On February 25th, the Australian Institute for Progress hosted a forum with the theme “Queensland: 2015 and Beyond” at the Queen’s Arms in New Farm, Brisbane.
Speakers
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Professor Tony Makin – Professor of Economics & Director of the APEC Study Centre at Griffith University |
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Hon Keith de Lacy – State Treasurer in the Goss government and a prominent company director & businessman |
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Professor Larry Smith – Professor at the University of New England Business School |
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Doctor Ross Cartmill – Senior Visiting Urologist at the Princess Alexandra Hospital |
Presentations
Click images for videos from the event
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Queensland 2015 & Beyond – Professor Tony Makin |
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Professor Larry Smith – Professor at the University of New England Business School |
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Australian Health Care Delivery – Dr Ross Cartmill |
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Question and Answer Session |
I attended the AiP forum “Queensland: 2015 and Beyond” on Wednesday evening (the 25th February) in the hope that it might open up some useful discussion of the many economic issues that seem to be crowding in on both Queensland and Australia. I consider that the forum was successful in achieving that aim. What follows are a few of my recollections about what the forum covered and my thoughts about what the Australian Institute for Progress (AiP) might consider turning its collective mind to in the future.
In opening the forum, the Chair (Graham Young) made the point that the AiP was formed to fill a sorely-needed gap in the “think-tank industry” (my words) in Australia and in Queensland in particular. He cited the motto that “The future does not look after itself”.
The dissertations were focussed on the direction (or misdirection) of public policy applicable to the specialist disciplines of the four speakers. I found the presentations revealing – as were the Q&As from the floor.
Although each presentation was delivered from a Queensland standpoint the issues raised apply generally across Australia and highlighted matters that should be of priority concern to policy makers and those politicians who genuinely have Australia’s future at heart.
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The Underlying Theme – Australia’s Potential Economic Decline – Some Realities:
The underlying theme of the forum was the growing public debt predicament in which both QLD and Australia are now enmired. The point was made that the rising public debt will inevitably lead to economic decline and falling living standards for Australians if not dealt with. Queensland will be the first cab off the rank.
What was news to me however, was that the Queensland public debt had not actually been stabilised by the former LNP Government. It was counting on the asset “leases” to turn things around. It is frightening to think that this debt will now have to continue to grow just to meet current expenditure commitments.
What is particularly alarming is that the newly installed QLD Palaszczuk government has no credible plan to pay down the state’s debt – at least not without raising taxes and charges significantly, which they will inevitably be forced to do. I would expect that raising taxes & charges will have the effect of further depressing economic activity and growth in Queensland.
Promoting a high rate of economic growth was cited as one long-term effective method of tackling the debt problem – however one of the speakers, Keith de Lacey, advised that there are already signs of government-induced impediments to future resources and rural development in Queensland. These impediments apparently result from internal political pressure within the Palaszczuk Government from “those who wish to save the world”, but not the economy. I note that separate mention of this same problem was also alluded to in today’s media.
It is probably not particularly surprising that the Palaszczuk government has no workable debt reduction plan. Over the last three years, while in Opposition, members of the new QLD government seemed to be strident in their repeated claims that the QLD public debt was purely hypothetical and that the whole issue was just a political scare campaign by the Newman LNP Government. Eventually, such a fantasy cargo-cult approach to government will become a mighty worry to the electorate.
Queensland – The Greece of the South Pacific?:
It is ironic that almost simultaneously with the election of the Palaszczuk government a new (Syriza party) government was elected in Greece on the platform of NOT paying Greece’s debts. It seems that despite the political line taken by Syriza, the unfortunate Greeks are about to learn the hard way from their EU colleagues that people who loan money invariably want it back. I noted the speculation during the forum Q&As about the likelihood of the IMF showing up here in the Sunshine State to dictate the terms of our surrender. One hopes that sanity will prevail before our situation reaches that point. One correspondent from Victoria put it nicely in a letter to today’s “Australian”:
“The welfare industry and the unions cannot see that the public trough will eventually empty and that unlike Greece we do not have hardworking Germans to fill it for us”.
Perhaps Tasmania might come to Queensland’s rescue???
What was not covered at the forum was how we have actually come to end up with an “accidental government” in QLD that is so bereft of policies that we are now talking about a looming debt-driven economic crisis. The politics of this have been well-analysed by both Graham Young and Gary Johns in articles published in “The Australian” on the 3rd and 11th February. These articles are reproduced on this website under “News”. They are well worth reading.
Education Policy & Failures in Teacher-Training:
Professor Larry Smith spoke at the forum on the subject of the failing education system across the country. The essence of Prof Smith’s dissertation was that ideological teacher-education academic perspectives combined with entrenched educational bureaucracies have resulted in sub-optimal education being delivered to Australian youth. The consequence is that Australia is falling further and further behind our Asian neighbours in educational standards and outcomes and we are now on the slippery slope to becoming “The Dumb Country”. (My words – not Prof Smith’s).
Do I hear an echo here of Singapore PM Lee Kuan Yew’s famous dictum in 1980? For the benefit of those who may have been too young at the time – Mr Lee observed that if Australia continued on the way it was going then it would finish up becoming “the poor white trash of Asia”.
Back then Lee Kuan Yew’s barb was an awful shock to Australia’s self-image and it stung badly – but it probably helped pave the way for the Hawke-Keating economic reforms that the Fraser Government had neglected. Perhaps what we need now is for some respected Asian statesman to drop all the diplomatic niceties and just say it again Sam – especially for the benefit of the Australian political class and particularly the Senate – who really do need to hear it.
