So far no one has worried too much about the logistical difficulties of getting $42b of stimulation out the door. They are significant and will bear directly on whether the package can actually do what it is intended to do.
Spending small amounts of money is relatively easy. Spending lots of money quickly, is hard. Very hard. One of the reasons for the Howard Government’s large surpluses was that it kept getting to the end of each financial year and finding it had a lot more money left over than it expected. The fault was only partly because Treasury could never accurately anticipate just how rapidly company tax receipts were growing.
One of the other reasons was that the Australian Public Service couldn’t roll out new programs fast enough. It didn’t have enough bureaucrats and the sheer volume of money going into dodgy regional programs and community grants was too great to direct unless all pretence of proper administration was abandoned.
That was all within one level of government. This mostly involves the states.
COAG met yesterday to work out how to spend nearly $28b between now and July 2011. Just to make things more difficult, the spending is targeted at housing and school construction, a sector dominated by smaller operators, who will be working on tens of thousands of small projects, ranging from building new school halls to constructing new housing and installing insulation. There are some options for efficiencies. Housing projects will be taken on by large developers, as usual. There is talk of trying to bundle a number of small projects together in specific areas so they can be managed by a single contractor who will sub-contract the work. There will, as Rudd cheerfully admitted yesterday, be implementation problems.
COAG did address one issue which for generations has driven Commonwealth bureaucrats and ministers to distraction — the capacity of states to cost-shift to the Commonwealth by reducing their expenditure in an area when the Commonwealth increases it. Instead, the Commonwealth Treasury will have access to all state expenditure forecasts for coming years to check that there has been no reduction by the states in housing educational infrastructure spending. That sounds good, except the Greens this morning discovered potential problems with state governments selling public housing. Despite the good intentions professed yesterday by Premiers, the states need to be watched closely. They’ll try anything.
COAG also agreed a rollout timetable which is, to put it mildly, heroic. The primary schools funding will be divided into three rounds. The first involve projects starting by June, the second by July-August and the third by December. Other components require projects to start within eight weeks. The housing package will be rolled out with comparative sloth. Allocations won’t be made until April and August.
All of this will involve state government bureaucracies. And, perhaps more scary, state government ministers as well.
So step forward Mike Mrdak, the new Commonwealth Coordinator-General. The Coordinator-General will oversee the entire program. He’ll liaise with new Coordinator-Generals in each state on ensuring the expenditure is rolled out in the timetable COAG has agreed.
Mrdak is a Deputy Secretary in Prime Minister and Cabinet. He moved there from Infrastructure last year as part of Terry Moran’s overhaul of the PM&C leadership team. He is one of the best of next generation of senior public servants and an outstanding choice for the role. Unfortunately it might be make or break for Mrdak, but he’ll assuredly move on to greater things if he succeeds. Those focussed on Rudd’s retention of Howard-era secretaries like Halton and L’Estrange are missing the ongoing transformation of the senior APS under Moran’s leadership.
Unlike the rest of us, Queensland readers might be familiar with the idea of a Coordinator-General, a position established in 1938 to expedite and better coordinate Depression-era public works. Rudd’s Queensland background is once again shaping his approach to government. The Queensland role combines a strategic approach to development with a Bjelke-esque capacity to override pesky regulatory requirements like EISs. It’s also similar to various “czar” roles in US bailout packages.
Mrdak’s role isn’t quite the Queensland position, though. It hasn’t been included in the bills for the package, and PM&C confirmed to the Senate committee this morning that it wouldn’t be a statutory position. Mrdak won’t have specific powers — merely the responsibility for overseeing the biggest and fastest spending program in Australian history.
No pressure.
Anyone who has had anything to do with government spending knows that the bureaucracy – quite rightly – is concerned about probity. The bureaucracy does not have the time or resources to be interested in efficiency and getting value for money. The government needs to find a way to let markets allocate resources. To give an example, instead of providing insulation to houses give all households $x as “vouchers” but require the dollars be spent on a range of goods that will save energy. Let the vouchers be transferrable so that if someone does not want to spend the money they can sell the vouchers for whatever they can get to someone who wants to spend the money on ways to save energy in the house.
To reduce the administrative overheads require people to register themselves to get the vouchers.
Bernard, you are so right. I am staggered by the housing insulation project. It is truly bizarre! The capacity to do this massive task clearly doesn’t exist and will take a long time to wind up for one massive burst of activity before it dies. What then? The whole approach smacks of being a grand gesture, which by its sheer magnitude and audacity, is designed to dazzle the masses. It clearly hasn’t been thought through. I think there is no chance they can spend that much money on the one project. At the end of the day it will end up mostly unspent and the bottom line won’t be harmed too much. Headline achieved, who cares about the outcome? It would have been far more sensible to spread the spend across a range of initiatives with good greenhouse gas minimisation outcomes.
Rudd has conspicuously failed to implement his election promises on climate change. Here was a chance to make a real impact and, as with the ETS, he has wimped out. Quite frankly, I feel I was conned out of my vote at the last Federal election. Here’s hoping Obama shows more balls on climate change.
The stimulus will support at least 7 jobs — co-ordinator-generals for each state and the commonwealth.
Just as Howard loved to announce mind boggling programs it seems that Rudd does too – however with time frames well before the next election which means that it won’t be spent and the budget will not go into the black to any degree.
The Public Service is reeling from efficiency dividends (job losses), changes to programs and the retirement of their corporate knowledge (baby boomers only too glad to leave). State governments are slow to act and have no capacity for this either – especially as the transfer will all be done by Agreements which will require the lawyers to have time to develop and then study the fine print.