Brainstroming productivity reform

I don’t generally take much notice of Henry Ergas’s op-ed pieces in the Oz, but even one-eyed Coalition shills sometimes have important things to say. So it was with Ergas’s article this morning drawing attention to actions by the Gillard government to diminish the role and effectiveness of Regulatory Impact Statements, especially by transferring responsibility for oversight of RISs from the independent Productivity Commission to the Department of Finance.

Troppo colleague Nicholas Gruen is a trenchant critic of the effectiveness of RISs in cutting bureaucratic red tape, but that doesn’t mean it’s a great idea to radically water down such checks and balances without putting something better in their place. As Ergas says, it doesn’t augur well for the Gillard government’s alleged commitment to boosting Australia’s productivity.

On the other side of the partisan pundit divide from Ergas, Ross Gittins has long been a cynic about the usefulness of micro-economic reform generally in boosting productivity. Gittins was on about it again the other day:

For the past 200 years, since the early days of the Industrial Revolution, the material living standards of people in the West have been rising almost continuously, thanks to continuing improvement in the productivity of labour and capital.

Have we had 200 years of continuing micro-economic reform to bring that improvement about? Of course not. So there has to be something seriously wrong with an economy that can’t achieve a satisfactory rate of productivity improvement without regular injections of reform.

Like most other things in the economy, micro reform is subject to diminishing marginal returns. And when we run out of things to reform, what do we do then? A counsel of perfection isn’t a lot of use.

We need to remind ourselves that governments don’t actually run the economy, business people do. So if businesses aren’t generating much productivity improvement, the obvious place to look is at the behaviour of business people.

Australia’s productivity surged at the rate of around 2 per cent per annum through the 1990s, mostly as a result of the Hawke/Keating government’s economic reforms. But since then productivity improvement has dropped back to a much more mediocre 1.4% per annum.  Gittins reckons that only technological advancement makes much long-term difference to productivity, and that economists know bugger-all about how to stimulate technological innovation. He might be right, then again it might be that politicians since Keating have simply lacked the “ticker” to make the necessary hard micro-economic decisions. I’d be interested in the opinions of the giant economics brains which regularly inhabit the Tropposphere.

Just to stimulate discussion, I’ve listed over the fold and in no particular order a series of possible micro-economic reforms that I reckon would have significant positive effects on productivity if implemented. Feel free to critique them, and add ideas of your own.  Of course, perhaps we shouldn’t take all  this too seriously, as the oxymoronic image at top right suggests.

  1. Abolish or drastically cut stamp duty on purchase of family home to facilitate worker mobility to take up new job opportunities;
  2. Finance this and any other stimulatory tax cuts (e.g. abolition of payroll tax) by increasing GST rate to (say) 12%;
  3. Require unemployed workers to move to areas of high job availability if unable to find work within 6 months, unless involved in retraining and subject to obvious hardship exceptions (e.g. spouse in employment for more than 20 hours per week, children in senior years of high school);
  4. Provide government relocation assistance to unemployed workers to move to areas of high job availability;
  5. Require mortgage providers to offer repayment moratorium of up to 2 years to unemployed workers undergoing retraining;
  6. 160% tax deductibility for R & D expenditure by small-medium businesses (up to $20 million p.a. turnover);
  7. Reduced company tax rate for profits from provision of venture capital to small-medium businesses;
  8. Abolish automatic employee right to wrongful termination action. Employers to be allowed to pay out workers on termination at rate of 2 weeks pay for every completed year of service (in addition to accumulated entitlements). Employers who choose not to pay out workers by this formula would remain liable to wrongful termination action as at present;
  9. Facilitate abolition of shift penalties and negotiation of flat hourly pay rates in retail, tourism and hospitality industries, with strong “no disadvantage” mechanism;
  10. Increase proportion of adult population undergoing VET and higher education training programs e.g. by boosting student allowances to equivalence to unemployment benefit;
  11. 160% tax deductibility for apprentice wages paid by employers in areas of recognised skill shortage;
  12. Expedite implementation of national schools curriculum (this would enhance worker mobility by removing disincentive whereby children may sacrifice an entire year of schooling through curriculum misalignment between States);
  13. Trim scope of National Broadband Network to provide only fibre-to-the-node in regional centres of less than 40,000 people. Use the billions saved in renewed drive for upgraded road, rail and port infrastructure in bottleneck areas;
  14. Implement Nicholas Gruen’s proposal for an independent fiscal probity authority to recommend and make public appropriate levels of government borrowing, especially for productive infrastructure;
  15. Implement my proposal for greater powers and independence for Infrastructure Australia in scrutinising and prioritising public infrastructure proposals.