With regard to the decline in Australia’s education system my personal thought is that the much-vaunted “Dawkins education reforms” of the late 1980s have had unintended damaging consequences. These “reforms” resulted in the fairly high-quality specialist vocational teacher-training institutions being transformed or absorbed into universities. The problem is that the ethos and function of universities is very different to that of vocational institutions and it has become quite apparent that because of poor governance oversight, many universities have proven to be unsuited to the task of teacher-training. Universities focus on things-academic – rather than “hands-on” vocational practice. Professor Smith explained that most of the university academics who are “training” Australian teachers have never actually taught in schools themselves! He cited cases where university-trained teachers have proven unable to control a class of just ten pupils. In my opinion university governing bodies have a case to answer here – this situation should never have been allowed to develop.
Health Policy Reform:
Dr Ross Cartmill spoke at the forum on the problems of the health system and its burgeoning costs. He provided an insight into how health services are financed in Australia (surprise – it is majority private), and the discontinuities between private health providers and the public system which are extremely wasteful and need rationalising.
One important point that Dr Cartmill made was that the Federal Government’s proposal for the development of a multi-billion dollar publicly-funded health research sector would actually be a great investment in Australia’s future. The problem was that the proposal failed in the budget mainly due to the ham-fisted manner in which it was linked to the Medicare co-payment proposal. Philosophically, linking both these initiatives was inherently contradictory and the public sensed that.
Declining Productivity – Australia’s Elephant?:
My view is that Australia has one helluva serious economic problem and that is that we now have pretty-well the highest cost of doing business in the world. This manifests particularly in manufacturing which is a collapsing sector in Australia – particularly heavy industry, where productivity is poor and getting worse. This was echoed in Gary John’s 11th February article in “The Australian” about the extensive featherbedding and restrictive work practices in the Queensland Government electricity utilities. (This article is reproduced in the “News” segment of this website).
The whole debate about where the RAN’s proposed next-generation submarine fleet should be built is really about the woeful productivity in Australian manufacturing. The estimate for building the submarines in Germany is for the labor cost component to be at about 15% of the contract price. If built in Australia the Dept of Defence estimates labor to be 50% of the construction cost. In other words an Australian build almost doubles the cost of the submarine construction. The embarrassing difference between the two figures is a direct measure of Australia’s shocking deficit in workplace productivity.
To understand the nature of the problem – after World War 2 the German labour unions adopted a policy of industrial co-operation to help resurrect German manufacturing from its wartime ashes. They turned their country’s manufacturing industries into the high-productivity and high-quality success stories that they now are – and which also support a high-wage work force. In Australia the opposite happened. Over time bloody-minded, ideologically-driven union leaders have forced overmanning and restrictive work practices into wage “agreements” that have bit-by-bit led to the disastrous productivity that has all but destroyed Australian manufacturing. Over decades, Fair Work Australia and its quasi-judicial predecessors have allowed this to happen – in other words, our industrial relations system has failed, and is still failing, Australia and undermining our economic future. Something needs to change. If it doesn’t, then Paul Keating’s famous 1986 warning about Australia becoming a banana republic will finally come to pass. It is worth requoting what Keating had to say back then:
“We took the view in the 1970s – it’s the old cargo cult mentality of Australia that she’ll be right. This is the lucky country, we can dig up another mound of rock and someone will buy it from us, or we can sell a bit of wheat and bit of wool and we will just sort of muddle through … In the 1970s … we became a third world economy selling raw materials and food and we let the sophisticated industrial side fall apart … If in the final analysis Australia is so undisciplined, so disinterested in its salvation and its economic well being, that it doesn’t deal with these fundamental problems … Then you are gone. You are a banana republic”.
Economic Opportunities – A Possible Future:
This is where the proposal for public funding of a massively-expanded medical research initiative comes in.
The intention of the Federal Government’s medical research initiative is to invest in the research necessary to generate a high-value medical services and patented health product industry. To upgrade to such high-value service and product delivery would assist Australia to escape the economic dead-end of trying to compete against low-wage economies in mass production – or just depending on resource extraction and tourism.
Very few people would know that in the early 1950’s Australia was one of just four countries that led the world in the development of computer technology. Who these days would remember the dynamic Professor Harry Messel – a former WW2 Canadian paratrooper turned academic? He went out and personally raised the funds to build on-site Sydney University’s SILLIAC computer (mainly because the CSIRO “were very unhelpful” and would not give Messel the computer time he needed for his Physics Department on their own CSIRAC mainframe). In a world with only a handful of computers, Australia had built two of them!
Unfortunately the lack of government, bureaucratic, and industry foresight at the time allowed Australia’s competitive advantage at the high-end of the nascent IT industry to just wither on the vine. Official policy held that it could see no future with this technology and that Australia’s main economic future lay with wool and resource extraction! Sound familiar?
In his presentation Dr Cartmill made the point that only large-scale public funding can generate the medical research results required. This is a result of the short-term profit imperatives that drive the private pharmaceutical industry that prohibit investing the sums required for long-term pay-offs. Australia already has a proven competitive advantage in this industry so you have to assume that the Abbott Government’s vision for the initiative was sound. It was just their proposed execution of the funding mechanism that was not.
To sum up – my feeling is that the AiP’s “Queensland: 2015 and Beyond” forum provided a valuable kick-start to some of the policy formulation issues that need to be debated as priorities if Queensland and Australia are to arrest economic decline and make rational decisions to provide for an uncertain future.