. If implemented, the first could make the second unnecessary.</p>
<p>The Pharmaceutical Benefits Scheme (PBS) is the tenth largest Commonwealth Government program, now costing more than A$9 billion a year. It’s an important element of the health-care system as it provides people access to drugs with a maximum co-payment of A$6.60 for concession-card holders and A$36.90 for others. </p>
<p>The scheme also has a “safety net”, which reduces, and in many cases removes, out-of-pocket costs for people with significant health problems who have reached certain expenditure thresholds. This means people holding concession cards get drugs free after they spend $360 in a calendar year. </p>
<p>Previous policy reforms, such as the introduction of <a href="http://www.pbs.gov.au/info/industry/pricing/eapd">accelerated price disclosure</a>, which sped up the rate at which the government takes advantage of falls in the market price of generic drugs, has resulted in slowing the real rate of the PBS growth over forward estimates. But the Commission of Audit predicts the scheme will cost over $15 billion in ten years.</p>
<h2>A more efficient scheme</h2>
<p>Economists like ourselves have been <a href="http://www.theaustralian.com.au/news/health-science/no-public-benefit-in-price-drop/story-e6frg8y6-1226318920200#">arguing for many years</a> that Australia pays too much for older, off-patent medications and this explicitly <a href="http://www.ncoa.gov.au/report/phase-one/part-b/7-4-the-pharmaceutical-benefits-scheme.html">recognised in the report</a>: </p>
<blockquote>
<p>For example in the case of Atorvastatin, currently the most highly prescribed and highest cost to government medicine in Australia, New Zealand pays $2.01 in comparison to the price paid in Australia of $38.69.</p>
</blockquote>
<p>The Commission’s main recommendation is to cap the budget for pharmaceuticals and have this managed by a new independent authority, known as the “PBS Entity”. This body would manage price negotiations, as well as the listing and de-listing of pharmaceutical drugs on the PBS.</p>
<p>Currently, the <a href="https://www.health.gov.au/internet/main/publishing.nsf/Content/Pharmaceutical+Benefits+Advisory+Committee-1">Pharmaceutical Benefits Advisory Committee</a> (PBAC) provides advice on the cost-effectiveness of medicines to be listed on the PBS, but it’s ultimately the health minister and the government that decides to list a drug. And there’s no routine process for actively managing the PBS budget to ensure it remains an efficient scheme.</p>
<p>This can lead to significant problems, such as the one recently highlighted about <a href="https://www.mja.com.au/journal/2014/200/9/evaluating-costs-and-benefits-using-combination-therapies">combination therapies</a>, where it costs over $30 a month extra to combine aspirin with another drug, for instance.</p>
<p>A benefit of a capped budget is that it provides incentives to end this type of wasteful expenditure; the authority would have to make savings either through price reductions or delistings in order to list new drugs. An independent authority could also depoliticise the decision-making about which pharmaceuticals get listed, as this will be largely based on their cost-effectiveness.</p>
<p>The proposal would result in a significant transfer of decision-making power from the political sphere to technocrats running the authority. This model currently operates in New Zealand where [Pharmaceutical Management Agency](http://www.pharmac.health.nz/](http://www.pharmac.health.nz) (PHARMAC) preforms this role.</p>
<p>While there are some examples of Australian politicians ceding power, such as the creation of an independent Reserve Bank board, they are relatively rare. For the authority to be successful, it would be necessary to build up its capacity for evaluating drugs and for the Australian community to explicitly accept rationing of some pharmaceuticals. </p>
<p>If the proposal were adopted, it would represent the most significant change to the PBS since its introduction in the late 1940s.</p>
<h2>Increasing out-of-pocket costs</h2>
<p>The commission’s other main recommendation is to change the level of co-payments for most medicines under the Pharmaceutical Benefits Scheme. The main change is a $5 increase in co-payment, from $36.90 to $41.90, for people who don’t have a concession card. </p>
<p>There would be no change to the co-payment of $6 for people who do have concession cards, but they’d be required to contribute $2 to the cost of their medicines when they reach the safety net. </p>
<p>These changes are less radical but more problematic. The Commission says it’s seeking to increase price signals for medicines, but a uniform increase in co-payment fails to signal differences in the real price of drugs. </p>
<p>And for people with concession cards, the $36.90 co-payment is already quite high by world standards. A <a href="http://www.publish.csiro.au/?act=view_file&file_id=AH10906.pdf">2011 international comparison</a>, for instance, showed Australia ranked fourth-highest of the 15 countries examined for such out-of-pocket costs.</p>
<p>An even bigger problem with high co-payments is that it may discourage use of beneficial medications and has the potential to increase downstream costs, for instance, through increased hospitalisations.</p>
<p>A better approach would be a co-payment that’s proportional to the actual cost of the drug up to a maximum level, as this would encourage doctors and patients to consider cheaper drugs. This is particularly important for conditions such diabetes and cardiovascular disease where there are a large number of therapy options available – and there’s long-term drug use. </p>
<p>Indeed, there’s a case for actually <a href="http://www.smh.com.au/business/leave-medicare-alone-but-reform-pricing-of-prescribed-drugs-20140116-30xmg.html">reducing the current levels of co-payment</a> for some drugs, as a way of passing on some of the savings of buying cheaper drugs to consumers.</p>
<h2>Likelihood of change</h2>
<p>What are the odds of the Commission’s recommendations on pharmaceuticals being adopted by the government? Given that previous Australian governments seem to take on only one major policy change in the health sector a decade, the chances don’t appear to be very high.</p>
<p>Nonetheless, the Commission has made a significant contribution by putting the need to tackle waste and inefficiency in our pharmaceutical expenditure on the political agenda. </p>
<p>Significant gains could still be made by simply refining the current system – by improving the price disclosure policy and closing loopholes in pricing policy and decisions.</p>
<p>We can only hope this report has its intended effect of shaking up the pharmaceutical benefits scheme to increase efficiency and to ensure that cost-effective drugs are always available at low cost for Australians. Reform would produce efficiency dividends that reduce the need for higher out-of-pocket costs.</p><img src="https://counter.theconversation.com/content/26183/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dennis Petrie has received funding from NHMRC, ESRC (UK), Cancer Australia, NIHR(UK), NHS Health Scotland, CSO (Scotland), NHS Tayside.</span></em></p><p class="fine-print"><em><span>Philip Clarke 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>When it comes to pharmaceuticals expenditure, the National Commission of Audit’s proposals rate highly on any policy change scale. Its two main recommendations are designed to reduce the overall cost to…Philip Clarke, Professor of Public Health, The University of MelbourneDennis Petrie, Senior Research Fellow in Health Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/259962014-05-02T02:04:09Z2014-05-02T02:04:09ZCommission of Audit fails to consider costs and benefits<p>There are some good ideas in the Commission of Audit report. Unfortunately they’re buried in so much else that it’s hard to find them. For a report focused on the costs and benefits of government, it shows remarkably little interest in the costs and benefits of budgetary reform.</p>
<p>This approach means the audit is a missed opportunity to give Australians the information we need - information that would enable a genuine national conversation about how to best climb out of our budget hole.</p>
<p>The biggest problem is that the report does not say which proposals would save a lot of money, and which only a little. </p>
<p>Proposals such as increasing the age pension and superannuation access ages, which Grattan Institute <a href="https://theconversation.com/age-pension-reform-needed-for-a-fair-sustainable-welfare-system-22313">analysis</a> suggests is worth around A$12 billion a year to the budget, are mixed in with a Medicare co-payment for doctors’ visits, which is worth about $1 billion a year at most (and is a bad idea for other reasons).</p>
<p>Without an assessment of budgetary impact, the extensive discussion about duplication between state and Commonwealth governments glosses over the fact that there are no massive budget savings to be made in this area. Abolishing the entire Commonwealth health department would save less than half a billion dollars a year, which isn’t going to do much to fix a deficit that currently sits at $47 billion.</p>
<p>And without a bottom-up evaluation of proposals, the report’s budget projections outside the first three years are essentially driven by the assumption that annual spending growth will be 2.5% a year in perpetuity. There is no attempt to make future spending align with even ball-park forecasting of the financial impact of individual measures.</p>
<h2>Collateral damage</h2>
<p>Grattan Institute’s analysis of possible budget solutions in our 2013 <a href="http://grattan.edu.au/publications/reports/post/balancing-budgets-tough-choices-we-need/">Balancing Budgets report</a> sought to identify how much various proposals would save. Consistent with basic principles of public administration, it also looked at the costs. In particular, it considered the possible collateral damage of each individual proposal if it shrank the economy (by discouraging working or investment, for example), caused bad social consequences (such as making housing less affordable), or disproportionately hit the worst-off. Without this sort of information, it’s impossible to tell whether a budget proposal is worthwhile.</p>
<p>Without this assessment, the Commission kicks some appalling own goals. The worst of these is the failure to think about the impact of its proposals on participation. Good welfare policy design ensures that thresholds and taper rates do not create too many <a href="http://mattcowgill.wordpress.com/2013/01/16/welfare-reform-can-we-have-it-all/">disincentives</a> to work.</p>
<p>However, abolishing Family Tax Benefit B – currently received by 60% of families – and tightening eligibility for Family Tax Benefit A would make women in middle-income families less likely to do paid work, because they would lose most of their wages in lost benefits. Previous Grattan Institute <a href="http://grattan.edu.au/publications/reports/post/game-changers-economic-reform-priorities-for-australia/">work</a> shows that if one partner in a family works full time earning $70,000 a year, it makes no financial sense for the second income earner to work for more than three days a week.</p>
