When it comes to economic reform, the old days really were better

Important economic reform in Australia peaked in the 1980s and 1990s.

Bob Hawke and Paul Keating

John Daley, Grattan Institute and Rory Anderson, Grattan Institute

It’s become a truism of Australian politics that important economic reform peaked in the 1980s and 1990s.

Sometimes the early years of the Howard government in the late 1990s are given credit as well.

This Grattan Institute map of important reforms illustrates the story.


Important economic policy reforms in Australia

Notes: Reforms that were not passed, or that were subsequently substantially wound back or repealed, are shown shaded out. A/T/M = Abbott/Turnbull/Morrison. FTAs = Free Trade Agreements. PBO = Parliamentary Budget Office. GBE = Government Business Enterprise. CBA = Commonwealth Bank of Australia. Airline IPO = the sale and Initial Public Offering of Qantas in 1993 and 1995. Access Economics (2019); The Economist (2011); Grattan analysis


Indeed, it looks like Australian governments have merely ‘improved’ at unwinding the reforms of their predecessors, and the reforms they propose for themselves.

But it’s possible that this is all just the rosy-hued memories of former politicians, public servants, and journalists.

It might also be that today there are fewer policy reforms worth doing – perhaps most of the big ones have already been done.

To test whether previous governments really were better at reform than more recent governments, we would need a running list of reforms proposed in advance, so we could see what proportion were adopted.

Between 1972 and 2018, the Organisation for Economic Co-operation and Development produced 31 Economic Surveys of Australia – roughly one every 18 months.

Each publication put forward reforms that the OECD believed would increase economic growth and living standards.

The good old days were better
Our analysis of the full series finds that between 1984 and 2001 the overwhelming bulk of these recommendations were taken up by the Hawke and Keating governments, and by the Howard government in its first two terms.

But from roughly 2003 onwards, the record is a lot more patchy: many more of the reforms recommended by the OECD have been either rejected, only partially implemented, or (in the case of carbon pricing) implemented and then unwound.


Fate of OECD Economic Survey recommendations

For more details on methodology, see Grattan’s blog. OECD, Grattan analysis.


Policies that the OECD recommended but which ran into the sand include reducing the gap between the company tax and top personal income tax rates, implementing a mining resource rent tax, reviewing negative gearing, creating competitive neutrality among Australian ports, aligning the eligibility ages for superannuation and the Age Pension, including more of the value of owner-occupied housing when calculating eligibility for the Age Pension, and raising Newstart.

A number of other proposed reforms continue to sit in the too-hard basket, including increasing the rate and coverage of the goods and services tax, swapping stamp duties for property taxes, congestion charging for roads, and the use of smart meters for time-of-day electricity pricing.

An imperfect measure, that tells us something
As a means to evaluate the history of reform, the OECD Economic Surveys aren’t perfect, but they’re guide.

It’s true that the scope and number of OECD recommendations has expanded over time, but that expansion was already underway during the Hawke/Keating and Howard eras.

And it’s arguable that these days, the OECD recommends smaller reforms – it certainly recommended many more between 1997 and 2010.

It’s likely that the OECD’s recommendations are partly influenced by the views of the government of the day. But many recommendations have been suggested under one government and implemented by the next.

And while OECD recommendations aren’t gospel, many policy experts support most of them. For instance, all of the policies that are on the OECD’s continuing wish list are also advocated by the Grattan Institute.

Our review of what happened after the OECD surveys is broadly consistent with popular wisdom, or at least the recollections of old men (usually men) that the good old days really were better.

And it is consistent with work in progress by Alphabeta reviewing the history of Australian economic reform.

Our review also shows that it often takes a long run-up of research, advocacy, and detailing before a government implements a major reform. Many reforms were only implemented after sitting on the slate for well over a decade, including the goods and services tax, lower tariffs, a more flexible award system, lower company tax, and competition in utility industries. Reforms often require patient advocacy.

It’s hard to prove beyond reasonable doubt that Australia has got worse at it. But our review of the OECD’s recommendations for Australia over the past 48 years is consistent with the oft-cited view that governments in the most recent 20 years have rejected many more significant reforms than governments in the 20 years before them.

There’s plenty still on the slate for the 20 years to come.

John Daley, Senior Fellow, Grattan Institute and Rory Anderson, Researcher, Grattan Institute

This article is republished from The Conversation under a Creative Commons licence. Read the original article.

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    COMMENTS

    To make a comment, please register or login
    Chris B T
    4th Sep 2020
    1:48pm
    Free trade agreements, no Tariffs = No manufacturing, Textiles, Car and Truck assembly, Receiving Dumped Goods etc.
    Well done, and who's putting their hand up saying this is what was achieved instead of The ! salute bunch of @'s.
    Selling of the Farm/ Water Rights to the highest Bidder Without a Farm.
    TMac
    4th Sep 2020
    5:11pm
    Regardless of which side of politics you are on our country would be in a much stronger position to implement more economic and social policies for the good of all, if it wasn’t for a hostile, self centred and often destructive Senate. In my view the upper house adds very little value to our democracy.
    Mariner
    5th Sep 2020
    8:47am
    Abolish the Senate like they did a hundred years ago in Queensland. Of course that allows people like Bjelke-Petersen and Palachook a free reign.
    adbob
    4th Sep 2020
    5:13pm
    The old system was tailor-made for Australia's almost unique situation - an advanced (sort of) westernised nation with both an industrial base and a huge mineral resource.

    The UK needs to trade to survive - so does Singapore - that puts them in a competitive situation with other similar countries - nice if you are winning - not nice otherwise.