About Ken Parish

Ken Parish is a legal academic at Charles Darwin University, with research areas in public law (constitutional and administrative law) and teaching & learning theory and practice. He has been a legal academic for almost 12 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in he early 1990s.
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34 Responses to Brainstroming productivity reform

  1. Me says:

    Some responses

    1. Why can’t/don’t mobile workers just rent?

    2. Simpler still, leave the rate unchanged and include food, education, etc in the base.

  2. Patrick says:

    We already have a form of #7, with venture capital limited partnerships and early-stage venture capital limited partnerships.

    I agree very strongly with #1, #3 and #4 which I think are a massive social issue hanging over our (and every other apparently-soon-to-be-post-heavy-industry) country. Obama should have done this when GE went bankrupt, instead of pumping money into the retired workers’ pension fund, and we should make this a standard part of welfare. Hell, we should give them a $20k cash handout (maybe $10k a year) if they move to the right areas.

    I disagree partly with #2 mainly because I thought the GST was already supposed to have paid for these. I would support however raising the GST to 15% if appropriate compensation was provided to lower income earners. I would definitely support including food in the base.

    I think #8 is also an excellent idea. I also like #6 onwards although I am less sure about the ability of #11 to really work enough to justify the effort.

  3. wizofaus says:

    Seeing as you had it twice, what is 160% tax deductability?

    I’d have no problem with applying GST across the board as long as
    a) lower income earners (that spend higher percentages of their incomes on food) were compensated
    b) some attempt was made to price in the externalities of processed food (on which there is currently GST charged) over fresh food

    Though a potentially cheaper alternative might be to make stores that ONLY sell fresh produce GST exempt. I worry how much of an overhead GST would be on small distributors at fresh produce markets.

  4. Me says:

    Are there externalities with the consumption of processed foods? Surely, the costs of eating them are born by the eater.

    I can see that there may be externalities associated with their production, but these would be better addressed during that process rather than downstream.

    Regardless, the GST is a VAT, not a luxury tax or sin tax, and probably shouldn’t be implemented in the manner you are proposing.

  5. Ken Parish says:

    wizofaus

    160% (or whatever) tax deductibility simply means you get a deduction of $1.60 for every $1.00 actually spent on that category. We had 150% deductibility for R & D expenditure at one stage from memory.

    BTW The reason I suggested raising GST to 12% rather than including food as “Me” proposes was precisely the fact that excluding food reduces significantly the regressive effects of a GST (i.e. your point (a) at #3). Excluding food (Democrats price for supporting GT) certainly makes GST admin and record-keeping a bit more complex, but people are used to it now. Hence better to raise the headline rate of GST to the extent required to fund State-based measures I’m suggesting.

  6. Nicholas Gruen says:

    An interesting list Ken.

    Perhaps we should broaden the scope of a project I’m working on.

    One thing: usually subsidies are better than accelerated tax deductions – they’re simpler, more transparent and less capricious – for instance tax deductions are much less valuable for companies that are not in tax profit.

  7. wizofaus says:

    “Me”, but the health costs at least are paid for by taxpayers. And it’s surely better to encourage people away from eating unheathily than paying for the consequences later.

    Thanks, Ken, more or less what I thought, but 160% just struck as an oddly arbitrary figure.

  8. Richard Tsukamasa Green says:

    Ken – It’s even easier to get pessimistic about policy to stimulate innovation and productivity gains when you consider how pro-cyclical productivity data is. For instance (and focusing on labour), it’s difficult to distinguish between a worker that is now more inherently productive or one in a company that has more demand and is fulfilling it’s potential better. A Mr Whippy operator’s observed productivity soars on weekends, despite being no better at his job. Labour that is kept on during downturns may continue to become more productive at a constant rate, but this extra capacity is not recognized until an upturn occurs. Likewise current disappointing productivity growth may only be a sign of “hoarded” workers who are underutilised in current conditions.

