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1 The future of economics: Reimagining economic reform Australian Fabians National Policy Conference: Economics, equity and trust in the twenty first century.

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Presentation on theme: "1 The future of economics: Reimagining economic reform Australian Fabians National Policy Conference: Economics, equity and trust in the twenty first century."— Presentation transcript:

1 1 The future of economics: Reimagining economic reform Australian Fabians National Policy Conference: Economics, equity and trust in the twenty first century Nicholas Gruen

2 2 Background Australia’s experience is unique. ALP has been the party of economic reform Results have exceeded New Zealand, US, UK – economic growth – equity ALP drove reform, not the right ALP’s reform was in the spirit of Adam Smith systematically sympathetic towards the poor suspicious of privilege persuasion rather than power

3 3 Background Reform gradually morphed into deregulatory formula Now encountering diminishing returns. Further areas of reform – rats and mice taxis, post, newsagents, pharmacies – reforming the tax - welfare interface – health, education and federalism A new canvass

4 4 Traditional ideas of the economy

5 5 New frontiers: New themes for reform

6 6 Information Major theme of economics –since Hayek, Arrow, Stigliz and Akerlof –Yet little attention to improving information flows. In workplaces workers compensation premiums are a good proxy for OHS performance –should be disclosed to all prospective employees Job satisfaction could be measured and published by workplace –producing a market in job satisfaction

7 7 Information Information can drive improvements in health and educational performance. We should audit the Report on Government Services Generate and publish information on –objective performance of investment advisors real estate agents –customer satisfaction and error rates of selected other areas

8 8 Public information on past performance

9 9 ‘Gruen Tenders’

10 10 Risk Approaches to government risk are primitive –Government balance sheets are a residual Privatisation, fiscal consolidation and retirement incomes policy has improved productivity but worsened risk bearing –foisting risk on private sector is costly Sydney’s cross-city tunnel may be a turning point –Governments should borrow to invest Like families and firms

11 11 Risk Large risk management agenda sketched out by Shiller which governments should help foster risk markets in such things as GDP growth House prices by suburb Employment prospects - by skills

12 12 Law We only really have a legal system for the rich and those with access to legal aid Otherwise you risk your life savings We need a legal system which is independent timely cost effective Legal procedure must ensure legal resources are commensurate with the magnitude of disputes Right to pre-emptively forsake appeal subject to opponents’ right to appeal on bearing all costs

13 13 Complexity, defaults and simplification Complexity is a major economic issue What happens ‘by default’ becomes increasingly important. We should simplify life and improve outcomes for ‘default’ behaviour –superannuation and investment –presumption that complex contracts are reasonable a duty to disclose unreasonable provisions –End tax returns for most employees

14 14 Regulation Regulation is hugely important – Debate still bogged down in left-right sloganeering – No country has done it well Some ideas Regulation is an interface in a complex system –between government and persons (actual and legal) Responsiveness to new ideas, information and needs is crucial Rghts to alternative compliance We need new institutions to mediate the ‘politics of detail’.

15 15 Macro governance Rule of law requires independent institutions that cohere through political changes in government. –Judiciary –Monetary policy And obligations to obtain independent advice –Industry assistance If we believe in the power of government to manage the economy we must develop its independence –begin with obligations to receive independent fiscal advice like Victorian Government Auditor General

16 16 Tax Tax pollution –greenhouse gases –congestion Difficult to establish the debate from Opposition

17 17 Oppositions can initiate change ! The more complex our society the less powerful is, central ‘command and control’ the more powerful are attitudes and decentralised decisions Achieving reform from Opposition would be good for Australia the Opposition, which would be actively building its vision, rather than just carping from the sidelines. Areas where one can start from outside government Job safety and satisfaction ratings Investment advisors keeping public sample portfolios Default superannuation And health and education are with the State Governments!

18 18 What’s reform for? These ideas can not just help us become richer Not just help us manage ‘the economy’ and minimise government expenditure - as worthwhile as those aims are They can make important contributions to – the quality, – security and – fairness of our lives And the fitness of our institutions for their purpose


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