<p>The changes the Commission proposes would see women with children in childcare going backwards financially if they work more than two days a week. Not only is that bad for Joe Hockey’s stated aim of increasing women’s workforce participation, it would hurt the budget by reducing income tax collected from women discouraged from working.</p>
<p>Similarly, the Commission proposes that Newstart benefits be reduced by 75 cents for every dollar earned. Imagine the screaming about disincentives to work if anyone proposes a top marginal rate of tax for high-income earners of 75%.</p>
<h2>Limited savings</h2>
<p>In the absence of calculations of the budgetary impact of its proposals, one could be forgiven for missing the key finding of the Commission. For all of its laundry list of ideas, its specific measures only make a difference of about $5 billion a year three years from now. Its “reform scenario” makes only limited changes to the spending growth planned under “business as usual”. This is manifestly too little too late. </p>
<p>The Commission itself found the current budget deficit of 3% of GDP is far too high five years after the end of the GFC. If the government is going to take its structural deficit problems seriously, it will either have to cut more things, phase cuts in earlier, or raise taxes.</p>
<p>The Commission’s failure to identify medium-term savings is due to its insistence that many of the largest proposals should be phased in very slowly. Its proposals suggest that no-one born before 1960 should contribute much to repairing the budgets. Changes to the pension access age and the pension assets test – both big budget reforms – do not even start until 2027 and then only applied to new recipients. It’s not clear why protecting baby boomers but making everyone else pay is a principle of good government.</p>
<h2>Some good ideas</h2>
<p>So what are the good ideas in the report - the changes that will make a real difference to the budget balance, without really awful side-effects? </p>
<p>The proposals to lift the pension and superannuation preservation ages, include owner-occupied housing in the pension assets test, reform <a href="http://grattan.edu.au/publications/reports/post/poor-pricing-progress-price-disclosure-isnt-the-answer-to-high-drug-prices/">pharmaceutical pricing</a>, better match defence spending to strategic goals, and <a href="http://grattan.edu.au/publications/reports/post/graduate-winners-assessing-the-public-and-private-benefits-of-higher-education/">increase the contribution</a> that students make to the cost of their university degrees were all recommendations of Grattan Institute’s <a href="http://grattan.edu.au/publications/reports/post/balancing-budgets-tough-choices-we-need/">Balancing Budgets: tough choices we need</a> report.</p>
<p>Cutting spending on paid parental leave and redirecting it into childcare is also a good idea, and is supported by international <a href="http://grattan.edu.au/publications/reports/post/game-changers-economic-reform-priorities-for-australia/">evidence</a> on what really enables women to participate in paid work.</p>
<p>Balancing budgets is important, because it helps us ensure that we have enough money available in the future to pay for the benefits and services that we will need, rather than making future generations pay for what we’re doing now. But by not being clear about the costs and benefits of their recommendations, the Commission has missed a big opportunity to help us all make difficult decisions about what we most value and our country’s future. </p><img src="https://counter.theconversation.com/content/25996/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with a $15 million endowment 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>Cassie McGannon does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There are some good ideas in the Commission of Audit report. Unfortunately they’re buried in so much else that it’s hard to find them. For a report focused on the costs and benefits of government, it shows…Cassie McGannon, Fellow, Australian Perspectives, Grattan InstituteJohn Daley, Chief Executive Officer , Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/261952014-05-01T20:45:42Z2014-05-01T20:45:42ZGP co-payments: a triple fail for the Commission of Audit<figure><img src="https://images.theconversation.com/files/47544/original/km99bbhz-1398937199.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">For general patients, the minimum co-payment would be A$15.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-185740/stock-photo-man-pulling-money-out-of-wallet.html?src=89hnRRafIsjniOfFG-fluA-1-9">Shutterstock</a></span></figcaption></figure><p>The <a href="http://www.ncoa.gov.au/report/phase-one/index.html">Commission of Audit’s</a> proposals about GP co-payments are just that, proposals. They are not government policy, nor should they be.</p>
<p>Some aspects of the Commission’s recommendations <a href="https://theconversation.com/commission-of-audits-health-hit-list-experts-respond-26179">are good</a>. But the centrepiece is a fundamental change to Medicare. All Australians are <a href="https://theconversation.com/explainer-what-is-medicare-and-how-does-it-work-22523">covered by Medicare</a>, with about half having top-up private insurance. Until now, Medicare has been a universal health scheme with bulk billing available to all Australians, equally.</p>
<p>If the Commission of <a href="http://ncoa.gov.au/report/phase-one/part-b/7-3-a-pathway-to-reforming-health-care.html">Audit’s recommendations</a> are adopted, universal access to bulk billing will be abolished, replaced by a government-mandated co-payment of A$5 for concession card holders (up to 15 visits, then A$2.50). For general patients, the minimum co-payment will be A$15, then A$7.50 after 15 visits. </p>
<p>The <a href="http://health.gov.au/internet/main/publishing.nsf/Content/1A9DB6D72BD5879ACA257BF0001AFE28/$File/MBS%20Statistics%2020134%20DecQtr%2020140121.pdf">current average</a> GP co-payment is A$28. If previously bulk-billing GPs have to introduce billing systems, why would they stop at the government-mandated minimum? The proposed A$5 co-payment may become, in reality, five times that.</p>
<h2>Less access, lower quality and less efficiency</h2>
<p>There are three big goals in health care policy: access (including equitable access), quality and efficiency. This proposal wins the reverse trifecta and is wrong on all three. It will hurt the poor, disrupt continuity of care and reduce system efficiency.</p>
<p>A <a href="http://link.springer.com/article/10.1007/s10198-013-0526-8">recent review</a> of the international evidence on the co-payments found they <em>do</em> reduce the use of health care and hence expenditure. That reduction will impact adversely on vulnerable groups. The review found:</p>
<blockquote>
<p>The empirical evidence likewise indicates that vulnerable groups, including individuals with low income and in particular need of care, reduce their use relatively more than the remaining population in consequence of co-payment. </p>
<p>This highlights the need for protecting particularly vulnerable groups from the consequences of co-payment, e.g. by making the co-payment income dependent or exempting groups in particular need of the services in question. </p>
<p>The strategy of exempting certain groups from co-payment suffers from the weakness that it may result in rather arbitrary dividing lines.</p>
</blockquote>
<p>Today, 10-15% of people defer going to a doctor <a href="http://www.commonwealthfund.org/%7E/media/Files/Publications/In%20the%20Literature/2013/Nov/1716_Schoen_access_affordability_2013_intl_survey_HA_WebFirst_11_13_13_ITL_v2.pdf">because of cost</a>. Abolishing bulk billing and introducing a compulsory co-payment will increase that proportion. </p>
<p>As health minister, Tony Abbott increased the GP rebate to encourage <a href="http://www.medicareaustralia.gov.au/provider/incentives/files/hic_minister_GP_letter.pdf">bulk billing for pensioners and families</a>. The Commission of Audit recommendations would reverse that and impact on pensioners and low-income families struggling to make do.</p>
<p>The proposals fail on quality too. People who baulk at paying the GP co-payment may seek care in hospital emergency departments, disrupting continuity of care. Health could also suffer if the GP co-payment makes it is harder for the patient (or their parent) to pay for treatments, such as medications.</p>
<p>Finally, this aspect of the Commission of Audit’s report fails on efficiency grounds. Patients are not good judges of what visits are necessary – GPs have years of training to make diagnoses, patients don’t. </p>
<p>If necessary visits are deferred, long-term costs to the health system may increase. The <a href="http://link.springer.com/article/10.1007/s10198-013-0526-8">review of co-payments</a> also found that preventive interventions fell, such as flu vaccinations. Again, this could mean higher costs in the future.</p>
<h2>Emergency department co-payments</h2>
<p>With higher patient costs, some people might go to a public hospital emergency department instead of their GP. Currently, hospitals can’t charge fees for ED visits, but the Commission recommends a change here too. </p>
<p>Fees in emergency departments would be a significant and surprising policy shift. It would create red tape and demand complex choices in an already high-pressure environment. </p>
<p>The Commission recommends that triage category four and five patients face a co-payment, implicitly assuming that triage category some-how equates to necessity or that the ED visit is a GP substitute. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/47546/original/zvw93t76-1398937827.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/47546/original/zvw93t76-1398937827.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47546/original/zvw93t76-1398937827.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47546/original/zvw93t76-1398937827.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47546/original/zvw93t76-1398937827.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47546/original/zvw93t76-1398937827.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47546/original/zvw93t76-1398937827.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Care in emergency departments is much more expensive than in GP clinics.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-80591686/stock-photo-blurred-motion-of-doctor-walking-in-a-hospital-corridor.html?src=pp-photo-551885-_bxgbMJ8kQ2jT9vvac1m6A-7">Tyler Olson</a></span>
</figcaption>
</figure>
<p>Triage categorisation <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1742-6723.2011.01399.x/abstract">should not be used that way</a>. What about a patient who has been referred by a GP? Or what if they are subsequently admitted to hospital? </p>
<p>If just one in four patients chose to go to a hospital emergency department, the Commonwealth will save no money because of the much higher costs of emergency department care; costs that the Commonwealth government now shares.</p>
