from Crikey .....

C'mon, Kev, show some guts: tell us where we're weak

Glenn Dyer writes:

We all believe in Australia (it being close to Australia Day), Test cricket (?), motherhood, having a beer, meat pies and anything else from a jingoistic Australia feel-good ad.

This check list also includes productivity in the economy. It is hard to be against productivity, it's somehow un-Australian if you are these days. But it is one of the main drivers of economic growth, rising incomes and living standards.

So it was no surprise that in his first speech of an election year, Kevin Rudd lectured us on the need to improve our productivity to meet the challenge of an ageing population by 2050.

It was a typical speech from the Prime Minister and in fact had echoes of the former Treasurer, Peter Costello. That's not surprising since it seems Rudd's lecture was based on a forthcoming Treasury paper on the ageing population (or intergenerational change), as were many of Costello's on the same subject.

It was predictable: we have heard it all before. Typically for the government, it missed (avoided?) several developments that need addressing if anyone is to take the idea seriously.

One is the finding of surveys that Australians already work hard and are not the slackers that some politicians and business leaders seem to infer from time to time.

The latest survey was from the Australia Institute last November, which showed that Australians work longer hours than any other country in the OECD and work large slabs of unpaid overtime. The institute estimated the value of that unpaid work at $72 billion a year.

Then there was the latest act of intransigence from the teachers http://www.aol.com.au/news/story/Teachers-plan-test-boycott-over-league-... CTRL + Click to fo" href="http://redirect.cmailer.com.au/LinkRedirector.aspx?clid=a1be3098-727e-4c06-baec-4c3f548eddd8&rid=69d1ff55-56ad-43e0-91ce-08877a1f397f">who are stepping up their campaign against performance league tables.

That is the sort of micro-reforms that will help boost productivity by allowing parents to make informed choices about educating their children, help teachers and educations departments to improve low-performing schools, and benefit the community generally. But the Education Union seems more interested in protecting their underperforming members rather than helping students and parents (and the community generally) get more from their tax dollars and other payments.

It's only small beer in terms of the reform agenda, but if it does illustrate the simple fact that change and improvement will hurt some and help others. As the years of change and reform under the Hawke, Keating and Howard governments showed, there were a lot of mostly false or illogical claims about the damage to a long list of groups, institutions from those changes.

But the overwhelming evidence is that the community and economy (and workers) benefit enormously. It is one of the reasons why Australia survived the global credit crunch and recession in a better state than any other country.

But union power and intransigence in the public sector (besides education, in police, health, and in white-collar employment across government departments and bodies) needs to be tackled. State governments haven't had the guts to make significant changes in these areas, so far Rudd's mob has shown a distinct inclination to talk rather than act.

Rudd rightly supported the idea of a "big Australia". But his speech failed to mention THE success story of the past decade: the way Australia has switched its focus from Japan, the US and Europe, to countries such as China and India.

The Reserve Bank has been alert to this change: in fact if it hadn't been for a series of speeches from governor Glenn Stevens and other RBA executives last year, ordinary Australians would have had no understanding of this significant change.

This speech from Stevens last November contained more information and ideas about the best path to lifting our economic performance than anything so far heard from the Prime Minister.

Rudd did point to the benefits of boosting productivity growth. But the agenda he outlined last night: stimulus-related infrastructure spending, his education revolution, the national broadband network and harmonising various state-based business regulations -- is not enough, not when more impediments to improving productivity are being created.

For example, the banking and finance sector has seen a rather worrying concentration of competition in the past year as the Big Four banks have moved to control more of the sector, whether it is retail deposits, superannuation, insurance, financial planning and investment management.

But there is a rough rule of thumb here for productivity: the greater the concentration of competitors, the greater the lack of meaningful competition and the greater the inefficiencies: fee gouging, complacent attention to customer needs, high profits, an ability to recover 100% of costs and then more, all hallmarks of an industry or sector where competition is low.

In banking it was what it was like before the deregulation of the Hawke government.

If you had to look at the drivers of improved productivity performance in the past 20 years it has been floating the dollar, improving competition in the economy through enforcing after toughening) competition laws, improving the labour force, making it more flexible and the GST and other taxation changes.

The ideas in those changes still apply. But this Labour government has presided over the greatest contraction of competition in financial services (banking, finance, super etc) seen since the Hawke government deregulated the sector and allowed in more competition 26 years ago.

If Rudd and his government were really serious, they would start with an inquiry (I know how he loves these) into the finance sector: not the insider effort former Macquarie Bank executive Mark Johnson produced last week with its siren call for tax changes to boost Australia's appeal as a regional financial sector (the great mirage of successive national and state governments for the past 26 years).

The loss of competitive pressures in banking, funds management (the move by the NAB to buy Aviva and Axa's Australian businesses), the CBA's purchase of Bankwest, Westpac's competition-limiting acquisition of St George: all these and other moves, such as regulation, tax and fees and charges, competition, should all be examined, by another Campbell/Wallis Committee approach.

Financial services are now one of the more important sectors in the economy, thanks to the more than trillion dollars of national super savings. That money helped Australian business recapitalise last year and avoid making big job cuts and closing unperforming businesses. It was a national lifeline that generated fat fees and profits for banks, accounting firms, investment banks and other advisers.

Investing that money wisely and in a way that benefits national long-term savings would contribute to helping grow national productivity, rather than the fees, profits and lifestyles of mob of bankers and other "suits".

There are other areas (telecommunications where we are to get yet another inquiry into Telstra's charges) that can do with more work to improve productivity. Medical services (and health care) are two others.

But it is more than just a simplistic speech by a Prime Minister on the eve of Australia Day, based on a forthcoming Treasury report and vague appeals to work harder and smarter.

That applies to prime ministers and secretaries of the Treasury. We have heard this stuff before, from the 1970s and 1980s. And, guess what, Australians have changed and Australia has changed for the better. But we need more than just idle talk from a Prime Minister and a Treasury that knows what's needed and should have the guts to issue a report pointing out the weak areas and suggesting what needs to be done.