    So how much of the observed spike in the 1990s was due to reform and how much was merely cyclical is quite difficult. At the time Quiggin was prepared to dismiss the idea that reform was responsible for any of it, and that’s very tempting considering productivity growth returned to normal roughly as the economy reached capacity rather

    I hope for the day when we better understand the sources of productivity growth, but the old institutionalists and more recent New Growth Theory experiences haven’t seemed too fruitful. By all means the various policies that you suggest and that might be brainstormed here are worth talking about and perhaps instituting. I don’t think it should be done with a mind to aggregate productivity growth as opposed to sectoral and micro improvements or treating the fostering of science and innovation as a pure public good (one without borders to boot).

    As far as macro goes I think it would be safer to follow the assumptions of Swan Solow, Okun or Friedman’s plucking model and assume productivity as exogenous and steady growth over the long run, the short run fluctuations are what needs addressing. Macro must be one of the few places where the short run deserves most of the focus, and also where politicians routinely fail to focus on it.

    I would add though that there is a productivity interest in addressing short term growth, namely that workers who aren’t working (unemployed) start to lose their skills and may have lower productivity when they return to work. The steps in this graph Don discussed can be interpreted as many men losing all their productivity, or at least falling below minimum wage.

  9. Ken Parish says:

    Thanks Richard. That helps my thinking about these issues quite a lot. I’m not sure about the cyclical underutilsation explanation for current mediocre productivity growth, however. These lower productivity numbers have been evident right through the “noughties” including the period when unemployment was at historic lows in the boom immediately preceding the GFC, when we didn’t have a “two speed economy” and labour shortages were fairly general to the extent that we were importing 150,000 per year or so on 457 visas.

    Perhaps that was even one of the reasons for lower productivity despite full labour utilisation up to the GFC i.e. we were importing/employing sub-optimally skilled labour in an ad hoc fashion to fill gaps. If that’s right, then building better incentives to train skilled workers locally wherever possible should help. So too should helping local workers be more mobile. And it may be, as you say, that post-GFC poor productivity reflects a different cause i.e. ““hoarded” workers who are underutilised in current conditions”.

    It’s interesting that we have to speculate about this rather than actually knowing the answers with any degree of certainty. Perhaps Gittins is right that the “revealed preferences” of economists show us that they’re not really interested in studying and understanding productivity as such. I’ve read several PC papers musing about the causes of disappointing productivity performance through the noughties and it seems they’re almost as puzzled as the rest of us (although they mostly blame it on large capital investments in the mining and utilities sectors which have not yet been converted into the expected cashflow i.e. we will soon see a reversal of the productivity downturn).

    The best paper I’ve found on this is one earlier this year by Eslake and Walsh. They partially dispute the PC explanation and seem to prefer Ross Garnaut’s explanation that much of the productivity decline results from the “Great Complacency”that set in after the reforms of the 80s and 90s. I tried to keep Eslake and Walsh’s observations in mind in formulating my ideas.

  10. Ken Parish says:

    Nicholas

    Yes I’d love to upload these idea to BudgIT if appropriate. Should I subscribe each one separately or as a group?

    I like your suggestion to broaden the scope of the project. Thinking about it, it may be that my difficulty in remaining deeply engaged with helping on it flows from the fact that I find a narrow budgetary focus fairly uninspiring, whereas I’m much more interested in ideas in a broader public policy context that could accurately be encompassed under “micro-economic and productivity reform”. I’ve been deeply interested in all this stuff since the early 90s when I held all the shadow economic portfolios in the NT Labor Opposition and was tasked with developing policy with no assistance at all except being periodically beaten around the head by then Opposition leader Brian Ede who was married to Senator Peter Walsh’s daughter and had swallowed whole Walsh’s spartan devotion to all things neoliberal. I was never fully convinced but I learnt a lot.

