We all believe in Australia (it being close to Australia Day), Test cricket (?), motherhood, having a beer, meat pies and anything else from a jingoistic Australia feel-good ad.
This check list also includes productivity in the economy. It is hard to be against productivity, it’s somehow un-Australian if you are these days. But it is one of the main drivers of economic growth, rising incomes and living standards.
So it was no surprise that in his first speech of an election year, Kevin Rudd lectured us on the need to improve our productivity to meet the challenge of an ageing population by 2050.
It was a typical speech from the Prime Minister and in fact had echoes of the former Treasurer, Peter Costello. That’s not surprising since it seems Rudd’s lecture was based on a forthcoming Treasury paper on the ageing population (or intergenerational change), as were many of Costello’s on the same subject.
It was predictable: we have heard it all before. Typically for the government, it missed (avoided?) several developments that need addressing if anyone is to take the idea seriously.
One is the finding of surveys that Australians already work hard and are not the slackers that some politicians and business leaders seem to infer from time to time.
The latest survey was from the Australia Institute last November, which showed that Australians work longer hours than any other country in the OECD and work large slabs of unpaid overtime. The institute estimated the value of that unpaid work at $72 billion a year.
Then there was the latest act of intransigence from the teachers who are stepping up their campaign against performance league tables.
That is the sort of micro-reforms that will help boost productivity by allowing parents to make informed choices about educating their children, help teachers and educations departments to improve low-performing schools, and benefit the community generally. But the Education Union seems more interested in protecting their underperforming members rather than helping students and parents (and the community generally) get more from their tax dollars and other payments.
It’s only small beer in terms of the reform agenda, but if it does illustrate the simple fact that change and improvement will hurt some and help others. As the years of change and reform under the Hawke, Keating and Howard governments showed, there were a lot of mostly false or illogical claims about the damage to a long list of groups, institutions from those changes.
But the overwhelming evidence is that the community and economy (and workers) benefit enormously. It is one of the reasons why Australia survived the global credit crunch and recession in a better state than any other country.
But union power and intransigence in the public sector (besides education, in police, health, and in white-collar employment across government departments and bodies) needs to be tackled. State governments haven’t had the guts to make significant changes in these areas, so far Rudd’s mob has shown a distinct inclination to talk rather than act.
Rudd rightly supported the idea of a “big Australia”. But his speech failed to mention THE success story of the past decade: the way Australia has switched its focus from Japan, the US and Europe, to countries such as China and India.
The Reserve Bank has been alert to this change: in fact if it hadn’t been for a series of speeches from governor Glenn Stevens and other RBA executives last year, ordinary Australians would have had no understanding of this significant change.
This speech from Stevens last November contained more information and ideas about the best path to lifting our economic performance than anything so far heard from the Prime Minister.
Rudd did point to the benefits of boosting productivity growth. But the agenda he outlined last night: stimulus-related infrastructure spending, his education revolution, the national broadband network and harmonising various state-based business regulations — is not enough, not when more impediments to improving productivity are being created.
For example, the banking and finance sector has seen a rather worrying concentration of competition in the past year as the Big Four banks have moved to control more of the sector, whether it is retail deposits, superannuation, insurance, financial planning and investment management.
But there is a rough rule of thumb here for productivity: the greater the concentration of competitors, the greater the lack of meaningful competition and the greater the inefficiencies: fee gouging, complacent attention to customer needs, high profits, an ability to recover 100% of costs and then more, all hallmarks of an industry or sector where competition is low.
In banking it was what it was like before the deregulation of the Hawke government.
If you had to look at the drivers of improved productivity performance in the past 20 years it has been floating the dollar, improving competition in the economy through enforcing after toughening) competition laws, improving the labour force, making it more flexible and the GST and other taxation changes.
The ideas in those changes still apply. But this Labour government has presided over the greatest contraction of competition in financial services (banking, finance, super etc) seen since the Hawke government deregulated the sector and allowed in more competition 26 years ago.
If Rudd and his government were really serious, they would start with an inquiry (I know how he loves these) into the finance sector: not the insider effort former Macquarie Bank executive Mark Johnson produced last week with its siren call for tax changes to boost Australia’s appeal as a regional financial sector (the great mirage of successive national and state governments for the past 26 years).
The loss of competitive pressures in banking, funds management (the move by the NAB to buy Aviva and Axa’s Australian businesses), the CBA’s purchase of Bankwest, Westpac’s competition-limiting acquisition of St George: all these and other moves, such as regulation, tax and fees and charges, competition, should all be examined, by another Campbell/Wallis Committee approach.