    In Australia we have everything - every climate zone, manufacturing and technical skills (if there's still any left) - we only need to trade in order to obtain those few things we can't or don't want to do for ourselves. The old system was tailor-made to suit that. It means we are rarely on the cutting edge of technological innovation - so what - we aren't now. Being able to buy dirt cheap imports in Kmart and Bunnings is not, in the long run, worth the price we pay for it.

    If we let the market decide everything Australia will be reduced to being a quarry. Throw in snowflakes and greenies and we won't even be able to sell the coal - one of our biggest exports over the years.

    Trading with China while she was a developing nation was good business.

    Now that China is a developed nation (miles ahead of us) and doesn't like us unless we kowtow to some of their more dubious practices we must realise that we have sold our birthright for a mess of potage.

    Selling them university courses was always going to be a short-lived thing anyway so you could forget that even if we sold our national soul (such as we have one) and kowtowed to them.

    It means a drop in living standard (ie via purchasing power) but what do we want to be as a noation? Proud of ourselves or ashamed.
    Cheezil61
    4th Sep 2020
    6:36pm
    In simple basic terms, for me at least, life was much more affordable when i was 17 (& jus left home supporting myself) than it is now at 59 (& single) without a shadow of a doubt! Life is not simple any more, it is extremely complicated & it is so much harder to get by! Let me off!
    Youngagain
    6th Sep 2020
    8:02pm
    I don't want to get off, but otherwise I agree with you, Cheezil61. Life was so much simpler. People were happier. I don't think most of the 'reforms' achieved benefits for the nation as a whole. Nor do I think the recommended 'reforms' that haven't been implemented are steps in the right direction. And if Grattan Institute agrees with it, it's almost certainly bad. Everything I read about Grattan suggests they are self-serving, arrogant, selfish folk who have no interest in improving the welfare of the majority.
    Susanne
    4th Sep 2020
    8:20pm
    I remember in my 20is if i was not happy with my job
    (1 hour those days) I could find an other and better job
    Those days are gone Who remember the gigantic breacfast in the milk bar?
    Mariner
    5th Sep 2020
    8:51am
    Mixed grill for breakfast for me in 1969 in Cape Town at 90 cents. Mind you my weekly wages were $48.50 as a tradesman.
    floss
    4th Sep 2020
    10:09pm
    The gap is getting bigger and we have sold the farm so god help the next generation.The last ten years have been the worst i can remember for Australia.
    Mariner
    5th Sep 2020
    9:29am
    Make that the last 30, floss. Started with the sale of the Commonwealth Bank, after that everything was good for a sale. About selling the farm: Do not forget, if the foreigner offers a bit more to the farmer for his land he will not sell it to a local. One has to prohibit sales of productive land to foreign buyers but that wont happen as we have signed too many international agreements.
    Tanker
    5th Sep 2020
    11:49am
    The sale of the CBA has been a disaster as it unleashed the predatory behavior of the banking industry. While the CBA was in public ownership it acted as a brake on the other banks while still in open competition with them.
    Privatisation as not been good for the ordinary Aussie and has only lined the pockets of overseas interests who bought those enterprises.
    We hear a lot about National Security but given our dependence on energy and communications we have sold them all off to foreigners and not necessarily Chinese. A double standard here methinks.
    Curious
    6th Sep 2020
    12:57pm
    I don't know what basis has been used by OECD and/or Grattan Institute in analyzing our government's policy in reforming the economic and political structures and processes over a period of 37 years. Based on our political system, each government cannot see beyond every three-year period. How can we say the older reform method is better than those in the contemporary era when the world has changed so much.

    We can see the changes in the world through Globalization since the 17th Century AD, the Silk Road. The expansion from the local trade to the national and then to global trade is a phenomenon to behold until now. With the phases of the industrial revolution from steam power to fossil fuel and to renewable energy, from labour to capital investments, from pen and paper to digital technology, from local suppliers to international supply chains, and from tariff to free trades. On what basis is the reform during the Hawke/Keating era better than those of the Rudd/Gillard era?

    Please don't get me wrong, I admired Bod Kawke a lot, a man of integrity and brilliancy. He was the first Prime Minister with a degree in philosophy, politics and economics degree from Oxford University. He was superior in understanding the people through his experience in the labour unions. His sincerity in his diplomatic approach to international affairs was second to none. Bob Hawke knew his economic pillars at the time and how an open trade will build the nation's wealth and strengthen its currency. He did indeed very well.

    John Howard had benefited from the Hawke/Keating years. However, during this era, Australian manufacturing had been privatised to foreign countries and the supply chain had changed again. It was in this period that Australian labour had been devalued. At the same time, our service industry has thrived with a lot of casual jobs and part-time jobs. No one has attempted to change this economic pillar ever since.

    Subsequent governments had tried but were interrupted by GFC, climate change, external foreign policies, and now Covid-19. Australia is very much still a lucky country. We have natural resources, good education system, excellent health care, plenty of food supply, and above all talented workers.

    We all have to remember, as time goes, our society evolves because of the changes in our industrial revolution and the new phases of the globalization. Therefore our economic pillars have to be changed in order to look after our people. Please remember, our people make over 60% contribution to our GDP. If you devalue our people, the economy is not going to work. This is because our people are the blood supply in our economy. Therefore I don't believe the big multinationals and corporations should be the winners, who take all.
    Youngagain
    6th Sep 2020
    8:05pm
    Australia had better economic policy BEFORE Hawke and Keating. By 1983, the government had already lost the plot.


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