  11. Personally, I think stamp duty has to be the number #1 reform priority.

    I don’t see the need to (immediately) act on #3 and #4 because I can guarantee you that families would be more likely to move if they weren’t facing upwards of $40k in costs just to relocate from one capital city to another!

    I would happily raise the GST to 15% in exchange for cuts to other taxes that negatively affect population mobility.

    Also agree with #8-#10, #13 and #15. Disagree with #12 on the basis that I’m not convinced the potential loss of innovation in schooling justifies eliminating the problems of student dislocation (in my memory about 4 months of each year’s curriculum gets repeated the following year anyway). The others I don’t know enough about to comment on.

  12. Peter Whiteford says:

    Interesting post with some real challenges.

    On requiring people to move to areas with high job vacancies I see at least two problems. First, long-term unemployed people generally don’t have the skills required in places where there are vacancies. (In passing about 40% of parents who have been on benefits continuously for 12 months or more have not finished Year 10.)

    While there are difficulties in getting unskilled labour for fruit picking etc, it is not clear to me how effective getting people into these jobs temporarily would be in reducing unemployment.

    Second a lot of these places with high vacancies have extremely high rental costs, and rent assistance for the unemployed is completely inadequate.

    So together we would be expecting unskilled people to move to areas with high rental costs to apply for jobs for which they are not well qualified. Unless there was some way of guaranteeing that they would actually get a job very few people could actually afford it.

    I have no doubt that we can do better than we are currently doing – it’s just that I think this is likely to be a long and rather complex process.

  13. Paul Montgomery says:

    I have really enjoyed Gittins lately, he is at the top of his game.

    I agree with him that technology is the source of most productivity gains. The problem is that since the gains made in the 1990s with ERP software, there has not been a lot of tectonic innovation from that quarter either. Business process engineering has been around for yonks and they are still talking about it. Knowledge management still faces intractable problems in implementation due to cultural issues.

    Can the NBN represent such a reform? It could, if the concurrent applications are developed by local startups. I am not seeing much investment or policies to nurture such innovation, though. That is where I would start looking for the next great micro reform: the Atlassians of the NBN. But they may not appear if the policies are not in place to enable them to be funded. The danger is that the NBN could become just another vector for importation of foreign IP, at more than full price.

  14. Pedro says:

    Did I miss the bit where you suggest a rewrite of the Fair Work Act?

  15. David Walker says:

    Eslake and Walsh specifically reject the argument that the commodities boom is behind Australia’s productivity puzzle. Their methodology looks pretty good, too.

    The one reason to be cautious about their conclusions – not dismiss them, but just be cautious – is this. Canada has the same productivity puzzle that we do.

    Canada is our closest economic analogue. Whenever someone claims Australia is especially good or bad, look at Canada. If the same thing is happening there, you’re probably looking at a result of underlying global trends rather than some result of policy.

    For instance, Canada’s inflation dropped at exactly the same time that Paul Keating was trumpeting his victory over inflation in the early 1990s. That seemed a clue that his claims of policy genius might be, um, over-inflated.

    That same is true in reverse now. Claims that governments since 2000 are productivity policy pygmies should be questioned carefully. Our productivity performance just may be more an artefact of events in the global economy, including events whose significance we do not yet recognise.

  16. Anthony says:

    Ken, you’re the first person I’ve noticed to focus on getting rid of the common law action for wrongful termination rather than the statutory action for harsh, unjust and unreasonable dismissal. What’s your reasoning behind this?

  17. Ken Parish says:

    I wasn’t intending that at all. I was just using shorthand in dashing off a list. It’s the statutory action I have in mind.

  18. Anthony says:

    But your proposal for reform addresses the common law remedy: ie, the requirement to pay out for “reasonable notice”. Why not just abolish the statutory prohibition on harsh, unjust and unreasonable dismissal and keep the common law remedy intact, even though the common law remedy may deliver damages more generous than you propose in certain circumstances (ie,long service)? In any case, most award and collective agreement provisions regarding notice would operate on a sliding scale that would in many cases results in more generous payouts than what you propose. Are these to be prohibited by law also?