<p>The <a href="http://link.springer.com/article/10.1007/s10198-013-0526-8">systematic review</a> of the effects of co-payments mentioned above concluded:</p>
<blockquote>
<p>… the results of the empirical literature indicate that introducing co-payment for new types of health care services or extending existing schemes involves some important economic and political trade-offs. </p>
<p>It is thus important for the responsible policymakers to be clear about what they wish to obtain by introducing co-payment and how to counter the possible side effects.</p>
</blockquote>
<p>It is not clear that a co-payment will reduce spending (its ostensible goal) nor that the policy fig leaf of a 15 visit discounted fee will counter the inevitable side effects. The government should not pick up this dangerous suggestion in the forthcoming budget.</p><img src="https://counter.theconversation.com/content/26195/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Duckett, along with all Australians, benefits from Medicare.</span></em></p>The Commission of Audit’s proposals about GP co-payments are just that, proposals. They are not government policy, nor should they be. Some aspects of the Commission’s recommendations are good. But the…Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/261752014-05-01T20:45:29Z2014-05-01T20:45:29ZThe government should think hard before deregulating university fees<figure><img src="https://images.theconversation.com/files/47541/original/4mfsdvpw-1398931491.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">University of Newcastle Vice-Chancellor Caroline McMillen says the government should look at the evidence before implementing the Commission of Audit's recommendation to deregulate university fees. </span> <span class="attribution"><span class="source">Supplied</span></span></figcaption></figure><p><a href="http://www.ncoa.gov.au/report/phase-one/index.html">The National Commission of Audit</a> released yesterday has made a recommendation to government in line with proposals <a href="https://theconversation.com/facing-the-hard-questions-on-university-funding-25915">from some</a> Group of Eight <a href="https://theconversation.com/universities-should-be-able-to-charge-students-what-they-want-25861">vice-chancellors</a> that university fees should be deregulated, increasing student contributions and removing caps on how much universities can charge.</p>
<p>Deregulation is a seductive word. It has such pleasant associations of throwing off the shackles of bureaucratic restraint to let institutions and the market run free. While many universities, including the University of Newcastle, welcome the reduction in administrative burden signalled by the government’s reforms to the higher education regulator, TEQSA, we might pause before embracing proposals to deregulate fees and the sector with unfettered enthusiasm.</p>
<p>On the face of it, allowing universities to charge what the market can afford for their courses appears to provide much greater freedom for institutions to realise the true market value of their degrees, particularly in a constrained funding environment. Put aside for a moment the vexed issue of the impact of fee deregulation on student equity, access and participation. The proposition of a boost to base funding seems particularly attractive as universities balance investment in teaching excellence with investment in world-class research and innovation.</p>
<p>It is the capacity of our universities to deliver on all these fronts that has underpinned the reputation and global competitiveness of the Australian higher education system. With government funding at risk, it is possible to see fee deregulation as a “lighthouse” signalling the way to a more secure and sustainable future for higher education funding. But will this signal lure Australia’s universities onto jagged rocks?</p>
<p>This will depend on whether fee deregulation is in fact a euphemism for “fee shifting”, a simple redistribution of current levels of funding support for higher education from the government to the student.</p>
<h2>The evidence from England</h2>
<p>The most recent experience we have available of the impact of a deregulated fee environment is in England, where there has been a significant shift in the way universities and colleges are funded. From 2012, students starting university were required to meet much of the cost of their education, through access to publicly funded loans. Universities were also able to charge up to £9,000 a year (about AUD$16,350) for their courses – a trebling of the pre-2012 fee in some cases.</p>
<p>Some Australian universities – notably the older Group of Eight institutions – have argued that fee deregulation should result in price differentiation between higher education providers. Students would be able to choose whether to pay a higher fee for “premium” education.</p>
<p>The UK experience does not bear this out. The <a href="http://www.hefce.ac.uk/">Higher Education Funding Council for England</a> (HEFCE) reported that the average tuition fee loan awarded to English students in 2012-2013 was £8,040, with the overall estimated sector average fee even higher at £8,507. Allowing universities to charge more for their programs has not differentiated the market. Instead, most institutions are moving to the higher fee “cap”.</p>
<p>More worryingly, a <a href="http://www.unialliance.ac.uk/wp-content/uploads/2014/04/UA_HEPI_UK_Australia_Report1.pdf">report released in April</a> by the University Alliance found that the increase in student fees did not bring in much additional funding to English universities overall. Some universities were actually worse off under the higher fee regime due to the shift in government support from base funding to more volatile loan subsidies. Even though the total quantum remained roughly the same, the balance of public-private investment shifted from 65:35 to 50:50.</p>
<p>The author of the report, Libby Hackett, notes that: </p>
<blockquote>
<p>the English experience suggests that any increase in the cost of public loan subsidy is likely to result in a matched reduction in core public funding for teaching.</p>
</blockquote>
<p>It’s a salutary warning, perhaps, for advocates of fee deregulation in Australia. If fee shifting occurs and overall funding to universities does not increase, support for research – which is what makes a university a university – could depend to a significant extent on the ability and willingness of students to pay for a university education.</p>
<h2>Public investment pays dividends</h2>
<p>Further decreases in public funding for higher education would be in contrast to the strategic investment by governments across the world, particularly in Asia, to build the capacity of their universities as drivers of economic growth, productivity and development.</p>
<p>Strong government investment has resulted in rapid growth of strong universities. Five years ago, there were no Chinese universities in the world’s top 200 universities (as measured in the <a href="http://www.shanghairanking.com/">Academic Ranking of World Universities</a>). Today there are five. Universities from South Korea, Hong Kong and Singapore dominated the top five places of the <a href="http://www.timeshighereducation.co.uk/world-university-rankings/">Times Higher Education top 100 universities</a> in the world under the age of 50 released today.</p>
<p>Federal education minister Christopher Pyne’s <a href="http://www.pyneonline.com.au/speeches/policy-exchange-speech-freeing-universities-to-compete-in-a-global-education-market">recent speech to the Policy Exchange in the United Kingdom</a> reminded us that the Coalition government will “continue to place education at the heart of our society, our economy and our democracy”. We would wholeheartedly support this aspiration. Australia should aim to have one of the best higher education systems in the world, one which is open to greater competition and less encumbered by regulation.</p>
<p>It is important, however, in moving to deregulate fees and the sector to beware the inadvertent consequences of any ‘fee shifting’. Any policy around deregulation must be developed and implemented strategically to future-proof the international reputation and standing of Australia’s universities. There is no doubt that as we navigate the way ahead - strategy, caution and a long term vision for what we wish the university sector to deliver for Australia are required if we are to avoid those looming rocks.</p><img src="https://counter.theconversation.com/content/26175/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Caroline McMillen 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 National Commission of Audit released yesterday has made a recommendation to government in line with proposals from some Group of Eight vice-chancellors that university fees should be deregulated…Caroline McMillen, Vice-Chancellor, University of NewcastleLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/261792014-05-01T07:20:50Z2014-05-01T07:20:50ZCommission of Audit’s health hit list: experts respond<p>The National Commission of Audit has made <a href="http://www.ncoa.gov.au/report/phase-one/index.html">86 recommendations</a> with a focus on the federal government’s 15 biggest and fastest-growing areas of spending. Health is near the top of the list, with the Commission recommending sweeping changes such as a slew of co-payments and a delayed roll-out of the NDIS. </p>
<p>This includes a $15 co-payment for all Medicare-funded services ($5 for concession card holders), a co-payment for visits to emergency departments where the patient could have seen a GP, and a rise in co-payments for pharmaceuticals. </p>
<p>It also recommends private health insurers play a greater role in Australia’s health system.</p>
<hr>
<h2>Overview</h2>
<p><strong>Stephen Duckett, Director of the Health Program at Grattan Institute</strong></p>
<p>The Commission of Audit report is like a curate’s egg: good in parts. It is broad ranging, covering the whole of government. If adopted, its recommendations would reshape the federation. Its focus is on a sustainable budget, an essential goal.</p>
<p>There are two broad ways to rein in government spending: control costs or shift costs. The Commission recommends both. In terms of controlling costs, its recommendations on PBS spending are good, echoing previous <a href="https://theconversation.com/fixing-australias-bad-drug-deal-could-save-1-3-billion-a-year-12707">Grattan recommendations</a>. The Commission is right that an independent, expert body should negotiate drug prices and that a budget should limit spending.</p>
<p>The Commission also attacks the regulatory detritus that impedes competition and efficiency in the health sector, including in community pharmacy and private health insurance. It recommends rationalising the alphabet soup of agencies in the health portfolio. Streamlining these bodies is broadly sensible, as long as important issues are still tackled and independent advice remains.</p>