Financial services are now one of the more important sectors in the economy, thanks to the more than trillion dollars of national super savings. That money helped Australian business recapitalise last year and avoid making big job cuts and closing unperforming businesses. It was a national lifeline that generated fat fees and profits for banks, accounting firms, investment banks and other advisers.
Investing that money wisely and in a way that benefits national long-term savings would contribute to helping grow national productivity, rather than the fees, profits and lifestyles of mob of bankers and other “suits”.
There are other areas (telecommunications where we are to get yet another inquiry into Telstra’s charges) that can do with more work to improve productivity. Medical services (and health care) are two others.
But it is more than just a simplistic speech by a Prime Minister on the eve of Australia Day, based on a forthcoming Treasury report and vague appeals to work harder and smarter.
That applies to prime ministers and secretaries of the Treasury. We have heard this stuff before, from the 1970s and 1980s. And, guess what, Australians have changed and Australia has changed for the better. But we need more than just idle talk from a Prime Minister and a Treasury that knows what’s needed and should have the guts to issue a report pointing out the weak areas and suggesting what needs to be done.
Economically, productivity is defined as GDP per hour worked. So increasing productivity has nothing to do with the high amount of hours worked by Australians but more about producing more with less. The old “Work smarter, not harder” analogy.
In that case, the so called “Education revolution” referenced by Rudd is important (a smarter workforce is more productive) , but one thing neglected is technology. The NBN will help, but we really need to improve our IT industry in this country to take advantage of it.
I would expect productivity to increase in the next few years regardless of what the Government does. Productivity usually improves naturally after a slump in the business cycle as businesses implement new processes/systems to handle increasing demand with less employment.
Scott,
Thanks for your razor sharp definition of the word “Productivity”. However, your contribution is so far off the mark as to be laughable.
I am an engineer. In my profession, stress and strain are entirely different concepts, but we get used to this and accommodate public uses which do nothing to detract form concepts which are learned in 1st year university.
In the public arena, a much broader interpretation is valid. The quotation is: “Kevin Rudd lectured us on the need to improve our productivity to meet the challenge of an ageing population by 2050.”
Nothing there about hourly rate of product towards the country’s GDP. Krudd said what he meant (for once).
My paraphrase would be that, given the expectations of an aging population, those working in 2050 will have to have their collective finger out or somebody will miss out.
On “school league tables”, if you want to talk about logic, cop this.
No matter how well the students perform, no matter how brilliant and dedicated the teachers are, no matter how extensive the remedial programs are – one school will always come last.
This school will then be pilloried by the press, deserted by aspirational parents, and avoided by status-conscious teachers. Enrolments are likely to plummet, and the students who remain will tend be those who show no promise or whose parents do not care. So the school will probably remain on the bottom of the league, until the government shuts it down. If by some superhuman effort the government boosts the school’s ranking, all this will achieve is relegating another school to bottom. Either way, the process will continue indefinitely and be a travesty of good public policy.
That’s what I call logic.
Dyer here is making the casual sophistry of business classes who only care about forcing diverse children through widget machines formerly known as the education system for a rounded and harmonious society.
Go watch The Wire (season 3?) on the schools system in Baltimore. The enforced teaching to the Test which doesn’t relate to the needs of the students in that district. The rote learning. The absolute disjunction between other govt and economic policy contributing to that school situation. Like say dumping of high immigration on one city in Australia meaning Western Sydney.
Gillard will say it’s the only way to get the stats on schools of greatest need. Or weed out the ineffective teachers. But then she also said McDonalds should be teaching mathematics tutorials.
Notice a pattern here? She’s not impartial and she’s not reliable with a prime ministerial baton in her briefcase and business lobby to feed cannon fodder. That’s what careerism in politics in the ALP does to a person’s soul.
Do we have transparent league tables of neurosurgeons cures and deaths? Do we have tables of Special Counsel at the Bar? Do we have league tables of general practitioners? Do we have league tables of public hospitals? Do we have league tables of taxes paid/avoided? Do we have league tables of company directors for R&D as well as shareholder price/dividends?
Gillard would be alot more credible if she actually addressed Ken Boston’s criticism as expert consultant to the UK school system as per his NSW Stateline interview last year.
Meanwhile Glen Dyer gives us non sequiturs with the confidence of an ideologue in love with widgets, as if life/education is a sausage machine.
Glenn uses the phrase “Union power and intransigence” in one form or another as a kind of battering ram. Where is his justification for this? My opinion is that employee unions have been an agent for good for a century or more and have been able to move with the times, changing and adapting from decade to decade.
I wish that this was so for the unions of employers. And, yes, they are unions. If only employers had been as flexible, as interested in the needs of many over the needs of a few, as determined to build a better future (fairer, democratic, sustainable…)
So I must thank Tom McLoughlin for his well put comments.