SEVEN OBSERVATIONS ABOUT PUBLIC POLICY AND REFORM IN AUSTRALIA Speech for Terry Moran AC President, Institute of Public Administration Australia and Vice-Chancellor s Professorial Fellow at Monash University CEDA Book Launch Wednesday 21 August 2013 Brisbane Thanks Anne. 1 [CONGRATULATIONS AND THANK YOU'S] I want to begin by congratulating CEDA on publishing this book and the contribution it makes to thinking about public policy in Australia. I also want to thank Nathan Taylor CEDA's chief economist who did all the interviews for the book. Like all good interviewers, Nathan is deceptively charming and very good at getting you to say more than you originally intended to say! [TWO CAVEATS] I have to say that doing these sorts of reflective interviews is always a little disconcerting. You are reflecting on history and that means that you need to mentally sift out what was really important at the time what you really think about public policy and reform. You will all draw your own thoughts after you have read the book.but what I want to do is briefly offer seven of my own observations about public policy and reform in Australia that crystallised in my mind during and after the interviews. 1 of 10
[#1 POLITICIANS CAN'T DO IT ON THEIR OWN] The first observation is that politicians can't devise public policy reforms on their own. I think there is tendency to just shake our firsts and say: "Why can't they just do it?" And the unpalatable answer is that any substantial reform is always a very messy, complex and an intensely disputed activity. It requires leadership in government that is effective in what I think of as "the arts of governing". I think of those arts as including: being good at political management and communication which is not always straightforward given the complexities of issues and political structures being able to work effectively with the major stakeholder groups who are affected by a reform proposal understanding that if the reforms involve the states and territories you have to approach them with a degree of respect for their constitutional role and finally, having a very clear idea about what the public service does and what Ministers and their private offices do wise Ministers (to paraphrase Sir Humphrey and Sir Arnold) are good at asking the right questions of their officials and then considering the answers in response with a degree of scepticism. That of course goes to the role of political advisors in our Westminster system which I have touched on at length elsewhere. That s a pretty big shopping list of requirement. And even if your elected government is filled with experts in all those arts of governing 2 of 10
and not surprisingly not all of them have been they also have to be able to take people with them. Even if you go back to what some now see as a golden age of strong political leaders Bob Hawke and Paul Keating OR John Howard and Jeff Kennett in Victoria they all spent a lot of time and political capital in bringing people into their way of thinking. That's not always apparent in the folk history of our politics. For example most people seem to think that Jeff Kennett had a sort of Whitlam-esque 'crash through or crash' approach to government. But in fact my memory is that before he became Premier, Kennett put an enormous amount of effort along with Alan Stockdale into arguing about the problems facing Victoria and what needed to be fixed. He had a huge win with a big majority and some politicians would say that it was that win which gave him the mandate for change in Victoria But I think the reality was that Jeff was actually quite faithful to what he said he would do during the first term and that he regarded what he had said to people as being the prime source of his mandate, rather than the size of his majority. It's true that in the period of the Hawke and Keating governments, most of the major reforms introduced were developed in government and not in the run-up to an election. But I think it also true that those reforms were substantially taken to the community, debated on their merits and introduced as measures in the national interest that needed to be adopted and implemented. And I think that many of the reforms introduced under John Howard - such as gun control legislation or the GST which I will come back to later were put out to the public and debated vigorously often at some political cost. 3 of 10
So what that tells me is that just complaining about our politicians not introducing substantial reform really misses the point. Yes - they might have their flaws and I have seen some of those flaws up close! But any substantive public policy reform requires our political leaders to take the broader public with them and they need support for that to happen. [THOUGHT #2 PEOPLE RECOGNISE SELF-INTEREST] My second observation is that most Australians in addition to finely honed bullshit meters also have a pretty well developed ability to recognise selfinterest at work. As a community we are quick and sometimes a bit too quick to ascribe any reform ideas from politicians to baser motives of political self-interest. But people also recognise corporate self-interest at work. If you put forward a reform idea that really only benefits a small group of individuals or businesses then it's not just the few remaining class warriors in Australia who will legitimately call you out. And I think that some people in the business community might have forgotten that. The corollary of this observation is that politicians are much more likely to be able to carry an idea forward if they can show support coming from across a range of interest groups. And the introduction of the GST which was one of the important reforms of the last thirty years is a good case study of that. My view is that a key to its implementation was the combined involvement of the Australian Chamber of Commerce and Industry and the Australian Council of Social Service. 4 of 10
Those two bodies came together and from a business and welfare perspective argued the case publicly that a GST would be a good idea. Now that type of combined lobbying is a very powerful force and like all powerful partnerships I am sure it only came about after a lot of internal grief and soul-searching from both groups. Graeme Samuels was the head of ACCI at that time and while Graeme has done a lot of great things since then I think that was one of his biggest achievements. Having that broad cross-institutional support provides a lot of cover for political leaders when they go out to make the case for change to an often sceptical community. So that's my second observation narrow sectional intent dressed up as major reform is just 'lipstick on the pig' and people see past the lipstick [#3 WE LIVE IN A PARLIAMENTARY DEMOCRACY] My third observation is that like it or not we live in a parliamentary democracy. And that means that major public policy reform almost inevitably involves political conflict. Maybe if we adopted a Confucian style of government where policies were decided by a wise group of 'old grey beards' you could introduce major reform through political fiat But that's not where we are. And if you think that our Westminster system is the root cause of reform paralysis then I invite you to look at the current political environment in the United States. 5 of 10