<p>The “cost shifting” recommendations are where the dangers are. Some are sensible: the income test for the Seniors’ Health card should incorporate all income, for example. Some are not. The most obvious example is the proposal to abolish bulk billing and introduce a <a href="https://theconversation.com/save-now-spend-later-why-co-payments-for-gp-visits-are-a-bad-idea-25823">government-mandated co-payment</a>. This will have a big impact on poorer people and save little money relative to other policy options.</p>
<p>The recommendation to end Medicare’s universality is another backward step. The Commission says higher income earners should be forced into private health insurance and excluded from Medicare coverage. This is the start of a slippery slope to Medicare becoming a second-class scheme for the poor.</p>
<p>Fortunately, the government has already said it will pick and choose from these recommendations. It should choose recommendations about managing the system better, cutting anti-competitive regulation and targeting support to people who need it. It should focus on managing costs, not leaving consumers to foot the bill.</p>
<hr>
<h2>Pharmaceutical Benefits Scheme</h2>
<p><strong>Philip Clarke, Professor of Public Health at University of Melbourne</strong></p>
<p>In terms of the Pharmaceutical Benefits Scheme (PBS), the National Commission of Audit’s report is quite radical. There are two good ideas and a very bad one.</p>
<p>On the very positive side, they recognise the potential for significantly cutting waste by reducing the high price of generic drugs in Australia and the inefficiencies in drug pricing generally. Their idea of an independent pricing authority is based on a similar body in New Zealand, and it moves away from ministerial decisions to this independent body.</p>
<p>This is quite a major change and the idea of capping the budget for pharmaceuticals and having this body redistribute funds would be a very significant policy shift. Such a move would provide stronger incentives to drive efficiencies, although it would ultimately depend on the skills of that agency to make hard-nosed decisions about what types of drugs to fund, de-list and to produce saving through price negotiations.</p>
<p>That’s quite different to the current process. The current system has a gatekeeper for a drug to get past, but once it’s on the PBS, there’s not much incentive to renegotiate prices or delist drugs that are no longer cost-effective.</p>
<p>The other positive that’s again radical from a political perspective, are the recommendations to deregulate pharmacy ownership and location rules. The current rules have meant that pharmacies numbers have stood still since the 1990 although we spend four times more on drugs and have 90 million more prescriptions. Reforms would dramatically increase competition in this sector.</p>
<p>The negative thing for the PBS is what they are <a href="http://www.ncoa.gov.au/report/phase-one/part-b/7-4-the-pharmaceutical-benefits-scheme.html">recommending for increased co-payments</a>. The report recommends all medicines, including concessional ones that are currently free, should attract a co-payment increase of up to $5. Here the policy reform is less well thought out. It doesn’t seem to me to create any price signals in terms of having different costs depending on the actual price of the drug.</p>
<p>And I worry about co-payments acting as a disincentive to take medications. There’s a lot of evidence from overseas that high prices for medicines are a major source of non-adherence or non-compliance to medication regimens.</p>
<p>The commissioners have really have thought about quite major sweeping reforms for the PBS rather than just tinkering. Clearly, I think you could build on what they’re recommending and redesign some of aspects. But overall, having a bold vision is more useful in this area than in many other aspects of health-care system.</p>
<hr>
<h2>Private health</h2>
<p><strong>Anthony Harris, Director of the Centre for Health Economics at Monash University</strong></p>
<p>The <a href="http://www.ncoa.gov.au/report/phase-one/part-b/7-3-a-pathway-to-reforming-health-care.html">Commission recommends</a> reintroducing a private health insurance market for primary care and having a mandatory private insurance replacement for Medicare for the better off. </p>
<p>In other words, it recommends replacing Medicare with a competitive insurance market where premiums are set according to the individual risk and characteristics such as smoking or weight. </p>
<p>The aim appears to be to reduce government spending rather than the cost of the health system – as it is far from clear how these proposed reforms would do anything other than increase total expenditure on health.</p>
<p>What is missing in the Commission’s rationale is the recognition (widespread among economic analysts) that private health insurance markets are inherently inefficient, and that government provision of insurance is both cheaper and fairer. The Commission admits to some of this when it says:</p>
<blockquote>
<p>where a third party, such as the government or an insurer, is paying for a service, moral hazard can lead providers and consumers to use more services than would otherwise be demanded.</p>
</blockquote>
<p>This is part of the story. But so is private health insurers’ inability to charge a fair premium when risks are unknown and the same coverage is needed for everyone who is sick, irrespective of income.</p>
<p>Yet the commission comes to the conclusion that allowing health funds to expand their coverage to primary care settings will improve the health of Australians at lower cost than public funding of Medicare. No evidence is provided for this. </p>
<p>Allowing private insurance to cover primary care services will not only lead more services being used, but will inevitably result in a rise in medical fees. All the evidence suggests that a single national insurer is cheaper to administer and is better able to control costs.</p>
<p>The proposal runs counter to the basic principle of Medicare and similar public health care systems: that we want the poor to have the same high quality care and attention as the rich, paid for in fair way. </p>
<p>A private insurance system will inevitably be more expensive; even if it reduces out-of-pocket costs for care, it will result in more, not less, service use and expenditure. It might reduce government expenditure, but it will increase total expenditure on health as a proportion of GDP at a time when hysteria about that ratio seems to have reached fever pitch.</p>
<hr>
<h2>National Disability Insurance Scheme</h2>
<p><strong>Karen Soldatic, Lecturer in Social Policy at UNSW Australia</strong></p>
<p>The three issues identified in the National Commission of Audit’s report about the National Disability Insurance Scheme (NDIS) – fiscal risk, technical issues affecting its rollout and changes to its advisory board – and two of these are not necessarily unexpected.</p>
<p>As the report states, this is major policy change. This is a completely new way of delivering services, particularly the NDIS’ focus on personalisation, where individuals can direct their supports to areas they feel is of most benefit to their own lives and relationships.</p>
<p>People with disabilities have been waiting for a long time for a fully resourced, responsive and enabling scheme. Talking about fiscal risk raises the question of how much longer they should have to wait.</p>
<p>The report also says there may be some technical issues about the NDIS’ rollout, and that they might delay it.</p>
<p>There’s no doubt that there will be some technical issues, given both its newness and the outcomes it is trying to achieve. There are always technical issues with any new large-scale policy directive.</p>
<p>The best way of managing, and learning, in such a new environment is to keep going and learn as we go, adapting, changing and amending those areas that we can identify as needing change.</p>
<p>This is why the NDIS has a number of trial launch sites just so system changes can be monitored and amended before the full rollout of the program. </p>
<p>A critical part of the learning comes from having a strong advisory body that is actively engaged in the development of the program, ensuring it maintains its intent of effective disability support, participation and social inclusion. </p>
<p>The report is suggesting this advisory body be consolidated with the existing board, but could that preclude having the voices of people with disability and their advocates driving the process? People with disabilities have waited long enough for something like the NDIS.</p>
<hr>
<h2>Preventive health</h2>
<p><strong>Rob Moodie, Professor of Public Health at the University of Melbourne</strong></p>
<p>It was widely expected that the National Commission of Audit report would recommend the Australian National Preventative Health Agency (ANPHA) be axed but the report only talks about two aspects of its budget. It seems ANPHA is being sliced rather than axed.</p>
<p>The report recommends creating a new National Health and Medical Research Institute (NHMRI) that will combine the National Health and Medical Research Council, Cancer Australia and the research budget of the Australian National Preventive Health Agency.</p>
<p>It says the NHMRI should “align and fully embed health and medical research in the health system” to “improve patient outcomes and deliver efficiencies by improving the evidence base available to clinicians and patients”.</p>
<p>That’s all good and well but there’s no talk of any notion of prevention. What I’m concerned about is what might happen if they continue to dilute the role of prevention because it’s very hard in the existing set-up to be able to focus on it without a specific agency.</p>
<p>The police say they can’t police their way out of alcohol-related problems on the street. In the same way, our hospitals won’t be able to treat their way out of diabetes, obesity, and tobacco-related harm. But still we’re watching declining investment in prevention.</p>
<p>That’s the agency’s research budget, its data collection and reporting on health outcomes funding will be subsumed into the Health Productivity and Performance Commission (HPPC).</p>
<p>So this announcement accounts for the research part and the data collection part, but whatever else is left of ANPHA we don’t know. There’s no indication about what else might happen.</p>
<p>What concerns me is the diminishing importance of prevention. We all say prevention is better than cure, but it’s constantly reversed in terms of funding allocation and political priorities across all governments. And its successes are ignored.</p>
<p>Imagine how crowded our hospitals would be if we had 75% of men still smoking as we did in the 1950s. Imagine how crowded they would be if we had done nothing about road trauma in the last 50 years and we still had 4,000 or more people dying on our roads and ten times that number being seriously injured every year. Blindly cutting preventative health budgets just doesn’t make sense.</p>
<hr>
<h2>Health reform</h2>
<p><strong>Jim Hyde, Professor of Public Health Policy at Deakin University.</strong></p>
