Modelli.ng consultative ineptitude at the Albanese Government's Economic Summit

by Paddy Gourley, former senior Commonwealth Public Servant and contributor ot thr forthcoming Promise and performance : Ableness's First Term *Connor Court)

Modelling consultative ineptitude at the Albanese Government’s Economic Summit

by Paddy Gourley

It’s to be hoped the Federal Government’s Economic Reform Roundtable being held this week signifies an intention to do more about something that truly matters – better productivity.

And it matters especially now because productivity improvement in Australia, like much of the rest of the world, has in recent decades not been impressive and standards of living have been constrained as a consequence.

So, while it should be hoped that the Roundtable is an exemplar of productivity, it might be as well to keep expectations well-tempered.

History of previous summits

What’s the history of such affairs?

Rudd’s Summit

Kevin Rudd’s “2020 Summit” in 2008 was an event contemporary observers probably described as “historic”. Well, it was historic in the sense that all things in the past are although fourteen years later not many, other than Rudd maybe, would say it was significant. Its 1,000 participants submerged themselves in an ocean of butcher’s paper, facilitators and good intentions with results in inverse proportion to its hype and hopes. Its rate of productivity was low. Sure, it led to an excellent review of the tax system, but Rudd knocked off 135 of its 138 recommendations. Sure, it gave a push to the establishment by the Gillard government of the unoriginal idea of a national disability insurance scheme. It can be safely assumed, however, that Kevin’s summit’s files and papers are now resting quietly in an archive that’s remained unvisited for many years.

Hawke Government’s Summit

The Hawke Government’s economic summit in 1983 was a different matter.

Before that government was elected, the ALP had reached an agreement with the ACTU on prices and incomes. It was grandly described as an Accord and was designed to bring to heel the damaging and self-perpetuating interactions of wage and price inflation. The purpose of Hawke’s gathering was to get the agreement of employers and others, including State governments, to the Accord; to effectively make them parties to it. They signed up and the back of wage and price inflation was slowly broken and an amenable climate was created for the other big economic changes the Hawke government made in the 1980s.

Lessons form previous summits

What lessons are there in the history of these and other Australian government “summits”.

First, while Treasurer Chalmers (and hosts of others nowadays) believe in the utility of “having conversations”, these are adjuncts to policy formulation not mainstays. Sound policy requires careful definition of problems, the gathering of relevant data, its dispassionate analysis and development of solutions, the presentation of options with their pros and cons and the recommendation of a preferred course all done by clever people who know what they’re talking about. It’s a more solitary, behind closed doors activity. It’s the way Cabinet works or at least is supposed to work.

Second, “summits” are more likely to succeed if they are asked to consider specific policy proposals clearly detailed by governments. That was an important part of the success of Hawke’s in 1983. It was not an open-ended “conversation” about prices and incomes policy; participants were asked to get behind a thoroughly articulated proposition. Even then they can be tricky. So, it was with Hawke’s 1985 one to consider defined options for a consumption tax. It, of course, fell apart. Maybe tax reform is best done by governments not telegraphing their intentions, just doing it and wearing the consequences.

Third, without the advantage of specific government proposals, summits of “conversations” can easily degenerate into turf protection and special pleading so narrowing the possibilities of compromises and consensus. Businesses and employers like cuts to company tax and “red tape” and stronger employer powers in industrial relations laws. Unions and employees want to protect employment, improve benefits for staff and stronger powers in industrial laws. Farmers and other primary producers want better roads and perhaps a new dam or two. A Tower of Babel arises to erode the prospects of joint, concerted action.

What about this week’s Summit?

So, what of this week’s “Economic Reform Roundtable”?

Its website says that the purpose is to “build consensus on ways to improve productivity, economic resilience and strengthen budget sustainability.” The Treasurer adds that it “is to help inform government decisions” and then he and the Prime Minister say it’s about “making sure our economy rewards people for their hard work, invests in their talent and nourishes their aspiration….[with] no one held back and no one left behind.”

Thus, the Roundtable’s weights are put up if in vague terms.

The show runs from 19-21 August beginning with an inspirational opening oration from the Prime Minister. Its 25 members will then enjoy four 20 minute presentations from sundry worthies and then a series of two hour discussions on a broad range of topics after which the Treasurer will sum up.

While the Department of the Treasury has prepared three brief papers, the government has not favoured proceedings with particular policy propositions, as Hawke did with his summits. That is, the government has provided no actionable proposals around which its desired consensus can form about what can be done to improve “productivity, economic resilience and …budget sustainability”, general objectives which should be uncontroversial. The government is consulting by saying “What do you reckon, fellas?” This is a lamentable although not unexpected lack of leadership from a government too often short on ambition and content to dawdle along in the comforting embrace of what might give the least offence to the most people.

So, attendees at the roundtable will come to it cold to the extent they have not been given an opportunity to reflect on what the government thinks are the best means of meeting its broad objectives. As attendees take their seats it’s more likely the minds of many will be full of their self-interests rather than what might best serve the public interest. This is already being reflected in the public comments many of them have made. What a surprise.

What can governments do about productivity?

Even without this consultative ineptitude improving productivity is difficult for governments for, as Michael Keating has recently pointed out, better productivity depends largely on technological change. In the last 50 years or so, despite the distracting dazzle of innovations in communications and entertainment, the rate of productivity boosting technological change appears to have slowed. Being able to see thousands of low-grade films on Netflix doesn’t do much to increase units of output per unit of input in the real world. There’s been little around in more recent history to compare with the productivity boosting capacity of the internal combustion engine or the long-distance transmission of electricity. AI might be useful but for the moment that’s hard to tell.

The scope for governments to do much directly about productivity therefore significantly relates to getting the incentives for technological innovation right and the related investment environment as hygienic as possible. That should mean greater investment in education and research, including in universities, the CSIRO and like organisations now not flush with funds. It should not mean anything like the Future Made in Australia law out of which little good is likely to come. That’s why the government won’t disclose the calculations it says it’s made on internal rates of return on the hundreds of millions of dollars its already spent on this dubious program.

Then if the government wants to get the community behind a productivity push it needs to do much more to explain what it is and how it works. People can understand taxation and social security because their effects are direct and obvious. But the more opaque concept of productivity is not well understood and is too often confused with things like efficiency, larger output and longer hours of work. Ask half a dozen neighbours what economic productivity is and you’re likely to get eight or nine different answers. There’s a leadership and education role here that the government has largely ignored. People cannot be expected to support something if they don’t know what it is.

But let’s wish the Economic Reform Roundtable all the luck in the world. It’s going to need that and a lot more.