Structural reform in Australia (and the role of the Productivity Commission)
Gary BanksDean/CEO, The Australia and New Zealand School of GovernmentFormer Chairman, Productivity Commission, Australia
Athens18 April 2013
Western Australia
NorthernTerritory
Queensland
SouthAustralia
New South Wales
Victoria
Tasmania
Australian Capital Territory
The Australian Federation
2
Australia’s Federal system of Government
•Powers and responsibilities divided between the central and state governments
•Westminster-style Parliamentary System−two dominant parties (but minor parties growing)
•Governments cooperate, but also compete– The ‘Council of Australian Governments’ is a forum
for cooperation on national reforms
3
The Australian economy: a snapshot
• Population 22.6 million(as at 3 April 2013)
• GDP $1336bn− Primary 10.3%− Manufacturing 9%
• GDP per Capita ($) $59 629• GDP growth rate 3.1%• Inflation 2.2%• Unemployment 5.4%• Current A/C deficit: GDP -2.2%• Public Deficit: GDP -3.7%
4
The previous 'protection for all’ regime
•Centralized prescription of ‘fair’ wages
• ‘Made-to-measure’ tariff protection
•Extensive regulatory barriers to competition
•Government monopolies in infrastructure and human services
5
Australia’s relative productivity performancewas poor
0.0
1.0
2.0
3.0
4.0
5.0
6.0
1960-65 1965-70 1970-73
Australia OECD
6
Fall of Australia’s economic ranking
Per capita GDP ranking in OECD1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Australia ranked 14th
in 1983
Australia ranked 4th
in 1950
Source: The Conference Board and Groningen Growth and Development Centre, Total Economy Database, January 2009
7
Wide-ranging structural and competition reforms
• Trade liberalisation (from early 1980s)
• Capital market liberalisation (from early 1980s)
• Pro-competitive infrastructure reforms (from late 80s)
• Labour market ‘deregulation’ (from late 80s)
• Human services administrative reforms (from early 1990s)
• A coordinated ‘National Competition Policy’ (from 1995)
• ‘National Reform Agenda’ (from 2007)
8
Some features of Australia’s reform implementation strategy
• We reduced barriers at the border first
• We liberalised unilaterally
• Reforms were implemented gradually
• We acted on a broad front
• We assisted adjustment in sensitive sectors.
9
Import protection and industry assistance are greatly reduced
0
5
10
15
20
25
30
35
40
1970-71 1976-77 1982-83 1988-89 1994-95 2000-01
Effective rates of assistance (per cent)
0
5
10
15
20
25
30
35
40
1970-71 1976-77 1982-83 1988-89 1994-95 2000-01
Manufacturing Agriculture
10
Increased trade intensity
Trade-to-GDP ratio
11
A surge in productivity and innovation
Average MFP growth Business R&D share ofmarket value added
0
0.2
0.4
0.6
0.8
1
1.2
1968-69 1976-77 1984-85 1992-93 2000-01
1.2
2.3
0.90.7
0
0.5
1
1.5
2
2.5
1984-85 to1988-89
1988-89 to1993-94
1993-94 to1998-99
1998-99 to2003-04
pe
r c
en
t12
Fall and rise of Australia’s economic ranking
Per capita GDP ranking in OECD
Source: The Conference Board and Groningen Growth and Development Centre, Total Economy Database, January 2009
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Australia ranked 4th
in 1950
Australia ranked 14th
in 1983
Australia back to 5th
in 2008
13
Australia back to 5th in 2010
“There is nothing more difficult to carry out … than to initiate a new order of things. For the reformer has enemies in all who profit from the old order, and only lukewarm defenders in those who would benefit from the new.”
(Niccolò Machiavelli; The Prince, 1513)
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Political obstacles to reform
•Costs are often immediate, but benefits can take time•Costs from reform are concentrated, benefits are
more widely spread•Potential winners tend to be poorly informed
(compared to losers)•Bureaucratic structures are fragmented, with variable
capacity and often aligned with sectional interests
•Multiple jurisdictions complicate progress
15
Some Australian institutional innovations within government to support reform (and good policy)
•Standing review bodies− The Productivity Commission
•Regulatory assessment processes− The Office of Best Practice Regulation
•Monitoring of public sector performance− Government Services Review− COAG (National) Reform Council
16
What is the Productivity Commission?
• An independent government agency to publicly review policies, programs and regulation −and provide research and advice on reforms that are in
the long term national interest.
• It evolved from a statutory body to advise government on import tariffs (the Tariff Board, 1922).−Re-vamped in 1973, 1990 and 1996 – progressively
widening its mandate.−Currently around 200 staff and $US30m annual budget.
17
Three core design features
•Independence−Government funded, but arm’s length from the Executive−underpinned by Act of Parliament (role, tenure)
•Transparency−public processes (submissions, draft reports)−published outputs
•Economy-wide perspective−‘to achieve higher living standards for the Australian
Community’
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How the Productivity Commission ‘fits’ within Government
ParliamentParliament
CabinetCabinet
TreasurerTreasurer
Productivity CommissionProductivity Commission
Public
...