<p>There is no evidence for the assumption in the National Commission of Audit’s report statement that making health more competitive and efficient will either lower costs or improve outcomes. In fact, there is evidence that too much competition drives down health outcomes. Increasing the supply of practitioners in Australia and elsewhere, for instance, has increased cost because of the professional strength of health associations.</p>
<p>Neither is there any evidence that regulation reduction will improve health. Imagine a regulation-free anti-smoking environment! The reason that the tobacco, alcohol and fast food industries are so opposed to regulation is that it holds them accountable for health outcomes and assists people make better choices about their health behaviours.</p>
<p>Public health in the areas of food safety, clean air and water and hazards are built on regulation and government intervention, not on a free market.</p>
<p>Let’s not even exercise the arguments about the inequity of co-payments in health. Co-payments do not lead to efficiency or effectiveness – words that don’t appear in the report – but to inequity and declining health outcomes. We know this from Australian and international research and it is completely irresponsible to ignore the evidence and recommend something that will lead to bad population health.</p>
<p>One of the biggest possible savings in health appears to have escaped the Commission’s notice. The report supports the ideological anti-free market mechanism of private health insurance that has done virtually nothing for health outcomes and has driven up health expenditure.</p>
<p>The costs of not investing in quality and safety, of not regulating some behaviours including some practitioner behaviours and of wilfully disregarding excellent evidence is completely outrageous and likely to be unacceptable to the community and electorally unpalatable.</p>
<p>It certainly won’t lead to reduced costs or government expenditure, and it certainly will not lead to better health outcomes.</p><img src="https://counter.theconversation.com/content/26179/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anthony Harris has received funding from NHMRC, ARC and CSIRO.</span></em></p><p class="fine-print"><em><span>Jim Hyde is a member of the Public Health Association of Australia.</span></em></p><p class="fine-print"><em><span>Stephen Duckett, along with all Australians, benefits from Medicare.</span></em></p><p class="fine-print"><em><span>Karen Soldatic, Philip Clarke, and Rob Moodie 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>The National Commission of Audit has made 86 recommendations with a focus on the federal government’s 15 biggest and fastest-growing areas of spending. Health is near the top of the list, with the Commission…Anthony Harris, Director of the Centre for Health Economics, Monash UniversityJim Hyde, Professor of Public Health Policy, Deakin UniversityKaren Soldatic, Lecturer in Social Policy, UNSW SydneyPhilip Clarke, Professor of Public Health, The University of MelbourneRob Moodie, Professor of Public Health, The University of MelbourneStephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/261782014-05-01T06:00:51Z2014-05-01T06:00:51ZProposed merger of Screen Australia and Australia Council spells … incoherence<figure><img src="https://images.theconversation.com/files/47527/original/5nrtc67p-1398924403.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">original</span> </figcaption></figure><p>The <a href="http://www.theguardian.com/world/2014/may/01/screen-australia-faces-50-funding-cut-and-merger-under-commission-proposal?CMP=soc_568">recommendation</a> made by the Commission of Audit to merge <a href="http://www.screenaustralia.gov.au/">Screen Australia</a> and the <a href="http://www.australiacouncil.gov.au/">Australia Council</a> is yet another example of this government’s policy incoherence. </p>
<p>Locked into belligerent opposition to anything done by Labor it has arrived in power bereft of any agenda – other than to somehow cut spending, cut taxes and open Australia for business. What that actually means is anybody’s guess. </p>
<p>The creative industries has always been a conundrum for the Coalition. Yes, it sounded all very business- and innovation-like, but it was launched by Labor’s Paul Keating. And some residual conservatism in what quickly became a fully neo-liberal party suggested that maybe the “intrinsic value” of the arts was important, whatever that meant (probably something to do with Sydney Opera House).</p>
<p>This <a href="http://www.ncoa.gov.au/report/phase-two/part-c/annexes/annex-b.html">recommendation</a> exemplifies this incoherence. </p>
<p>Screen Australia has had its ups and downs, its hits and misses – but it has learnt a lot over the last decade. It also has been subject to contradictory impulses. Do we go for Australian content or do we promote films that employ Australian facilities? The Great Gatsby was, in the latter terms, an Australian film. These don’t have to be opposites. </p>
<p>In recent years the promotion of Australian content could also mean a commitment to developing local skills below the threshold of the huge global tax-cut seeking “runaway” production crews. Perhaps we could have a diverse thriving film industry growing local talent. Many initiatives in Indigenous film were moving this way, as were experiments in digital distribution (let’s not mention the NBN).</p>
<p>Of course none of this registered with the present government. </p>
<p>They want to cut spending so hey, why not Screen Australia? It’s all about subsidy right – and that’s wrong, as we all know. So the industry bit should be left to its own devices – like cars and canned fruit. But maybe some of it is art – historical content, like, you know, Gallipoli. So let’s give it to the Australia Council.</p>
<p>The Australia Council was set up <a href="http://www.australiacouncil.gov.au/about">to distribute arts funding</a>. It has no capacity whatsoever to deliver an industry strategy, even if the government knew what such a strategy might be. </p>
<p>In my view, if this recommendation is followed, the Australia Council will administer the rump of Screen Australia and somehow promote a few historical art film projects. This is no good for the Australia Council, already suffering a barrage of criticism for its inability to administer what it does have. </p>
<p>And it is no good for the film sector, suffering from the high dollar but also beginning to think in new ways about what it might be. It’s lose-lose.</p><img src="https://counter.theconversation.com/content/26178/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Justin O'Connor 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 recommendation made by the Commission of Audit to merge Screen Australia and the Australia Council is yet another example of this government’s policy incoherence. Locked into belligerent opposition…Justin O'Connor, Professor of Communications and Cultural Economy, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/237292014-03-17T19:37:01Z2014-03-17T19:37:01ZWant Medicare savings? Stop paying for private hospitals<figure><img src="https://images.theconversation.com/files/44074/original/pp7tbpdm-1395030290.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">'Going private' may speed up your time to treatment, but Medicare shouldn't pick up the tab.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-158522741/stock-photo-above-view-of-male-bandaging-his-leg-while-sitting-on-pavement.html?src=YC2YD5Sv-9x8_bEorcOKdA-2-74">Shutterstock</a></span></figcaption></figure><p>The polls this week suggest half of Australians think the Abbott government should <a href="http://m.theage.com.au/federal-politics/political-opinion/public-is-ready-for-tony-abbotts-government-to-make-the-hard-choices-20140316-34vn1.html">reduce the cost of Medicare</a>. My solution? Claw back some of the A$9 billion the government pays to private hospitals. </p>
<p>Consider my experience … A few years ago I twisted my knee playing football. My GP, maybe after estimating my salary, suggested a private sports physician to diagnose my injury. The sports physician pulled and prodded at my knee before telling me:</p>
<blockquote>
<p>It doesn’t seem like any ligaments are torn, but I can’t tell for sure. Why don’t we get you a scan – you’ll only pay $60. And Medicare will pay the rest.</p>
</blockquote>
<p>I had an <a href="http://www.betterhealth.vic.gov.au/bhcv2/bhcarticles.nsf/pages/MRI_scan">MRI scan</a> at a Melbourne private hospital where you lie down in a big tube for ten minutes or so. Despite this scan being part of the “private” system, I paid $60 and the Australian taxpayer picked up $340 for the scan. I wasn’t put on a waiting list, had full choice of my doctor and hospital, and all of the benefits of private treatment. </p>
<p>Turns out my anterior cruciate ligament was “partially” torn and I just had to wait six weeks before running again. </p>
<p>I was happy to have my private treatment so heavily subsidised, but in an era of rising waiting lists for public treatment and calls for government cutbacks, this subsidy was not a good use of taxpayers’ money. </p>
<p>Nor was it equitable: this speedy access to a nearly-free diagnostic scan would not have been available to somebody who couldn’t afford to pay the $200 for a private sports physician. <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/di-factsheet-mri">Recent changes</a> also allow GPs to refer patients for MRI scans. </p>
<p>So, how much does Medicare spend subsidising private patients to visit private hospitals?</p>
<p>Medicare <a href="http://www.medicareaustralia.gov.au/statistics/mbs_group.shtml">spent</a> A$18.6bn in 2012/13 (these are my calculations based on data from Medicare reports, as are the following figures). This includes $8.2bn on “professional attendances” – out-of-hospital consultations with doctors, which is roughly equally between GP consultations ($4.3bn) and specialists (like my sports physician).</p>
<p>Of the remaining $10.4bn, around $1.7bn goes to other out-of-hospital funding of allied health services (such as physiotherapy), psychological counselling and dental care. The rest ($8.7bn) mainly gets handed over to private hospitals for a variety of services including surgical procedures, diagnostic imaging and pathology services. </p>
<p>(Note, this $8.7bn also includes some out-of-hospital private pathology and diagnostic tests as well as treatment for some private patients in public hospitals).</p>
<p>Over the last five years, spending on doctor consultations in Australia has risen 28% and spending on operations in hospitals has risen by 25%. Given inflation in prices and rises in population, these don’t seem too dramatic. </p>
<p>But looking at diagnostic imaging (scans and x-rays), we see an increase of a whopping 38% over five years. This might be explained by an increase in unnecessary knee scans for amateur footballers!</p>
<p>These figures illustrate one problem with subsidising the private system: a lack of control over spending. With public services, the government can use waiting lists and other rationing rules to hold back spending growth. Subsidising the private sector can be a blank cheque to private hospitals, hence the 38% growth in spending on diagnostic imaging.</p>
