In her latest Monthly article on Bill Shorten, Laura Tingle highlights the Labor leader's comments about the importance of evidence-based policy and reaching out beyond the party:
Tingle ends her lengthy article with her own take on the election: "It will be the year of fears versus ideas." Maybe. But it may also be an election where rebuilding trust in institutions and proper deliberative processes are as important as the policies themselves.
In whom might voters have greater confidence to nurture institutions and apply due process? Will they consider how the parties would implement their policies, addressing whatever issues future events give rise to, and positioning the nation for the longer term? Will those unwilling to support the major parties consider the likelihood of independent candidates and minor parties contributing constructively to government decision-making over the next three years and beyond?
No doubt many will vote on the basis of the policy choices presented, and many will vote in line with perceptions of broader philosophical leanings. But this time, the very processes of policy deliberation, and the role of institutions within government and across civil society, deserve particular attention – and just maybe that will be a factor. How might the nation rebuild trust in the processes of governance and move away from the "shoutiness" of recent times?
I don't for a moment suggest that Shorten's assurances be accepted without question, but his statements identify a key issue on which all parties (and their leaders) and candidates should be assessed.
One way to explore the extent, if any, to which the major parties might support better informed and more deliberative processes is to consider issues on which both sides' policies are seriously wanting. Would the parties be willing, in government, to adjust their policies after consulting experts in the public service and/or externally, those affected and those on the other side of the Parliament (and the crossbench)? Would they refine the policies during implementation or modify them significantly later, or are they too wedded to prevailing party ideology or too blinkered by commitments to interest groups?
Below are some policy areas where I believe both sides' approaches are ill-thought-through and need more careful deliberation.
The Coalition is berating Labor's proposal to remove dividend-imputation credits for those not paying income tax because it "shifts the goalposts" for self-funded retirees who invested savings on the basis of rules introduced 20 years ago (notably, with bipartisan support). But the Coalition has not acknowledged that the change to the pension assets test, which Scott Morrison initiated, similarly "shifted the goalposts" for many of those same self-funded retirees.
Moreover, the new assets test's "goalposts" are totally unsuited to rational savings behaviour by future retirees: some people approaching retirement will now find their net retirement income may be reduced if they add to their superannuation savings, and so will be encouraged not to save more, or to direct more money into their home (exempt from the assets test), or to retire early and spend more on overseas travel before applying for the pension.
Labor says it doesn't like the new assets test but is yet to clarify what it might do instead. It's sticking to its dividend-imputation policy, which I suspect was developed in response to former treasurer Peter Costello's irresponsible action to exempt from tax any payments after retirement from super savings where the contributions had been taxed. But former prime minister Malcolm Turnbull's revised contributions tax arrangements and associated caps effectively removed the excessive concession that Costello introduced.
Labor's policy on dividend imputation is, in fact, decidedly weak. It indeed moves the goalposts, and the way it is to be implemented is complicated and distortionary (pensioners will be protected, though they may have as much as $800,000 in investments, and those with savings in the large super funds will be unaffected). (A declaration: Labor's proposal would affect my wife's super.)
What is needed is a stable, comprehensible system of tax and social-security rules that not only allow those aged 50 and older to plan their savings and retirement with confidence but also guide them firmly and simply towards having secure and adequate lifetime retirement incomes. The system should also, surely, involve a fraction of the transaction costs that now exist. We have a long way to go to get to that; the ad hoc policy pronouncements from both sides just add to the task.
That Australia's health system seems to work not too badly – compared to most overseas systems – understates how complicated it is and how much better it could be. One aspect that is particularly complicated and causes serious trouble is our approach to private health insurance and its relationship with Medicare.
On this, neither side of politics offers any serious reform. The Coalition has tried to negotiate with the industry to see if classifying products into broad categories may help consumers make informed choices between products and between funds. But consumers continue to be surprised by the out-of-pocket costs they face and confused about whether to "go public" or "go private" when turning up in a public hospital. No serious reform has been pursued since Michael Wooldridge's "lifetime cover" and "known co-payment or no co-payment" measures nearly 20 years ago.
Turnbull had the chance to clarify the Coalition's position when he angrily (with justification) complained about Labor's "Mediscare" campaign, by setting out the Medicare principles the Coalition supported and where private health insurance fits in, but he didn't.
Labor's policy is neither clearer nor better. With great fanfare and claims of courage, it means-tested the private-health-insurance rebate but simultaneously increased substantially the tax penalty on those on higher incomes without such insurnace. It was a total sleight of hand that in fact increased the effective subsidy to the industry. It increased the tax payable by everyone on higher incomes (insured people lost the rebate and the uninsured paid a higher tax penalty), made the subsidy more opaque and allowed even more distortions in the market (for example, encouraging more people to take out insurnace for tax purposes only, or to take out minimum cover while still presenting as public patients in public hospitals).
Under both parties' policies, there is no reason to believe the industry is genuinely taking pressure off the public system and every reason to believe it is encouraging higher costs and increased waiting times for the uninsured. Labor now plans to cap premium increases to 2 per cent a year for two years, when the effective Medicare premium is much higher. It is almost inevitable that co-payments will rise.
One more coherent approach would be to remove all the subsidies and let private health insurance play the sort of residual-only role it plays in Britain (where coverage is about 10 per cent). The savings could be used to enhance Medicare, but choice would play a more limited role in the system. Some experts support this approach, though it would be a radical departure from Australia's historic practice.
