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Title: Structural reform in Australia (and the role of the Productivity Commission)


1
Structural reform in Australia (and the role of
the Productivity Commission)
  • Gary Banks
  • Dean/CEO, The Australia and New Zealand School of
    Government
  • Former Chairman, Productivity Commission,
    AustraliaAthens
  • 18 April 2013

2
The Australian Federation
2
3
Australias Federal system of Government
3
  • Powers and responsibilities divided between the
    central and state governments
  • Westminster-style Parliamentary System
  • two dominant parties (but minor parties growing)
  • Governments cooperate, but also compete
  • The Council of Australian Governments is a
    forum for cooperation on national reforms

4
The Australian economy a snapshot
4
  • Population 22.6 million (as at 3 April
    2013)
  • GDP 1336bn
  • Primary 10.3
  • Manufacturing 9
  • GDP per Capita () 59 629
  • GDP growth rate 3.1
  • Inflation 2.2
  • Unemployment 5.4
  • Current A/C deficit GDP -2.2
  • Public Deficit GDP -3.7

5
The previous 'protection for all regime
5
  • Centralized prescription of fair wages
  • Made-to-measure tariff protection
  • Extensive regulatory barriers to competition
  • Government monopolies in infrastructure and human
    services

6
Australias relative productivity performancewas
poor
6
6.0
Australia
OECD
5.0
4.0
3.0
2.0
1.0
0.0
1960-65
1965-70
1970-73
7
Fall of Australias economic ranking
7
Per capita GDP ranking in OECD
  • Source The Conference Board and Groningen
    Growth and Development Centre, Total Economy
    Database, January 2009

8
Wide-ranging structural and competition reforms
8
  • Trade liberalisation (from early 1980s)
  • Capital market liberalisation (from early 1980s)
  • Pro-competitive infrastructure reforms (from late
    80s)
  • Labour market deregulation (from late 80s)
  • Human services administrative reforms (from early
    1990s)
  • A coordinated National Competition Policy (from
    1995)
  • National Reform Agenda (from 2007)

9
Some features of Australias reform
implementation strategy
9
  • We reduced barriers at the border first
  • We liberalised unilaterally
  • Reforms were implemented gradually
  • We acted on a broad front
  • We assisted adjustment in sensitive sectors.

10
Import protection and industry assistance are
greatly reduced
10
Effective rates of assistance (per cent)
Manufacturing
Agriculture
11
Increased trade intensity
11
Trade-to-GDP ratio
12
A surge in productivity and innovation
12
Business RD share ofmarket value added
Average MFP growth
13
Fall and rise of Australias economic ranking
13
Per capita GDP ranking in OECD
Australia back to 5th in 2010
  • Source The Conference Board and Groningen
    Growth and Development Centre, Total Economy
    Database, January 2009

14
  • There is nothing more difficult to carry out
    than to initiate a new order of things. For the
    reformer has enemies in all who profit from the
    old order, and only lukewarm defenders in those
    who would benefit from the new.
  • (Niccolò Machiavelli The Prince, 1513)

15
Political obstacles to reform
15
  • Costs are often immediate, but benefits can take
    time
  • Costs from reform are concentrated, benefits are
    more widely spread
  • Potential winners tend to be poorly informed
    (compared to losers)
  • Bureaucratic structures are fragmented, with
    variable capacity and often aligned with
    sectional interests
  • Multiple jurisdictions complicate progress

16
Some Australian institutional innovations within
government to support reform (and good policy)
16
  • Standing review bodies
  • The Productivity Commission
  • Regulatory assessment processes
  • The Office of Best Practice Regulation
  • Monitoring of public sector performance
  • Government Services Review
  • COAG (National) Reform Council

17
What is the Productivity Commission?
17
  • An independent government agency to publicly
    review policies, programs and regulation
  • and provide research and advice on reforms that
    are in the long term national interest.
  • It evolved from a statutory body to advise
    government on import tariffs (the Tariff Board,
    1922).
  • Re-vamped in 1973, 1990 and 1996 progressively
    widening its mandate.
  • Currently around 200 staff and US30m annual
    budget.

18
Three core design features
18
  • Independence
  • Government funded, but arms length from the
    Executive
  • underpinned by Act of Parliament (role, tenure)
  • Transparency
  • public processes (submissions, draft reports)
  • published outputs
  • Economy-wide perspective
  • to achieve higher living standards for the
    Australian Community

19
How the Productivity Commission fits within
Government
19
Parliament
Cabinet
...
Treasurer
Public
...
Productivity Commission
20
Steps in the Commission's Inquiry Process
20
Reference from Cabinet
  • PC calls for submissions
  • Initial consultations and Issues Paper
  • First round of hearings or roundtables
  • Draft Report publicly released
  • Second round of submissions and
    hearings/roundtables
  • Final Report to Government (subsequently publicly
    released)
  • Cabinet submission by relevant Minister
  • Decision and implementation