...
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Steps in the Commission's Inquiry Process
Reference from Cabinet
PC calls for submissions
Initial consultations and Issues Paper
First round of hearings or roundtables
Draft Report publicly released
Second round of submissions and hearings/roundtables
Final Report to Government (subsequently publicly released)
Cabinet submission by relevant Minister
Decision and implementation
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The Commission’s advisory activities range widely
• Industry assistance and trade policy
•Regulatory frameworks for infrastructure and utilities
•Competition and consumer regulation
• Labour market reform
•Social and environmental programs/regulation
•Reducing ‘Red Tape’ on business
•Productivity trends and drivers
21
How has the Commission supported reform in Australia?
• Impartial advice in the ‘national interest’
• Findings publicly scrutinized and evidence-based
•An opportunity for government to test public reactions
•Ammunition for government in ‘selling’ reform
•Greater community awareness of the costs of existing policies and benefits from reform−Facilitating pro-reform coalitions
22
Some recent inquiry topics
• Regional Trade Agreements• R&D Support• Regulatory impediments in key industries• Urban Land Planning and zoning• Water policy and regulation• Airport regulation• Retail sector performance• Carbon ‘pricing’ international comparisons• Education workforce• Aged Care policy framework
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Other ingredients in Australia’s reform story
•Ad hoc policy review processes on specific issues (tax, labour market,….)
•Coordination and oversight mechanisms within and across governments
•Political leadership
−strong ‘technocratic’ support
24
Implications for others?
•Countries differ, but face similar reform needs and obstacles
•Structural reform in Australia benefited from institutions that provide independent research and advice
•Scope to adapt such approaches to other countries’ institutional circumstances?
25
Some Australian innovations in policy development and review (continued)
•Standing review bodies− The Productivity Commission
•Regulatory assessment processes− The Office of Best Practice Regulation
•Monitoring of public sector performance− Government Services Review− COAG Reform Council
26
The key elements in Regulation Impact Assessment
• Explain objective and why government action is needed
• Identify all relevant options (including non-regulatory)
• Assess their costs and benefits across the economy/community− and choose the option with greatest net benefit
• Consult with stakeholders along the way
• Have an effective implementation strategy− and periodically review the outcomes
27
The Australian Government’s regulatory assessment system
• All regulatory proposals are screened for impacts on business/competition
• OBPR advises on need for Regulation Impact Statement −and monitors compliance
• Failure to comply means regulatory proposals cannot proceed−unless the Prime Minister grants an exemption (and then a post-
implementation review is required)
• All regulations periodically reviewed −sunset clauses in subordinate regulation−5 yearly reviews (and ad hoc ‘stock’ reviews)
28
Some Australian innovations in policy development and review (continued)
•Standing review bodies−The Productivity Commission
•Regulatory assessment processes−The Office of Best Practice Regulation
•Monitoring of public sector performance−Government Services Review−COAG Reform Council
29
How the Review of Government Services is structured
Annual reporting on efficiency and effectiveness of government services
Steering Committeeof senior officials from central
agencies – head by Productivity Commission Chairman
12 Working Groupsof officials from line agencies
Specialist input
Secretariat:
Productivity Commission
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Services covered in annual reporting
• School education• VET• Police• Court administration• Prisons• Emergency management
• Public hospitals• Primary and community
health• Aged care• Disability services• Children’s services• Housing
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Performance indicators for public hospitals
Text
Text
Text
Key to indicators
Information not complete or not directly comparable
Yet to be developed or not collected for this Report
Provided on a comparable basis for this Report subject to caveats in each chart or table
PERFORMANCE
ObjectivesEffectiveness
Outputs Outcomes
Quality
Efficiency
Appropriateness
Sustainability
Capability
Access
Safety
Responsiveness
Continuity
AccessEquity
Sentinelevents
Patient satisfaction Patient satisfaction surveys
Workforce sustainability
Pre-anaesthetic consultation rates
Unplanned re-admission rates
Surgical site infection rates
Separation rates for selected procedures
Accreditation
Waiting times for elective surgery
Equity of access by special needs groups
Emergency departmentwaiting times
Recurrent cost per casemix-adjusted separation
Relative stay indexRecurrent cost per
non-admitted occasionof service
Total cost per casemix-adjusted separation
Continuity of care
32
Some Australian innovations in policy development and review (continued)
• Standing review bodies−The Productivity Commission
• Regulatory assessment processes−The Office of Best Practice Regulation
• Monitoring of public sector performance−Government Services Review−COAG Reform Council
33
COAG Reform Council
• A ‘national’ body– appointees from different jurisdictions
• Monitors and reports on implementation of agreed national reforms– discipline through transparency
• Advises whether state performance meets requirements for Federal funding in specific areas (eg. hospitals, schools...)
34
Structural reform in Australia (and the role of the Productivity Commission)
Gary BanksDean/CEO, The Australia and New Zealand School of GovernmentFormer Chairman, Productivity Commission, Australia
Athens18 April 2013