Ask yourself if adopting that system of government would make our political environment more or less conducive to major reform. That means that one ambition for major reform proposals should be to get bipartisan support. Now in the lead up to an election an appeal for bipartisanship sounds like you've been both smoking and inhaling! But in reality it's not a political pipe dream. Although the Labour Party went to the first post-gst election arguing against the tax it subsequently supported it And even in our 43 rd Parliament we managed to get major reforms for example, NDIS and Gonski - ultimately supported by both political parties. [#4 WE LIVE IN A FEDERATION = OPPORTUNITIES AS WELL AS CHALLENGES] My fourth observation is that like it or not we also live and will continue to live in a Federation Yes Federation does create some enormous challenges and the environmental issues associated with water flows across state boundaries are Exhibit A in that argument. But it's also true that Federation create opportunities There is evidence that federal systems have tended to do better economically than unitary states. It is also the case that only at the State level are there management capabilities and local connections actually available to manage big delivery systems and big projects credibly. Commonwealth Departments of State are just not good at this. 6 of 10
It is therefore still the case that arrangements created under federal systems offer opportunities and structures to help drive new reforms. Effective real federalism is the key. [EXAMPLE CASE MIX TESTING IN VICTORIA] For example the introduction of casemix funding in Victoria in the early 1990s which revolutionised our ability to fund hospitals in a sustainable way came from an experiment in Victoria during the late 80s and ultimately the resultant system was taken up by other states and is about to be implemented at a national level. And having our federal system does make it easier to trial and then scale up that type of experimentation. [EXAMPLE NCP REFORMS] The National Competition Policy reform of the 1980s and 1990s that amongst other things created the national electricity market took a broom to a whole series of government owned bodies that were acting as monopoly businesses and removed a series of private sector cartel arrangements were all done through the Council of Australian Government under another name by offering the states a financial carrot as an incentive to act in support of economic growth. The benefits that came from the National Competition Policy reforms of the 1990s were estimated to be in the order of 2% of GDP. 2 2 http://www.treasurer.gov.au/displaydocs.aspx?pageid=&doc=pressreleases/2005/032.htm&min=phc 7 of 10
And COAG's subsequent Human Capital Reform agenda which includes: human capital driven reforms in education and health reducing regulation and improving productivity and efficiency in energy and transport sectors has been assessed as having the potential to increase GDP over 25 years by 8 per cent or more if faithfully implemented. Those are very substantial increases in national wealth. So I think there is no point in crying over constitutional spilt milk We need to think creatively about how to work within our Constitutional constraints and recognise that all wisdom and skill in government doesn t reside in Canberra [#5 PIPELINE OF REFORM IDEAS ISN'T BROKEN] I also think that we need to be careful of just accepting the common wisdom that the pipeline of big reform ideas is broken. There are plenty of ideas out there. Many of which have come through the public service but equally have also come from industry bodies like CEDA and Think Tanks like the Grattan Institute and the IPA. I think that the 43rd parliament wasn't as big a disaster as some people choose to describe it. Yes there was lots of shouting and frankly nastiness from both sides. But equally there was eventually bipartisan agreement on Gonski which is an opportunity to take schools on a new journey to improve outcomes for students and thus raise national prosperity outcomes more valuable than just money 8 of 10
There was also the introduction of the NDIS which is significant economic and social reform. [#6 ELECTIONS AREN'T A SILVER BULLET] My sixth observation is more of a warning. Don't think that an election victory by either side will magically transform the opportunities for major public policy reform in Australia. After whoever wins on September 7 gets over their election night hangover they are going to wake up to: the same macro-economic situation the same Federation issues including the most extreme vertical fiscal imbalance in the world of federated states and probably the same Senate issues. They will also have to face the facts that: the cost of government in Australia as a percentage of GDP has stayed pretty constant for years it is low by international standards and as a share of all employment public sector employment has been falling for the last thirty years. That means that our capacity to make really substantial government savings just by further cuts in the number of public servants is pretty limited. And anyone, who thinks that smaller government is an easy trip from where we are at the moment, should read the recent Grattan Report called 'Budget pressures on Australian governments'. 9 of 10
[#7 DON'T IGNORE THE PUBLIC SERVICE] My final observation is that the history of major successful public policy reform in Australia has always depended in part on the involvement of the public service. It's not perfect by any means but it can be and has been a major driver and supporter of reform in the past. From the introduction of tariff reforms and the opening of the Australian economy from the 1970s and with more determination in the eighties until now the public service has played a major role in helping governments of all political stripes to introduce major public policy reform in Australia. By international standards it s an innovative and flexible service that does actually contribute to economic efficiency. It is admired far more abroad than here in Australia. Over the last six months I have spent time talking about how we could make further big reforms to public administration itself in Australia as a way of contributing to national economic reform. And the push for these reforms should come from within the public service. [CONCLUSION] So am I optimistic about the future of public policy in Australia? Yes! Am I cautious about the future of public policy in Australia? Also yes! Caution and optimism are pretty good base ingredients for a cocktail. Maybe my seven observations are the olives in that cocktail. So congratulations again to CEDA for producing this book. 10 of 10