21
The Commissions advisory activities range widely
21
  • Industry assistance and trade policy
  • Regulatory frameworks for infrastructure and
    utilities
  • Competition and consumer regulation
  • Labour market reform
  • Social and environmental programs/regulation
  • Reducing Red Tape on business
  • Productivity trends and drivers

22
How has the Commission supported reform in
Australia?
22
  • Impartial advice in the national interest
  • Findings publicly scrutinized and evidence-based
  • An opportunity for government to test public
    reactions
  • Ammunition for government in selling reform
  • Greater community awareness of the costs of
    existing policies and benefits from reform
  • Facilitating pro-reform coalitions

23
Some recent inquiry topics
23
  • Regional Trade Agreements
  • RD Support
  • Regulatory impediments in key industries
  • Urban Land Planning and zoning
  • Water policy and regulation
  • Airport regulation
  • Retail sector performance
  • Carbon pricing international comparisons
  • Education workforce
  • Aged Care policy framework

24
Other ingredients in Australias reform story
24
  • Ad hoc policy review processes on specific issues
    (tax, labour market,.)
  • Coordination and oversight mechanisms within and
    across governments
  • Political leadership
  • strong technocratic support

25
Implications for others?
25
  • Countries differ, but face similar reform needs
    and obstacles
  • Structural reform in Australia benefited from
    institutions that provide independent research
    and advice
  • Scope to adapt such approaches to other
    countries institutional circumstances?

26
Some Australian innovations in policy development
and review (continued)
26
  • Standing review bodies
  • The Productivity Commission
  • Regulatory assessment processes
  • The Office of Best Practice Regulation
  • Monitoring of public sector performance
  • Government Services Review
  • COAG Reform Council

27
The key elements in Regulation Impact Assessment
27
  • Explain objective and why government action is
    needed
  • Identify all relevant options (including
    non-regulatory)
  • Assess their costs and benefits across the
    economy/community
  • and choose the option with greatest net benefit
  • Consult with stakeholders along the way
  • Have an effective implementation strategy
  • and periodically review the outcomes

28
The Australian Governments regulatory assessment
system
28
  • All regulatory proposals are screened for impacts
    on business/competition
  • OBPR advises on need for Regulation Impact
    Statement
  • and monitors compliance
  • Failure to comply means regulatory proposals
    cannot proceed
  • unless the Prime Minister grants an exemption
    (and then a post-implementation review is
    required)
  • All regulations periodically reviewed
  • sunset clauses in subordinate regulation
  • 5 yearly reviews (and ad hoc stock reviews)

29
Some Australian innovations in policy development
and review (continued)
29
  • Standing review bodies
  • The Productivity Commission
  • Regulatory assessment processes
  • The Office of Best Practice Regulation
  • Monitoring of public sector performance
  • Government Services Review
  • COAG Reform Council

30
How the Review of Government Services is
structured
30
Annual reporting on efficiency and effectiveness
of government services
Steering Committeeof senior officials from
central agencies head by Productivity
Commission Chairman
Secretariat Productivity Commission
12 Working Groupsof officials from line agencies
Specialist input
31
Services covered in annual reporting
31
  • School education
  • VET
  • Police
  • Court administration
  • Prisons
  • Emergency management
  • Public hospitals
  • Primary and community health
  • Aged care
  • Disability services
  • Childrens services
  • Housing

32
Performance indicators for public hospitals
32

Equity of access by special needs groups
Access
Equity
Emergency departmentwaiting times
Access
Waiting times for elective surgery
Appropriateness
Separation rates for selected procedures
Objectives
Unplanned re-admission rates
Effectiveness
Pre-anaesthetic consultation rates
Safety
Patient satisfaction
Surgical site infection rates
PERFORMANCE
Quality
Responsiveness
Patient satisfaction surveys
Capability
Accreditation
Sentinelevents
Continuity
Continuity of care
Sustainability
Workforce sustainability
Recurrent cost per casemix-adjusted separation
Key to indicators
Efficiency
Total cost per casemix-adjusted separation
Provided on a comparable basis for this Report
subject to caveats in each chart or table
Text
Relative stay index
Text
Information not complete or not directly
comparable
Recurrent cost per non-admitted occasionof
service
Outputs
Outcomes
Text
Yet to be developed or not collected for this
Report
33
Some Australian innovations in policy development
and review (continued)
33
  • Standing review bodies
  • The Productivity Commission
  • Regulatory assessment processes
  • The Office of Best Practice Regulation
  • Monitoring of public sector performance
  • Government Services Review
  • COAG Reform Council

34
COAG Reform Council
34
  • A national body
  • appointees from different jurisdictions
  • Monitors and reports on implementation of agreed
    national reforms
  • discipline through transparency
  • Advises whether state performance meets
    requirements for Federal funding in specific
    areas (eg. hospitals, schools...)

35
Structural reform in Australia (and the role of
the Productivity Commission)
  • Gary Banks
  • Dean/CEO, The Australia and New Zealand School of
    Government
  • Former Chairman, Productivity Commission,
    AustraliaAthens
  • 18 April 2013
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