  19. Ken Parish says:

    Anthony

    It was a summary list not a detailed discussion on each proposal. What I have in mind is in essence that the common law would remain in place with 2 weeks per year of service setting a baseline, but that the statutory harsh etc dismissal provisions would remain in place where the employer chose not to avail itself of the common law (e.g. in cases of embezzlement or other serious and wilful misconduct justifying dismissal without notice or pay in lieu thereof). However an order for reinstatement would not be possible even if serious and wilful misconduct was not made out.

    Nor was it my intention that such a reform would override any particular awards or EBAs which make specific provision for pay in lieu of notice on termination. Nor, for that matter, was it my intention to preclude action where an employee alleges they were dismissed for a reason covered by state or federal anti-discrimination/equal opportunity laws.

    My overriding objective is to introduce greater certainty and predictability into the situation for both employer and employee; provide desirable labour market flexibility; and avoid pointless, expensive and invariably unpleasant litigation. More generally, by ensuring greater government support for retraining and relocation for displaced employees, the need for strong protection against harsh and oppressive dismissal is reduced if not eliminated. When the employment relationship has broken down irretrievably, hashing over the reasons for it is mostly a pointless exercise except from the viewpoint of generating an entitlement to compensation/termination payment.

  20. derrida derider says:

    Gittins reckons that only technological advancement makes much long-term difference to productivity, and that economists know bugger-all about how to stimulate technological innovation

    A dirty little secret amongst economists is that both parts of this sentence are orthodox wisdom, bolstered by both theory and history. Most of the inefficiencies targeted by microeconomic reform or tax reform are static ones – in effect they impose a fixed cost and therefore don’t affect much affect the GROWTH (as distinct from the the LEVEL) of output.

    That doesn’t automatically mean they ain’t worth fixing. It’s just that they’ll make only a marginal difference to our children’s living standards, and so we need to look hard at the costs (including transition costs) as well as the benefits of them.

    In contrast, things that we suspect do affect technological advancement and hence growth – human capital policies, intellectual property laws, etc – are likely to make lots of long-run difference. It just that we don’t have a good handle here on what actually works in that long run.

  21. Richard Tsukamasa Green says:

    Ken – Quite possibly, by the time we could find out it would be well after the fact. Alternatively, to go off the same ideas in your second paragraph, if we were to assume firms hires workers with diminishing returns, or marginal productivity, and then to aggregate to the macroeconomy we would hypothesize low revealed productivity in conditions of full employment. But this would only be because the last hired workers are the least productive and once employed they pull the average down. More reasons to question the utility of aggregated productivity statistics.

    Then again we could ask why we’d want growing productivity at the macro level. The obvious answer is because it brings growth (the only thing that does in the long run). But why do we want growth? The main reason I would proffer in an age of affluence is because of unemployment (distinguished from poverty) – which is one of the most reliably predictors of misery, unhappiness and social instability. Growth prevents unemployment because we need greater output to keep everyone employed because productivity growth means that a given output would need progressively less workers to produce. All rather circular. We could treat aggregate productivity growth as an enemy, or work out ways of sharing scarce jobs, but I think that would all cause too many problems.

    Not surprisingly I interpret this as another reason to not worry about aggregate productivity. Instead focus on industry by industry productivity so workers aren’t left unemployed by the fact that productivity elsewhere in the world doesn’t shift an industry there if it can be helped, or focus on the productivity of workers who are already structurally unemployed. Or again, science as a pure public good.

    The sources of aggregate productivity growth is a mystery, particularly since it seems to only have become a steadily growing thing in the past 200 years – remember my fruitless speculations earlier this year. But growth in East Asia and especially the subsequent slow down in Japan in the 1980s seems to imply higher growth is catch up to the productivity frontier allowed by the present stock of human technological knowledge. This stock is borderless [fn1] and thus beyond the province of individual governments. Searching for the source of this is more an intellectual exercise than one with immediate policy implications. It may prove as pointless as a search for a theory of value. That said, you might be interested in Cowen’s Great Stagnation essay I talked about here, since it deals with similar issues and argues the potential frontier of productivity is increasing at a far smaller rate since the 1970s.

    This is all irrelevant to the purpose of this post, since brainstorming on how to improve productivity in various industries is still very worthwhile.

    There is IP, but the borders are those of a firm, not those of governments, and firms are as eager to license overseas as they are in their own country.

