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Below is my letter published in today’s Australian on the excellent address by Productivity Commission chairman, Gary Banks. The full text, available here, covers the mostly successful  history of productivity-enhancing reforms in recent years and in the concluding section (“Challenges Ahead”) identifies some important  candidates for a reform revival.

As noted in my letter, particular emphasis is given by Banks to industrial relations and the absence of any assessment process (“regulation impact statements”) by the government of the new system (sic) despite the mounting problems emerging from the one-sided tribunal. Banks rightly says that this cannot remain a no-go area for reform. Relevant here are his comments that an important part of the reform process is to expose “reform options to proper public scrutiny and debate” (P11).

But neither major political party seems prepared to tackle it and there is a real danger that Australia may have to repeat the long drawn out process of reform that started under Labor in the late 1980s and even led Prime Minister Keating to say in 1992 “the system is finished ... we are rapidly phasing out its replacement” (he meant “phasing in”!). Unfortunately, the unions stopped that and worthwhile reform did not occur until Peter Reith became minister for workplace relations when the Coalition won government in 1996.

Will reform again have to go through a ten year cycle when the deficiencies are blindingly obvious?

My major criticism of Banks’ address relates to his treatment of carbon pricing. While noting that this has “significant implications for productivity”, his subsequent remarks relate only to the  inefficiencies of reducing emissions by using alternatives instead of carbon pricing. That is correct of course. But Banks is not brave enough to acknowledge publicly that carbon pricing also has adverse effects on productivity. It is in fact very like the tariffs that he and others fought so hard to remove.

Des Moore

Essential Reading
letter published in The Australian, 10 December 2010

The address by Productivity Commission chairman Gary Banks, on what constitutes reform provides Julia Gillard and Tony Abbott with essential Christmas reading (“PM urged to rethink energy and IR policies”, 9/12). “Productivity growth, he rightly says, ... is the mainstay of economic progress”, as is the importance of  “exposing reform options to proper public scrutiny and debate”.

Of particular importance is Banks’s statement that “industrial relations is arguably the most crucial to get right” and his observation that changes there have generally been exempt from impact statements. As he said, “the regulation of labour markets cannot remain a no-go area for evidence-based policy making”.

What response do the leaders of our two two main political parties have to this fundamental policy challenge in circumstances where day by day the Fair Work Australia tribunal is making important regulatory decisions that have negative productivity implications ?

Des Moore, South Yarra, Vic

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