The better coherent option, in my view, is to return to explicit subsidies and tie them directly to the costs that Medicare would otherwise face, and nothing else; indeed, the insurance funds should need to accept fully the risks of hospital care for their members, including any public hospital care, and receive from the government a subsidy tied directly to their members' risks that Medicare would otherwise need to bear. This would get rid of all the nonsense of members wondering if they should "go public" or "go private", of public hospitals pressing patients to "go private" to get more money, of private hospitals complaining of unfair competition and so on. And it would force insurance funds to act more firmly to limit doctors overcharging, to offer genuine insurance with firm limits on both total annual out-of-pocket costs and the out-of-pocket costs for each episode of care, and to encourage them to increase their efforts to limit unnecessary hospital visits.
Is either side of politics willing to seriously explore one of these options in an open and deliberative process?
It seems the shouting from all sides is making sensible debate almost impossible. Claims of "the greatest moral issue of our time" are as unhelpful as those denying there is any issue to be addressed. Reserve Bank deputy governor Guy Debelle's recent speech provides a refreshing contribution, identifying some of the economic "science" that needs to be considered in addition to the physical science. Importantly, he emphasises the need to invest in adaptation and does not focus exclusively on mitigation.
Unfortunately, he chose to be almost silent on mitigation, perhaps to avoid political controversy, but mitigation policy equally deserves attention from economists as well as physicists. In deciding on appropriate climate-change policy, it is essential to weigh up the costs and benefits involved, including between costs now and benefits in decades into the future, the trade-offs involved, and the balance between adaptation and mitigation.
The Coalition is finding it almost impossible to reach internal agreement: some deny the need for any action, some even suggest subsidies for coal rather than a price on carbon; others support selective action to enhance the role of renewable energy, including through Turnbull's Snowy "battery" to address problems of intermittent supply.
Meanwhile, Labor has set a high target for reducing emissions, with almost no indication of the costs or the consequences for the management of energy supply, and no clear statement about its attitude towards coal mining. The Greens want to close down coal mining altogether, as well as coal-fired energy within Australia, with no acknowledgement of the costs to the Australian economy, nor that the international impact on emissions would almost certainly be in precisely the wrong direction (as China and India would turn to lower-quality coal from elsewhere).
While the price of renewable energy is falling here and internationally (as a consequence of well-justified research and development investment), the facts are, as Debelle noted, that countries like China still depend heavily on coal and are likely to for decades. The share of such power generation is, however, likely to continue to fall as those countries apply a price on carbon, directly or indirectly, which in time will affect demand for our coal.
But unilaterally hitting our coal industry makes no sense. Debelle also noted the likelihood of greatly increased demand for natural gas as demand for coal falls, implying the need to recognise the mining industry's continuing benefits to Australia. Those demanding China, India and other developing countries move much more swiftly to higher-cost energy should also recognise the serious trade-offs involved, in particular the slowing-down of reductions in global poverty.
I accept, reluctantly, that comprehensive tax reform is simply too hard at present (how on earth have we ended up with a "progressive" company tax, and when might we seriously broach broadening and increasing the GST to help meet inevitable increases in health and aged-care costs?). But even the income-tax policies announced so far bear almost no resemblance to those recommended by the 2010 Henry tax review.
Both sets of proposals would make the system even more complex rather than more coherent. The Coalition is increasing the means-tested low-income tax offset to provide modest and short-term-only relief for low-income taxpayers. It's also providing much greater relief at higher-income levels by phasing out the second-top marginal tax rate. Labor's proposals are even more complex: it will both increase the means-tested low-income tax offset and introduce a new means-tested middle-income tax offset.
Neither side proposes to index the tax scale to stop bracket creep. Both seem determined to offer "tax cuts" to their preferred constituents (including potential "swing voters") with no regard for reforming the system.
Ken Henry proposed abolishing all existing means-tested tax offsets, and instead increase the tax threshold directly to a level exceeding the age pension (facilitating more coherence across the tax and transfers system), simplify the tax scale and index the tax points. It wouldn't be hard for either party to modify their policies to move towards the Henry model, while broadly retaining the distribution of the income-tax burden each prefers. But would either be willing to revisit their policies in the next year or two with an open and deliberative process?
Lack of trust in institutions is hardly unique to Australia: the issue is of deeper concern in some other countries, particularly the United States. I was at an American Society for Public Administration conference last month where former vice-president (and likely presidential candidate) Jo Biden spoke.
That he chose to speak to an audience of public administration practitioners and scholars was itself telling. He referred to institutions as "the boundaries that stop the abuse of power" and expressed great concern that, according to a recent Harvard survey, 75 per cent of Americans under 30 do not trust their federal government to do the right thing (a clear majority also distrust their state and local governments, and two-thirds fear for the future). "The current reality is not who we are," he said. "This is not the US." He encouraged his audience: "Don't just keep the faith – spread it."
Biden also said it was important that international institutions expressed concern that the Trump administration is undermining them. These institutions are not only critical to the world's economic interests but also to peace and security.
Like Shorten, Biden is a leader one can believe or not. But, just perhaps, the theme of trust in institutions, which the two of them are identifying, will strike a chord in their respective countries, encouraging those of different political persuasions to add their voices in favour of renewed trust.
Andrew Podger, a former public service commissioner, is an honorary professor of public policy at the ANU. email@example.com
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