Tuesday, April 14, 2015

Economics, public policy and the importance of the small

On Tuesday 7 April, the Australian Chamber of Commerce, Business Council of Australia, Australian Industry Group, Australian Food and Grocery Council, National Farmers Federation, Property Council of Australia, the Minerals Council of Australia, and Restaurant and Catering Australia released a joint statement calling for renewed efforts on economic reform in Australia to boost competitiveness.  The prescriptions offered were pretty standard, drawing on the 2015 intergenerational report for support.

Both the Australia Government and opposition attacked the statement, if on different grounds. Why weren't you there when we needed you? said the Government,  Mr Shorten took pride in the fact he was being criticised for upholding fairness."Labor shares business frustration that the Abbott government, having bungled reform, now appears to have given up on reform," he is reported as saying. "Labor will support reform which is fair. Labor will fight reforms which is unfair." That's a bit like having two bob each way.

A week earlier, at the end of March, the Australian Government's tax white paper was released. It's being called a white paper in reporting, but it's more accurately a tax discussion paper. The introduction states:
The Government is committed to ensuring that everyone is paying their fair share of tax. This year, we are continuing to work with the G20 on the modernisation of international tax rules to address tax avoidance by multinational companies.  
But that is just the start. We want to have an open and constructive conversation with the community on how we can create a better tax system that delivers taxes that are lower, simpler, fairer (italics in original).  
To deliver lasting, workable reforms, the community needs to be on board and engaged in the conversation. That’s why the Government is committing to a comprehensive and inclusive process. Releasing this tax discussion paper marks the start of what we hope will be a broad conversation about the current tax system and the issues confronting it. All are encouraged to take part. This conversation will support the development of a tax system to build jobs, growth and opportunity — a better tax system to deliver taxes that are lower, simpler, fairer.
The reference to addressing tax avoidance by multinational companies reflects the growing political and economic importance of this issue. This piece by Heath Aston's in the Canberra Times, Energy company's $11 billion transfer to Singapore rings tax avoidance alarm bells, provides just a random example.

Down in Canberra on Wednesday 8 April, Thursday 9 April a Senate Committee held hearings on the matter.The links will carry you through to the Hansard transcripts for the two days. They make quite interesting reading.

Staying in Canberra, the Productivity Commission is inquiring (among other things) into workplace relations. Meantime, preparation continues on the Reform of the Federation White paper.

You can see that there are a lot of inquiries and studies under way. I have only listed a few! They take place against a background of apparently deteriorating Australian economic conditions; the headlines here are the decline in Chinese growth and the collapse in the iron ore price.

Meantime, over at his place, Winton Bates has continued his discussion on the problems and prescriptions as he sees them (most recently, Should young Australians be more concerned about their futures?, What tax and spending reforms might be feasible in Australia?) I notice that Winton doesn't get a lot of comments. That's a pity. His topics can be dry, his responses written from a particular and consistent perspective, but his posts are thoughtful and represent a significant contribution to debate.

Take Does the McClure report provide a basis for sensible welfare reform? This provides a succinct explanation of the New Zealand investment approach. I think that one of the challenges faced by Winton (or me for that matter) is to set our analysis in a context that will explain significance to a time limited non-technical reader. The McClure report with its use of the New Zealand model is an example.

At one level, you can look back and set the New Zealand investment model in a context set by previous New Zealand thinking. Does this matter? Why should New Zealand thinking be relevant? Well, New Zealand thinking has actually had a profound effect on Australian policy  thinking.

Two weeks ago, I was at a meeting. Listening to the discussion, I suddenly said that if we are going to apply the New Zealand model, we needed to be clear on its implications. Nobody had mentioned New Zealand, but most people knew what I meant.

This is the second level. Forget the headline stuff. That sets a context. We are, in fact, making key decisions now that will set the next part of Australia's public policy future. Those decisions are being set in a variety of discussions taking place at State and Federal level on the system architecture of future policy positions.

This is dry stuff, but it's also important.

When I look at the constant chatter that marks public political and policy debate with its now focus, most misses the point. From a long term perspective, it doesn't matter if the iron ore price falls to $US35. So what? We still have the iron ore. Firms that go broke will end up by writing off their debt. With that adjustment in place, with financing costs removed or at least reduced, economic mines will reopen, production will expand to meet the future increase in demand

What really matters are all the smaller longer term decisions we are making now, and those decisions are set withing a mental frame holding in multiple small meeting rooms around the country. It is that frame that we need to understand.        


Winton Bates said...

Hi Jim, thanks for your links to recent articles on my blog.
It would be nice to get more comments. The data I obtain from Blogger suggests that some articles get a fair amount of attention, but most of the time I can only guess who might be reading.

Evan said...

I agree Jim. I am inclined to name that mental frame 'neo-liberalism'.

Would you name it that way or give it another?

Anonymous said...

Well, I always read Winton's stuff, but I rarely comment because I find it hard to engage when the author himself takes no actual position? I'd love to debate some of his chosen topics, but on the one hand..., and then...

Anyway, what does the 'New Zealand model' suggest about this? The land of premier Rugby, of Maori aggression in both attack AND defence (few people acknowledge this counterpoint), of polite but firm resolve?

We maybe need a few more backroom meetings; please pass the Iced Volvos, and practise your hurrumphs :)


Jim Belshaw said...

That's always difficult, Winton. I get some feel for this by doing web searches. I haven't done a detailed analysis of your reach, but it appears not inconsiderable.

Evan, it is to a degree, but it has quite a few things added onto it because it is placed in a KPI, evaluation frame.

Jim Belshaw said...

May I beg for a gin and tonic, kvd? Perhaps a sherry as well? I will deal with your comment properly later. Damn, I have neither gin now tonic!

Winton Bates said...

I view myself as a classical liberal. My former work colleagues view me as a loose cannon. Evan says I am a neo liberal. kvd sees me as the typical two handed economist.
Jim is very kind. He says I am thoughtful.

Anonymous said...

Not to gin you up Jim, but I hope you took my comment as respectful and affectionate towards both Winton and the other side of the dutch :)

ps: always wondered why "one of us" would seek to row there, but "none of them" ever try the opposite? Maybe a question for Winton?


Evan said...

Neo-liberalism + managerialism?

Anonymous said...

I view myself as a classical liberal. My former work colleagues view me as a loose cannon. Evan says I am a neo liberal. kvd sees me as the typical two handed economist. Jim is very kind. He says I am thoughtful.

And that's the problem right there. You need to get a consistent persona. Talk to my mate Stitch. He'll sort you right out :)


Jim Belshaw said...

Perhaps you are all those, things, Winton! I did indeed, kvd, but I am waiting for my gin! And, Evan, both and perhaps a little more.

JS is entitled to his views, too, kvd. You can be crabby!