<p>The government should not allow this spending on subsidising private patients to continue to grow unchecked at the expense of funding public services. </p>
<p>In Australia, the government subsidises private sector health care in two main ways: first, through Medicare payments to private hospitals, and second, through the 30% rebate for private health insurance.</p>
<p>A useful contrast is with the United Kingdom. The UK government funds the National Health Service to provide free-at-the-point-of-use health-care services for everyone. But patients who choose to “go private” don’t receive a cent (or a penny) of subsidy for their care.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/44076/original/yzsfq7b3-1395031108.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/44076/original/yzsfq7b3-1395031108.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/44076/original/yzsfq7b3-1395031108.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/44076/original/yzsfq7b3-1395031108.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/44076/original/yzsfq7b3-1395031108.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/44076/original/yzsfq7b3-1395031108.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/44076/original/yzsfq7b3-1395031108.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">
<figcaption>
<span class="caption">Patients in the UK who choose to ‘go private’ don’t receive government subsidies.</span>
<span class="attribution"><a class="source" href="http://www.flickr.com/photos/pswansen/3063800085/sizes/o/">paulswansen/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>It’s difficult to know for sure if subsidising the private sector saves money for the government overall, or is an unnecessary expense. You have to estimate how many people are encouraged to “go private” rather than use publicly provided services, as a result of the subsidy. </p>
<p>But when it comes to the possibility of removing the private health insurance rebate completely, University of Melbourne health economist Dr Terence Cheng <a href="http://theconversation.com/why-its-time-to-remove-private-health-insurance-rebates-16525">has estimated</a> the measure would save around A$500m, even after accounting for more people using the public system. </p>
<p>Furthermore, the previous Labor government was clearly unconvinced of the merit of subsidising private insurance through the rebate, and <a href="http://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/insurancerebate.htm">introduced a means test</a> so individuals with incomes of more than A$88,000 don’t receive the full rebate and individuals with incomes of more than A$136,000 pay the full cost of private health insurance themselves. </p>
<p>The Coalition government <a href="http://www.afr.com/p/australia2-0/health_policy_in_need_of_major_surgery_OzfNT1422XZiowd6ulNtBI">has vowed</a> to abolish the means test but hasn’t made any concrete commitments about if and when this would occur.</p>
<p>If the government isn’t willing to rein in spending by subsidising private insurance, perhaps it should consider reducing the other subsidy to the private sector: Medicare items for procedures, diagnostic imaging and pathology, which largely go to private hospitals. </p>
<p>Given their recent strong growth in spending, Medicare items for diagnostic imaging could be first in the firing line. A means test – such as reducing Medicare benefits for individuals without health-care cards – could yield substantial savings to the public purse for little cost to health-care access.</p>
<p><strong><em>Read the other instalments in The Conversation’s <a href="https://theconversation.com/topics/paying-for-health">Paying for Health series</a></em></strong></p><img src="https://counter.theconversation.com/content/23729/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Sivey has received funding from the National Health and Medical Research Council and the Australian Research Council</span></em></p>The polls this week suggest half of Australians think the Abbott government should reduce the cost of Medicare. My solution? Claw back some of the A$9 billion the government pays to private hospitals…Peter Sivey, Senior Lecturer, School of Economics, La Trobe UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/243272014-03-13T02:25:19Z2014-03-13T02:25:19ZGetting tax expenditures right is a game of hypotheticals<figure><img src="https://images.theconversation.com/files/43759/original/d46swk33-1394671905.jpg?ixlib=rb-1.1.0&rect=19%2C157%2C940%2C652&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">What's the ideal tax system and where do tax expenditures fit in?</span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p>In recent days it’s been suggested the Commission of Audit should look at so-called tax expenditures as well as government spending as traditionally defined. <a href="http://www.afr.com/p/opinion/audit_commission_can_ignore_tax_4T9m3QvxePdycG1BPbwQNM">Writing in the Australian Financial Review</a>, John Hewson suggested that “the government’s treatment of tax expenditures will clearly define the nature and extent of their commitment to genuine tax and expenditure reform”. </p>
<p>Sounds very impressive – unfortunately what he is really proposing isn’t tax reform so much as simply higher taxes. At The Conversation <a href="https://theconversation.com/to-cut-fairly-commission-of-audit-should-look-at-tax-expenditures-23769">Dale Boccabella writes that</a>:</p>
<blockquote>
<p>Attaining the goals of fairness, equity and efficiency through our public finance system dictates that all the main value exchanges between a sector or taxpayer grouping and government should be taken into account when determining whether the current level of “expenditure” is appropriate.</p>
</blockquote>
<p>That seems very sensible. Neither of them is wrong – but their arguments have less practical policy importance than simply looking at traditional government spending. To understand why this is the case we need to drill into the idea of tax expenditure.</p>
<p>The notion of tax expenditure was first developed by former <a href="http://en.wikipedia.org/wiki/Stanley_S._Surrey">Harvard Law professor Stanley Surrey</a> in the late 1960s while working in the US Treasury Department. </p>
<p>He took the view that government could influence economic behaviour either by spending money or by not taxing that behaviour. His <a href="http://lawdigitalcommons.bc.edu/cgi/viewcontent.cgi?article=1605&context=bclr">argument</a> was that the taxation process consists of two components; defining the tax system, and then creating exemptions to that tax system that favour specific industries, individuals, or activity. Tax expenditures take the form of exclusions from the definition of taxable income, tax credits, non-standard rates, and so on.</p>
<p>In theory that sounds very simple but the devil is in the detail. As the <a href="https://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCwQFjAA&url=http%3A%2F%2Fwww.oecd.org%2Fgovernance%2Fpublic-finance%2F36986711.pdf&ei=08cfU-fQL4mXkQXmn4Aw&usg=AFQjCNFacKS1OjC6_24shK9clrN2KHFlWQ">OECD has conceded</a>, “definitions of exactly what constitutes a ‘benchmark’ tax system – used to identify tax expenditures as deviations from the benchmark – are controversial”. </p>
<p>In practice tax expenditures are created when the actual tax system deviates from an ideal tax system to the apparent benefit of a narrow group of taxpayers. The difficulty is in establishing the ideal tax system – and, of course, who gets to define that “ideal tax system”.</p>
<p>When any policy issue revolves substantially around the question of “who gets to play god?” there is always trouble on the horizon. Economists seem to make this mistake a lot with economics Nobel Laureate James Buchannan arguing that economists enjoy playing god and imposing their own preferences through their policy prescriptions.</p>
<p>In the ideal Treasury tax system home owners would be taxed for living in their own homes. Who knew that buying your own home was a tax rort? The GST would apply to health and education, and there would be no superannuation tax concessions.</p>
<p>Then there are the measurement problems.</p>
<p>There are three approaches to measuring the size of tax expenditures; revenue foregone, revenue gain, and equivalent outlay. The first thing to note is that the three different approaches can generate very different numbers. Revenue foregone is the easiest estimate of tax expenditure, but the most inappropriate. Revenue gain figures are likely to be wishful thinking. These two measures, however, are the measures Treasury usually reports in the annual <a href="http://www.treasury.gov.au/Treasury%20Home/PublicationsAndMedia/Publications/2014/TES%202013">Tax Expenditure Statement</a>. </p>
<p>If tax expenditures are an alternate mechanism to achieve a given aim then the correct method of evaluating the trade-off between actual expenditure and tax expenditure is the equivalent outlay approach. That approach, however, would involve Treasury having to estimate hypothetical policies and appropriate costings. In other words, a “correct” estimate of tax expenditure would involve comparing the cost of a hypothetical policy to a deviation from a hypothetical tax system. With all those hypotheticals Treasury would be able to generate arbitrarily large numbers.</p>
<p>The biggest numbers usually relate to things like owner-occupied housing and superannuation. It is true that if the capital gains tax applied to the family home that more tax would be paid. Yet no Australian government has proposed such a policy. It is true that if superannuation contributions were taxed at the marginal rate that more tax would be collected. Again, no Australian government has proposed such a policy. Similarly, if there were no GST exemptions more tax would be paid. But those exemptions weren’t designed to favour any particular industry; rather they were the political price the Howard government paid to get the GST through the Parliament.</p>
<p>Mind you, economists and tax lawyers don’t normally point to the big ticket items when talking about tax expenditures. Rather they tend to point to things like the car fringe benefits tax concession and meal and entertainment fringe benefits tax concessions in the non-profit health sector. </p>
<p>What Treasury doesn’t report, and most people gloss over, is the incidence of tax expenditure. Who gets the benefit? When it comes to matters of taxation most people instinctively think that loopholes and tax expenditures must benefit high-income earners or those who are politically connected. As we saw during the car fringe benefit tax debate last year, however, most of the beneficiaries were individuals on modest incomes. So too with the meals and entertainment cards so common in the non-profit health industry – most workers in that industry are not high-paid doctors and specialists, but modestly paid nurses, cleaners, and hospital staff.</p>