  22. Ken Parish says:

    Speaking of IP and brainstorming specific ideas, how about offering lower tax rates for the IP-related profits of businesses which licence their IP to others on more liberal Creative Commons licence terms? That would at least serve in some measure to subvert the restrictive effects of the Australia-US Free Trade Agreement and possibly encourage intellectually creative synergies between related industries and businesses. In a NBN context it could have really exciting results.

  23. derrida derider says:

    BTW I agree with Peter – the bit about making the long term unemployed “move to where the jobs are” is exactly the sort of sound-good evidence-free policy we’ve seen a lot of – like Work For The Dole.

    For a start as an employer, Ken, would you take on a highly reluctant, low productivity worker, typically with a substantial disability (sometimes including plain dumbness or seriously bad social skills) or with childcare responsibilities that sharply limit their hours? Remember that even in high-employment areas there’s no real shortage of alternative unskilled labour. And if you would be so altruistic, do you think that person is likely to stay long enough to justify the shedload of taxpayer’s money spent in moving their family – including, as Peter points out, the substantial and ongoing rent subsidies needed to get them living close enough to the work (remember “high employment area”=”high rent area”)?

    Anyway if we think spending sufficient taxpayer’s money to make low-skilled labour more mobile is worthwhile, then compulsion would be pretty superfluous – the employable would not need pushing because the money would pull them.

  24. Nicholas Gruen says:

    “IP related profits?” and you plan to define that how?”

    Fraid I can’t see how it will fly Ken. Though we did argue in the Cutler Report that the R&D tax concession should be available to activities that produce open source IP (which is more easily defined than the profits therefrom). Not that it got implemented.

  25. Given the state of our budget, and the fiscal pressures predicted by the IGR, any suggested reforms should *not* spend more money.

    There is precious little evidence that government R&D funding/subsidies actually gives the benefits predicted by new growth theory.

    The biggest missing piece from the micro-economic reform agenda is health care policy. We should be following the Dutch in their voucher-style reform, which increases competition while ensuring everybody is covered. But of course, that would require that we first fix our federation. I’ll start holding my breath now.

    dd — there is an argument, more prevalent among trade economists but applicable to all reform that reduces barriers to entry/exit, that good reform can create “dynamic” benefits by speeding up the innovation process. Standard micro theory says that there is no link between competition and growth, but empirical studies stubbornly refuse to endorse that view.

  26. derrida derider says:

    Yes, John, there is such an argument, but gee it sounds a bit like wishful thinking to me.

    The theory is not well developed and tested, and as for the empirics it seems startlingly difficult to explain such things as Asian economic takeoff that way – after all that involved anything but reduced barriers to entry. Anyway at a more micro level, what of the Schumpeterian argument that it is actually the prospect of market power (ie reduced competition) that drives innovation? It’s a thesis that when you think of things like Bell Labs and the Xerox Palo Alto Research Centre seems to have casual empiric support.

  27. Paul Montgomery says:

    Increasing productivity is a different set of arguments to creating a tech hub. For the latter, I’d suggest the work of Paul Graham.

  28. Pedro says:

    DD, I expect pretty much everyone has a business goal of reducing the competition against them and it is always going to be better if they aren’t doing that by rent seeking. The Asian growth story is best explained by good old conservative values.

  29. Paul Frijters says:

    Ken,

    quick feedback on your list:

