Comment

John Hewson
Coalition at a loss on productivity

Perhaps the fairest way to describe this week’s Economic Reform Roundtable – initially billed the productivity round table – is awkward, in a couple of respects. First, it’s difficult to know just how it might result in genuine reform.

The necessary depth of detail for an idea to become policy wasn’t going to be delivered by the two dozen invitees sitting around the cabinet table. Though a formal agenda for discussion was circulated, focus wasn’t helped by the prime minister suggesting “the agenda for the summit is whatever people want to raise” – presumably to downplay expectations that the government had an undeclared endgame.

Both he and Treasurer Jim Chalmers emphasised their open minds, days after the ABC reported the leak of a Treasury document listing a few possible announcements at the end of the event. It cited a freeze on the National Construction Code, plans to speed up housing approvals, including by using artificial intelligence to help clear environmental assessment backlogs.

Another source of awkwardness in this round table is the fact that experienced advisers and policy wonks already have a fairly good and detailed idea of what reform is needed in almost every area of government. It has always been a question of inadequate political will to take the necessary action. The Albanese government’s landslide victory – which could make it unbeatable by the current opposition in 2028 – should have given Labor the courage to embrace big opportunities. The government’s polling has even improved since the election, both in terms of their two-party preferred lead and the prime minister’s personal standing.

Don’t get me wrong, it is highly commendable for a government to tap the best and brightest for policy ideas and directions. And Chalmers did manage expectations by framing the summit as helping to build federal budgets over the next three years.

Not surprisingly, the current opposition has been deliberately unhelpful. Coalition governments presided over a decade of decline in our productivity – from a growth rate of 1.7 per cent in 2012-13 to just 0.9 per cent in 2022-23 – failing to even attempt to address it. As the sole representative for the Coalition at the round table, shadow treasurer Ted O’Brien showed up with no concrete ideas to contribute. As was evident in the last election, the opposition has attempted several attacks, such as accusing the government of having a hidden agenda to increase current taxes and to introduce new ones. They have also warned that the summit was a pathway for a union takeover of the policy agenda, as the ACTU called for increased taxes, for a four-day working week and a slowing in the pace to AI.

In general, the discussion wasn’t helped by the majority of the invitees being the “usual suspects” of sector and vested interests whose agendas are well known and have often been rejected, for good reason. For example, the business organisations always push the view that tax reform should be all about corporate taxes, arguing that the headline rate of 30 per cent is globally uncompetitive – ignoring the fact our effective rate, in the high teens, is very competitive.

The government was obviously shaken by the considerable discussion of tax in the media in the run-up to the round table. It is hard to talk down the importance of genuine broad-based tax reform, given it is so fundamental to the dual declared objectives of productivity improvement and budget sustainability, as well as to more affordable housing. However, the prime minister sought to minimise the political “damage” of the discussion by ruling out several tax changes in advance – namely broad GST reform, changes to capital gains tax and negative gearing, and wealth taxes.

Despite the government’s wariness over tax reform, some round table submissions made persuasive cases for an economy-wide carbon tax and a cash flow levy to encourage businesses to invest. What I would consider one of the strongest was former Treasury secretary Ken Henry’s view that if the right environmental taxes are prioritised, then much will follow. He highlighted the under-taxing of the gas industry, which contributes less to government revenues than students do with their HECS-HELP payments, and also less than teachers do with their income taxes. And these fossil fuel tax breaks mostly support multinationals that take the benefits offshore.

As for the tax proposal most likely to be taken up: Labor clearly supports replacing fuel excise with a road user charge. Work is under way on a levy to capture EVs as well as combustion-engine vehicles, and better account for road use and wear and tear by vehicles of different weights and use.

One area that has been widely accepted as representing “low-hanging fruit” in the quest to improve productivity is deregulation. The chair of the Productivity Commission, Danielle Wood – a key presence at the round table – emphasised this point in her address last week to the National Press Club, in which she highlighted delays in approvals for housing projects. Approvals for renewables and other environmental projects are also slow moving. Wood’s basic point was the need for all contributors to our economy to regain a “growth mindset”.

Unfortunately, the discussion of regulation has quickly declined to be a pointscoring contest between the government and the opposition. Liberal Senator Andrew Bragg claimed the Albanese government imposed more regulation than previous Coalition governments – a point hotly contested by Treasurer Jim Chalmers and his assistant minister, Andrew Leigh.

This back and forth misses another important point – the need to reform the regulators, such as ASIC and the National Anti-Corruption Commission, both of which are accused of having fallen short of their missions.

One of the most important challenges for participants in the summit has been to get them to face up to the reality of how their behaviour hurts productivity and needs to change fundamentally. Mismanagement in the corporate sector includes money laundering, for which severe penalties have been enforced, wage theft, imposing illegal fees, price gouging, misleading customers and uncompetitive behaviour. A senior and successful businessman once commented to me that companies that are consistently profitable are gaming the system. That may be more rewarding than attempting to be innovative and working smarter.

All this aside, one point too often missed in the push to get more done, more efficiently, over recent years is the urgent need for reform in the care sectors, which many believe are a drain on national productivity. True, it is difficult to measure productivity in the care of children, the elderly and the disabled. The improvements that are desperately needed are in terms of the availability and quality of care, which are more important considerations. Surely, we don’t want to be a society that ranks economic performance ahead of proper care for our citizens and their families, especially those with greater needs. And while a well-run economy is fundamental to our capacity to satisfy these social objectives – including environmental ones – we shouldn’t forget we are reforming our society, not just our economy.

I had hoped the round table would include a strong focus on education, right from early learning through to universities and workplace skills development. Action is needed to address the collapse in the standing of our basic schools education and to improve funding of our universities and research. Indeed, education should be a principal focus of any growth mindset and future national strategy.

Of course, a courageous reform agenda would also include reform of our federation, to deal with the overlap and inconsistencies in policy development and implementation, to unify regulations and policies across all states in areas such as education and transport and industrial relations. There should be an increased focus on the total national fiscal position, with tax and spending reforms cordinated through both levels of government. This country needs a once-and-for-all clear definition of responsibilities for policy development, implementation and funding, as a better basis for essential collaboration.

Above all, my overarching hope for the round table is that it will lead to a strong national commitment, across all levels of our society, to prioritise the clean energy transition as part of the “growth mindset” that Danielle Wood champions. Unfortunately, our opportunity to lead globally in this respect is being lost amid the current Coalition’s infantile obsession with sustaining the climate wars, for some perceived but undemonstrated political advantage, at the clear expense of our national interests. We have the world-class, natural advantages of renewable resources and technologies for their effective development, we have the workforce skills, and we can readily get the necessary finance. There should be no limit to what we can achieve, other than the extent of our national imagination.

The real value of the round table is not just in the quality of the ideas put forth but the extent of the action that follows.

This article was first published in the print edition of The Saturday Paper on August 23, 2025 as "Cogito ergo summit".

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