<p>All this isn’t to say that tax expenditures aren’t important – but their definition is rubbery, their magnitude arbitrary, the largest expenditures politically not negotiable, and their incidence unclear. It is unsurprising then that the government and the Commission of Audit will be concentrating on those aspects of government spending that are well understood.</p><img src="https://counter.theconversation.com/content/24327/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sinclair Davidson is Professor of Institutional Economics at RMIT University and a senior fellow at the Institute of Public Affairs. He has previously held research grants from the Australian Research Council.</span></em></p>In recent days it’s been suggested the Commission of Audit should look at so-called tax expenditures as well as government spending as traditionally defined. Writing in the Australian Financial Review…Sinclair Davidson, Professor of Institutional Economics, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/237692014-03-11T23:59:21Z2014-03-11T23:59:21ZTo cut fairly, Commission of Audit should look at tax expenditures<figure><img src="https://images.theconversation.com/files/43560/original/jrfmrw32-1394512256.jpg?ixlib=rb-1.1.0&rect=29%2C62%2C931%2C997&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Commission of Audit may miss the true picture if it looks only at cutting costs.</span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p>In the lead-up to a crucial federal budget in May, it could be argued that requiring the Commission of Audit to identify revenue trends that could pose a risk to the budget’s structural integrity could encompass tax expenditures. </p>
<p>While the <a href="http://www.ncoa.gov.au/docs/NCA_TERMS_OF_REFERENCE.pdf">Commission of Audit’s terms of reference</a> expressly mentions levels of direct government expenditure, such as grants and transfer payments, there is no express reference to tax expenditures, and secretariat Peter Crone has confirmed that it will not deal with them. </p>
<p>Tax expenditures are “expenditure programs” of the Commonwealth that are delivered through the tax system, rather than the direct expenditure side of the budget. They mainly take the form of deductions, rebates, exemptions and concessional valuation rules. </p>
<p>The essence of tax expenditures is that they involve under-taxation compared to the nation’s benchmark income tax system. What should be the benchmark within our income tax is debatable, so not everyone will agree with Treasury’s view on that. Treasury mainly works with the idea that most gains and profits should be fully taxed under a benchmark system, and that is why tax free gains made on the sale of family homes is listed as a very large tax expenditure. </p>
<p>On the other hand, the generous tax treatment of discretionary trusts (family trusts) is not included in the tax expenditure statement - but there are good reasons why it should be. The negative gearing loss on rental properties and share investments is not included either. For 2012-13, the Commonwealth has around 280 tax expenditures under the income tax, worth around $100 billion. This is around 6% of GDP. Direct expenditure of the Commonwealth for the same period was around $360 billion, which is around 24% of GDP. </p>
<p>The point is that tax expenditures are <a href="http://www.treasury.gov.au/Treasury%20Home/PublicationsAndMedia/Publications/2014/TES%202013">significant in size</a>. While characterising tax expenditures is problematic, they deliver concrete economic advantages, and in numerous cases, significant advantages to their recipients in the form of deliberate non-collection of taxation. </p>
<p>Given this, why aren’t tax expenditures expressly within the terms of reference of the Commission of Audit? After all, keeping tax expenditures out of the commission’s deliberations necessarily means it is not looking at all government expenditure items. </p>
<p>Does this matter? Yes, because any deliberations and ensuing recommendations may not be based on full information. If the commission will not examine the full scale of government assistance being received by a sector or a category of taxpayer, how can a credible recommendation be made about the level of direct assistance that should be scaled back? </p>
<p>Attaining the goals of fairness, equity and efficiency through our public finance system dictates that all the main value exchanges between a sector or taxpayer grouping and government should be taken into account when determining whether the current level of “expenditure” is appropriate. </p>
<p>A good example is housing, where there are both substantial direct payments provided to taxpayers (such as housing grants and rental assistance) and considerable tax expenditures (such as negative gearing). How can the commission make fair and efficient recommendations about the proper level of rent assistance and pensions in the direct expenditure system when it does not consider the level of assistance provided to homeowners and others through tax expenditures? There are many more examples in both the private and business sphere. </p>
<p>The commission’s response is that tax expenditures will be taken into account in the tax review, promised by treasurer Joe Hockey. The problem with this is that direct expenditures are hardly ever comprehensively examined in tax reviews, which means the same partial or disjointed examination problem is present again. Further, the tax review and associated measures are some way off, whereas the 2014 budget is just months away. </p>
<p>It is hard to predict what the political landscape will be in three to four years time. Indeed, given the risk of an inevitable voter disenchantment following any savage budget cuts, it is very unlikely that the government will have the same reserves of political capital to move on tax expenditures with a similar degree of vigour that will be brought to bear on direct expenditures.</p>
<p>In any event, the directive in the commission’s terms of reference to aim for savings that will deliver a surplus of 1% by 2023-24 is a strong indication the government intends for savings to mainly come from reducing direct expenditures, and not reducing tax expenditures.</p>
<p>Yet the problems of not dealing with tax expenditures are compounded because the political dynamics are quite different between examinations of direct expenditure programs and tax measures. </p>
<p>What can happen is that the proposed removal of a tax expenditure can easily be seen and presented as a tax increase. The failed attempt to remove the tax expenditure on the <a href="https://theconversation.com/the-truth-about-fbt-on-cars-meaningful-tax-reform-is-hard-16235">car fringe benefits tax</a> in the lead-up to the 2013 election is a recent case in point.</p>
<p>The <a href="http://www.news.com.au/finance/economy/joe-hockey-warns-australians-the-age-of-entitlement-is-over/story-e6frflo9-1226816598949">“age of entitlement is over”</a> doctrine outlined by Hockey implies that before entitlements are reduced (or less likely, increased), a fairly accurate account of the level and spread of entitlements will be established. </p>
<p>It is hard to see how such accuracy can be attained if tax expenditures are not subjected to the same standard of scrutiny and the same political accountability mechanisms that are applied to direct expenditures.</p><img src="https://counter.theconversation.com/content/23769/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dale Boccabella 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>In the lead-up to a crucial federal budget in May, it could be argued that requiring the Commission of Audit to identify revenue trends that could pose a risk to the budget’s structural integrity could…Dale Boccabella, Associate Professor of Taxation Law, Australian School of Business, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/231292014-02-13T19:35:07Z2014-02-13T19:35:07ZSwedish lessons for the Commission of Audit<figure><img src="https://images.theconversation.com/files/41335/original/698nrz6d-1392181148.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Sweden shows it's possible to maintain a welfare state and good public finances </span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>As the Abbott government’s Commission of Audit busily scours the globe for answers to our fiscal woes, where in the world will it look?</p>
<p>My tip is that it will dwell with the usual suspects: the UK, the United States, good old New Zealand, and maybe Canada, at a stretch. Expect Europe to figure not as a solution to our ills but as an example of what not to do if we really are keen to get our financial house in order.</p>
<p>A country that is likely to be forgotten is slap bang in Europe, but farther north than we tend to see. Sweden, the bastion of social democracy genuinely ranks as a nation to follow rather than avoid.</p>
<p>There, the age of entitlement is firmly entrenched, courtesy of a giant welfare state delivering services for all, thanks to a tax base that is <a href="http://stats.oecd.org/Index.aspx?DataSetCode=REV">almost one third bigger</a> than our own.</p>
<p>All that social expenditure has had a dramatic effect, for on most measures the Swedes have the most equal society in the west, thanks not just to generous social security payments, but also a welfare state that keeps employment of women at levels most other nations can only dream of.</p>
<p>But being a champion of equality is one thing, a paragon of fiscal virtue is quite another. Why might we expect a truly independent champion of sound finance to trumpet Sweden as a potential budget saviour?</p>
<h2>How to support a welfare state</h2>
<p>Back in the early 1990s, Sweden got hit by a massive financial crisis that caused the economy to shrink and government finances to go deeply into the red. That prompted a re-think about how to mind the till that has continued through to this day.</p>
<p>Sweden now has some of the tightest fiscal policy settings in the west, with a set of policy principles firmly enshrined, and now with broad support across the party spectrum.</p>
<p>The principles commit Sweden to running budget surpluses equivalent to 1% of GDP across the business cycle. This compares to our own current commitment of a balanced budget over the cycle.</p>
<p>To ensure this happens, the government has put in place two safeguards around expenditures that so far have worked rather well. The first involves committing to expenditure caps three years in advance. This means that expenditures are unlikely to balloon if revenues unexpectedly swell.</p>
<p>The second involves committing each year to an expenditure envelope across the public sector that is less than the formal cap. The gap between the envelope and the cap forms a safety margin to protect against the unexpected, thereby limiting risks to the budget balance, and enabling expenditures to be shifted across the public sector from areas of less to pressing need.</p>