    1. (stamp duty). Disagreed. Mobility is high enough for economic reasons.
    2. (tax changes). Disagreed. Taxes are low enough and I fail to see why you would want to exchange a progressive tax cut for a flat one like GST.
    3. (forced job mobility) Perhaps, but this already occurs a bit. The proof of this pudding is whether you would be willing to force mobility out of the `homelands’.
    4. (job mobility II) See 3. There are plenty of people on welfare rolls in the boom states of UWA and Queensland, so dont realistically expect anything from job mobility.
    5. (cross-subsidy). Strange idea: why force mortgage providers to cross-subsidise unemployment training? A clear no from me.
    6. (R&D tax deduction). Such schemes have a long history of being gamed. A no from me.
    7. (subsidise venture capital). Not that much evidence internationally that this has any positive effects.
    8. (reduce worker rights). I dont expect much effect from this: it is already possible via time-dependent contracts to circumvent job protection, so I think the main effect from abolishing job security is that a few groups of workers will get shafted by their long-tine employers and will then have to be taken care off by the community in terms of Disability Support.
    9. (shifts and hourly rates). No idea what is meant here so no comment.
    10. (more vocational training and uni). Always a vexed issue. Vocational training makes people employable in the short-run but usually means they wont work much after 50. More uni depends very much on the quality of uni. Increasing subsidies for uni is essentially a reverse Robin Hood scheme given that students disproportionately come from richer families.
    11. (tax deductions of apprenticeships). Will be abused and basically interferes with the market mechanism: wages respond to shortages already so why add ministerial winner-picking?
    12. (national curriculum). Agreed. Though I would expect the national curriculum to be bad in the short run.
    13. (reduce NBN). Agreed. The NBN needs to be properly assessed before it is adopted, and at the least initially minimised to those areas with greater payoff.
    14. (adopt Dutch model of project accountability). Agreed, but dont expect this to really make much difference: it will still be politics that drives the list of projects looked at.
    15. (independent Infrastructure Australia). Sounds like centralisation in infrastructure to me which is probably a good thing though I am hesitant about having serious budgetary power outside of the democratic process.

  30. KB Keynes says:

    I find it interesting that when someone wishes to talk about productivity it is almost always labour productivity never total factor productivity which is the most important.

    I think it was Robert Gordon in the USA who said we really do not know much about productivity and how it occurs. After all it is only a residual in the national accounts.

    On labour productivity I remember when at business school surveys showing most businesses either could not measure productivity or did not wish to.
    Imagine to my surprise a survey early in the year showing things haven’t changed.

    I also remember management journals harping on about the productivity paradox in the US in the early 80s where a lot of energy went into attempting to boost productivity but nothing eventuated.

    does in fact the macro lead the micro in this area!!

    In the end technology swamps anything to do with labour productivity.

  31. observa says:

    Here’s my kind of carbon (CO2E) tax that could well garner bipartisan support if not tripartisan-
    http://www.economist.com/node/18989175
    Be awre though that BC produces around 92% of its power from hydro and currently only pays around $1 AUD/L for petrol and I’m no fan of the Abbott Gillard stance on picking winners here with-
    “Both leaders want future carbon revenues to be used for energy-efficient infrastructure projects rather than more tax cuts.”
    Whatever, this sort of level playing field taxing beats the hell out of thin air credit trading and the evil empire of carbon cops and green inspectors that we’re being fed now.

    Add in Labor’s move to MRRTaxing and there’s plenty more scope for cutting income and company tax as well as ditching frictional drag taxes like payroll and stamp duties. There’s no valid reason why we can’t go the whole hog and rely almost completely on CO2E/resource taxing more generally. Then all we need to add is to listen to Warren Buffett-
    http://www.news.com.au/business/business-leader/buffett-calls-for-more-taxes-on-mega-rich/story-fn88b9gp-1226115762186
    and work out just how that would be implemented. An annual net wealth tax with a deeming rate and environmental kicker, because that’s where the largest resource is available to give the natural environment true countervailing market power. Anything else is trying to soak the battlers and working families or loading them up with burdensome admin.

  32. murph the surf. says:

    Is increasing taxes on the mega rich the rational thing to do?

  33. KB Keynes says:

    If one is to talk about Productivity then Saul Eslake’s paper is eesential reading rather than one latter day Bob Ansett.

  34. Nicholas Gruen says:

    Ken, I think improving information flows is a key front of micro-economic reform, and not one we’ve done much about. There are lots of areas – building regulation so that in addition to the probity issues that it addresses, it assists in the formation of reputation. One could do this with various professions. One could at the very least improve the flows of information about workplace safety – by for instance publishing experience rated workers comp premiums.

    And in that vein I’d like to add my “Windows on Workforces” to the mix. I think it would improve productivity – both because workforce satisfaction is a kind of invisible production – giving people what they want even if they don’t pay for it, and also because more satisfied workplaces tend to be more productive.

    What do you think?

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