Australia at the reform crossroads: NSW charges ahead — but who’ll back it?

With Australia facing a huge range of economic challenges after nine wasted years — energy, workforce, the budget, decarbonisation, health services, inflation just for starters — there’s a pressing need for imaginative government leadership.

The new federal government is a blank slate, led by experienced ministers but constrained by a deliberately unambitious election agenda. The South Australian government is new and fresh but leads a relatively small state. The Andrews government in Victoria is old and scarred by years of corruption. The Palaszczuk government in Queensland is also old and racked by governance problems. But in NSW, the oldest government of all outside the People’s Republic of Canberra, age has turned into a virtue. Having cycled through three premiers, it is now on to its fourth and most reformist.

Paul Keating had a view that if you got elected you had three years to pursue your agenda as vigorously as possible and your priority was to get as much done as you could because you might not be there any longer. NSW Premier Dominic Perrottet and NSW Treasurer Matt Kean have adopted a similar strategy of going all out in their remaining time before the election next March. Circumstances have given them one budget to put their stamp on NSW before they face a reinvigorated NSW Labor under Chris Minns.

“Reform” — real economic reform, not the kind pushed for by business and The Australian Financial Review — has changed in the past 30 years, however. Reform in traditional priority areas like productivity and tax has been joined by an urgent need for reform in “human capital” areas: health, care, education — service sectors with a strong government role either directly or through funding, and where traditional productivity measures are more difficult to use.

The benefit of reforms in caring services, however, is that they usually involve investing more money, which is always politically popular. Kean is also focused strongly on women’s economic participation — he’s already got stuck into company boards that lack female directors, and has imposed a gender equity requirement on boards of state-owned bodies.

His childcare package in next week’s budget goes a lot further, however, aiming to reduce the “childcare deserts” across parts of Sydney and regional NSW by providing incentives for new centres and funding scholarships for early childhood education. With a bill running to $5 billion over a decade, the package is aimed both at providing more competition in childcare services — thus bringing down costs — and boosting a stretched workforce.

Those who are attracted into childcare by a scholarship of course don’t end up in another industry — but that’s a bigger national issue created by the fact that we’re running out of workers.

Childcare has hitherto been a Commonwealth area. Kean’s investment marks a historic entry into the sector and complements Prime Minister Anthony Albanese’s plan to further expand childcare subsidies. In fact, expanding the workforce if anything is crucial if the Commonwealth’s funding increases aren’t simply to push more demand into a system with a fixed supply of carers.

Pumping billions into more childcare capacity will be popular. But Perrottet and Kean also want to tackle the much harder dumping of stamp duty, following the ACT, which is halfway through a 20-year transition to a land tax. The NSW government is moving ahead with the plan flagged earlier, in which buyers can opt to pay an annual land tax rather than stamp duty when buying. If they do, the land tax remains with the house in perpetuity.

NSW Labor has already flagged the kind of scare campaign it’ll run on this: the property tax will be an annual hit to family budgets that they can’t afford, even if they won’t have paid the colossal stamp duty worth tens of thousands when they purchased. The ACT Liberals have been running a similar line — albeit unsuccessfully — for several elections.

Perrottet also needs federal support for the transition, but Treasurer Jim Chalmers is referring to the issue as “one for the states”.

Removing stamp duty would eliminate a key hurdle to households moving to different locations depending on their needs — the working couple needing to live closer to where they work or relocate to another centre for employment, the senior looking to downsize, first-home buyers looking to enter the market. It will help ease worker shortages — at the margins, of course, but we need all the help we can get.

The childcare investment, too, will help address worker shortages, helping lift female participation in tandem with federal Labor’s increased spending. It will be an important contribution to making more workers available in heavily feminised professions like health, which in NSW, as in other states, is in crisis after the pandemic.

As the freshest government on the block, the federal government could do much worse than back an old government determined to use every minute in office to deliver quality outcomes.