<p>The new principles are flexible, and enable the budget’s “automatic stabilisers” to work effectively during a recession. When the economy and employment shrink, spending on unemployment rises and tax revenues fall causing the budget balance to worsen thereby giving the economy a lift. In other words, deficits are allowed, but only when they are needed to ensure public spending makes up for a contraction in private spending.</p>
<p>To cap it off, Sweden has also introduced a non-partisan and independent Fiscal Policy Council charged with the responsibility of monitoring what governments do. They publish annual reports about financial performance versus targets and the transparency and accuracy of what has been done. This oversight keeps the politicisation of public finances to a minimum, while exposing the government of the day to a degree of scrutiny not seen before.</p>
<p>In contrast to much of the rest of Europe, Sweden’s public accounts recovered quickly from the Global Financial Crisis, swinging quickly back into balance. Instead of growing, its gross public debt has been shrinking, and it remains one of the few countries in the OECD whose financial assets considerably exceed its liabilities to the tune of more than 20% of GDP.</p>
<p>Yet social expenditures remain high, and the Swedish welfare state remains strong.</p>
<h2>Competing where it matters</h2>
<p>And all this has been possible because the economy continues to grow. <a href="http://www.mckinsey.com/insights/europe/growth_and_renewal_in_the_swedish_economy%5D">McKinsey and Co</a> have put this down to “continued productivity gains in the areas most exposed to international competition: manufacturing and business and financial services, which together account for only about one-third of the nation’s economy”.</p>
<p>After a missstep during the global financial crisis in 2008 and 2009, and an unexpected slowdown last year, Sweden’s economy has been growing at a healthy clip, and at a faster rate than the OECD as a whole (see below). </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/41329/original/x94phttg-1392179270.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/41329/original/x94phttg-1392179270.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=279&fit=crop&dpr=1 600w, https://images.theconversation.com/files/41329/original/x94phttg-1392179270.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=279&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/41329/original/x94phttg-1392179270.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=279&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/41329/original/x94phttg-1392179270.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=350&fit=crop&dpr=1 754w, https://images.theconversation.com/files/41329/original/x94phttg-1392179270.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=350&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/41329/original/x94phttg-1392179270.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=350&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Swedish growth compared to OECD members.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-163795538/stock-photo-i-love-sweden-sign-series-for-countries-and-travel-destinations.html?src=Ey4aVJgmA-HDUEWP5wtUAQ-1-42">The World Bank</a></span>
</figcaption>
</figure>
<p>And unlike other western nations, Swedes’ trust in government (over 60%) is amongst the highest in the western world, <a href="http://www.keepeek.com/Digital-Asset-Management/oecd/governance/government-at-a-glance-2013_gov_glance-2013-en#page27">roughly one third above the OECD average</a> as a whole (40%).</p>
<p>Which is not surprising, given that Sweden has shown successfully how a culture of entitlement and relative equality can coexist alongside a balanced budget funded by high taxation in an economy doing pretty well for all.</p>
<p>Now that’s a model to aim for.</p>
<p>But one unlikely to get much of a hearing in a Commission of Audit that is likely to say much about financially troubled central and southern Europe and ignore the great things happening in a social democratic exemplar of sound finance farther north.</p><img src="https://counter.theconversation.com/content/23129/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Hayward is a member of the ALP.</span></em></p>As the Abbott government’s Commission of Audit busily scours the globe for answers to our fiscal woes, where in the world will it look? My tip is that it will dwell with the usual suspects: the UK, the…David Hayward, Dean, School of Global, Urban and Social Studies, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/223102014-01-23T04:17:22Z2014-01-23T04:17:22ZJust how much can we really expect from the National Commission of Audit?<figure><img src="https://images.theconversation.com/files/39714/original/39ypxkxj-1390436580.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The National Commission of Audit has an extension of time for its first report, but the issues are complicated.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>News that the National Commission of Audit had been granted an <a href="http://www.theage.com.au/federal-politics/political-news/tony-abbotts-audit-commissioner-accused-of-conflict-of-interest-over-pay-tv-advocacy-20140120-314v8.html">extension of time</a> shouldn’t be a surprise given the complexity of issues in the scope of its <a href="http://ncoa.gov.au/docs/NCA_TERMS_OF_REFERENCE.pdf">first phase</a>.</p>
<p>The questions it is examining around the scope of government, the current architecture of commonwealth-state relations, the efficiency and effectiveness of government expenditure, commonwealth finances, and adequacy of existing budgetary controls and disciplines, are not simple. </p>
<p>Indeed, the answers will reflect a range of factors including philosophical and ideological views of the role of government in society. It’s not clear how such views can be sought, deliberated and delivered in a little over three months. </p>
<p>The report on phase one, due in just a few weeks, will then form the basis for phase two which will deal with Commonwealth infrastructure, and performance sector reporting and accountability.</p>
<p>But this week has seen two major announcements that seem to pre-empt the Commission of Audit’s report. On Wednesday came the news that the federal government will seek to <a href="http://www.theaustralian.com.au/national-affairs/policy/from-26-indigenous-programs-to-five/story-fn9hm1pm-1226807204320">merge 26 Indigenous programs</a> into just five, part of the rationale being to slash administration costs. </p>
<p>Earlier in the week it was announced that it was time to revisit the foundations of our welfare system, as our current approach is unsustainable. From the <a href="http://www.canberratimes.com.au/federal-politics/political-news/welfare-review-targets-jobless-disabled-20140121-316tj.html">Social Services minister Kevin Andrew’s comments</a>, it is clear that the attention will be on disability and unemployment benefits, with a range of schemes out of scope including the aged pension.</p>
<p>This takes us to the process; there is no doubt this was a compelling part of the recent Senate Committee hearing. To start, there was considerable argy-bargy about whether a list of submissions, at least, would be made publicly available. This developed into long discussion about the processes in place inside the Commission of Audit as to who was reading submissions from whom. </p>
<p>For example, was it appropriate for <a href="http://www.bca.com.au/about-us/peter-crone-chief-economist">Peter Crone</a> who is heading up the Secretariat and who is on leave from the Business Council of Australia, to read the BCA submission? Which submissions had the chairman, Tony Shepherd, President of the BCA reviewed? Who selected which submissions went to which Commissioner? Who arranged the meetings - those who put in submissions, or the Commissioners?</p>
<p>Shepherd faced questioning on how would he deal with questions on propping up Qantas given he sits on the board of competitor Virgin, while Crone was grilled on how far removed he was from the BCA submission given he led a <a href="http://www.bca.com.au/publications/action-plan-for-enduring-prosperity-overview">major report</a> calling for National Commission of Audit to the major consulting house which is itself providing “pro bono” consulting work to the Commission. (What was the scale and scope of their current work with the Commonwealth and how were potential conflicts being managed?)</p>
<p>The issue of conflicts of interest and how these (real or perceived) are <a href="http://www.theage.com.au/federal-politics/political-news/tony-abbotts-audit-commissioner-accused-of-conflict-of-interest-over-pay-tv-advocacy-20140120-314v8.html">continues to in the media</a>. </p>
<p>Scope was also a fascinating topic covered in the hearing; were the <a href="http://ncoa.gov.au/docs/NCA_TERMS_OF_REFERENCE.pdf">terms of reference</a> fixed or malleable? The revelation part way through that two ministers had formally written to the Commission, essentially giving them the job of sorting our how many public servants to reduce the public service by, seemed to be a shock to Shepherd and was somewhat embarrassing given earlier comments he made about the independence of the Commission.</p>
<p>Those involved in the Senate hearing had a fixation on the numbers and rightly so. The main game is on whose figures are being used to calculate the <a href="http://ncoa.gov.au/docs/NCA_TERMS_OF_REFERENCE.pdf">big target</a> given the Commission of Audit is being asked to “make recommendations to achieve savings sufficient to deliver a surplus of 1% of GDP prior to 2023-24”. It is still not clear what financial and economic data is being used, including whether Treasury and/or Finance data has a serious place in this process. </p>
<p>The other number that got some attention was the cost of the Commission – great “value for money” according to Mr Shepherd at the cost of just $1 million. But once we got into the detail it was not clear what this covered and what was left out; certainly the cost of all the public servants supporting the Commission was not factored into this bargain basement price.</p>
<p>As the speculation continues about what will be delivered in the first report, what we can be sure of is that these questions are central to public administration and policy – what is the role of government? Who does it need to work with to get this done? When should government move out of the way? </p>
<p>How do we measure the performance of government? What is the role of public servants? How transparent should the processes of governing be? In the complex work of public management, these questions never go away.</p><img src="https://counter.theconversation.com/content/22310/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Janine O'Flynn has received funding from the Australian Research Council, the Australian Public Service Commission and the Brotherhood of St Laurence. </span></em></p>News that the National Commission of Audit had been granted an extension of time shouldn’t be a surprise given the complexity of issues in the scope of its first phase. The questions it is examining around…Janine O'Flynn, Professor of Public Management, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.