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Audit Commission’s secrecy and haste makes for bad policy

Commissioners of the Abbott government’s Commission of Audit Robert Fisher, Tony Shepherd, Amanda Vanstone and Peter Boxall faced a Senate hearing yesterday, but little was revealed. AAP/Lukas Coch

Treasurer Joe Hockey expected yesterday’s public hearing into the Commission of Audit would be a “show trial” and a “stunt”.

And at face value he was right. Those who hoped Tony Shepherd or the other Commissioners would reveal their views on privatising Australia Post or a co-payment for doctors’ consultations were bound to be disappointed.

Shepherd’s repeated response to speculative questioning was that the Commission was “not ruling anything in or out”, and that it was up to the government to decide how to act on its recommendations.

Senators Richard di Natale, who chaired the hearing, Kate Lundy and Sue Lines made some progress in getting the Commissioners to reveal their processes and decision rules.

Others were in a partisan mood. Liberal senators David Bushby and Dean Smith wasted no opportunity to mention the Howard government’s budget surplus – no mention of that government’s structural deficit – while Labor’s Sam Dastyari posed a string of “gotcha” questions.

Labor’s Sam Dastyari was determined to find new details about what the Commission of Audit’s Tony Shepherd had discussed with Abbott Government ministers. AAP/Lukas Coch

Dastyari’s first “gotcha” was about the GST, making it clear Labor would vigorously oppose any hint of a GST rise. By contrast, di Natale, while not endorsing a GST rise, reasonably stressed the Commission’s brief, focussing on cost-cutting, was one-sided, and that ways to increasing revenue should also be on the table.

Shepherd ducked that issue, referring to the government’s plan to have a separate tax inquiry.

Unfortunately that questioning about revenue, which could have led the Committee into rich policy territory, was not pursued in any depth. Government processes tend to separate revenue from expenditure. The nation’s taxation capacity is taken as a “given” (particularly when politicians like Dastyari raise hell when there is any sniff of a new or higher tax), and expenditure has to fit within that constraint.

That’s why proposals for new initiatives generally have to be funded by cuts in other programs, almost regardless of the public good justifications of those programs.

Time poor, scope rich

Dastyari’s most telling “gotcha” concerned the Commission’s secrecy, seizing on a statement Shepherd had made in an article published last August, when he wrote an audit into the “scope, size and efficiency of government” should be conducted “carefully and openly in a reasonable period with wide-ranging consultation and trade-offs made explicit”.

While there is nothing in the Commission’s terms of reference prohibiting a more open process, it certainly does not have a “reasonable” period. It was appointed in late October, with reports required by the end of January and March.

Unlike standing bodies such as the Australian National Audit Office and the Productivity Commission which have ongoing capacity, the Commission had to pull together staff, and to operate within a A$1 million budget, which Dastyari reminded us contrasted with A$15 million for the Royal Commission into the Home Insulation Program.

It doesn’t have time for a more open process. The first we will know of its recommendations will be at Budget time, by which point Hockey has said he’d “expect that the government will adopt a vast number of recommendations”.

That lack of openness, be it a reflection of this government’s secrecy or of time constraints, could result in a set of recommendations and budgetary decisions which prove to be costly in both economic and political terms.

Successful economic reform, particularly if it involves difficult trade-offs, cannot be done hastily. Gary Banks, former chair of the Productivity Commission, explained the success of the difficult reforms of the 1980s:

Acceptance that reform was needed did not come about overnight. It emerged over time, with mounting awareness of the costs of the status quo and the potential gains from doing something about them. This in turn resulted from research and evidence on the deficiencies of existing policies, and deliberate efforts to communicate that information to the community.

Why transparency matters

While the Productivity Commission does not always get its recommendations over political hurdles, it does have a process to smooth that path. It releases discussion papers, helping people see issues in their wider context and broadening options for solutions. It holds public hearings, and issues draft reports.

Only its final reports are kept confidential pending government decisions. It’s a process with three distinct benefits.

First, it often reveals unintended consequences of proposals which at first glance look like good ideas. No such reality check applies to the Commission of Audit.

Second, it helps expose the motives of rent-seekers and others who would profit from particular policies – supplicants who couch their submissions in terms of supposed public interest. It’s a fair bet that the Commission of Audit has many elegantly-drafted submissions urging privatisation of government enterprises which conveniently gloss over or ignore the economic reasons for public ownership.

Third, it gives parties a hearing. Public hearings assure people that even if they don’t get what they want, their interests have been considered. They get their “day in court”, and are more likely to accept the outcome.

Without proper process, even if proposals clear political hurdles and become enacted in legislation, they may have a short lifetime. The textbook case is the Whitlam government’s 25% tariff cut, a precipitate decision which put further tariff reform off the agenda for ten years.

The subsequent success of the Hawke-Keating government in economic reform owes much to good process – use of the Industry Commission, which later became the Productivity Commission, establishment of standing consultative bodies such as the Economic Planning Advisory Council, and generally a patient and consultative approach to reform.

It’s a model this government could emulate if it seeks enduring reform rather than a vehicle to discredit the previous government.

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