The sensible centre: building bi-partisan support for a new reform agenda for Australia

John Somerville, National Managing Partner, Advisory
John Somerville, National Managing Partner, Advisory
A wide and diverse Senate crossbench, a razor-thin majority in the House of Representatives, the odd rogue MP — it’s a daunting task getting anything through today’s parliament, let alone major economic reform.

Yet with unexpectedly strong winds of populism howling, responsibility now weighs heavily upon what the Prime Minister describes as “the sensible centre” of Australia’s polity.

There is some cause for cautious optimism. The National Reform Summit last year, held by KPMG, The Australian and The Australian Financial Review, demonstrated a surprising amount of centrist agreement is possible.

Yet the situation is now urgent. Australia’s transition from the mining boom has been slow, and the economy is vulnerable to global shocks or stagnation.

If we want rational economic reform in the great Australian tradition to triumph over regressive emotion-based policy we cannot wait for a more placid parliament. This may be the new normal.

KPMG has therefore looked to identify eight key areas where the sensible centre could — with political will — navigate the choppy waters of our 45th parliament.

  1. Budget repair

The Government and the Opposition have already agreed to $6.3 billion worth of savings, and KPMG has identified 30 other measures that could improve the budget position by $10 billion per annum.

But real consensus will not be reached through simple slashing of existing spending. Where it may be possible is in the redesign and modernising of major programs, like health, where there is significant potential to improve effectiveness and efficiency.

  1. Mending the social safety net

At just $38.20 per day, the Business Council of Australia characterises Newstart as “a barrier to employment” which “risks entrenching poverty.” The OECD has expressed concern about its effectiveness in “enabling someone to look for a suitable job.”

Improving Newstart to mitigate health and wellbeing issues, and improve the chances of employment, makes long term economic sense. Consensus could be possible if the changes were considered at the same time as measures to repair the budget.

  1. Infrastructure investment

It is widely acknowledged Australia would benefit from new infrastructure, but both governing parties have poor records in allocating spends efficiently.

To depoliticise the issue, parliament could endorse Infrastructure Australia’s priority list, and agree that future governments could not substitute these projects for more politically appealing builds.

Deploying new technology to squeeze extra utility out of existing infrastructure might not generate the sexiest announcement, but it may well be most efficient, and Infrastructure Australia is best placed to make the call.

  1. Reforming the education system

Technology will soon replace most low-skill jobs, leaving only non-routine jobs at the high end. Business has been arguing vigorously that educational outcomes need to improve to meet this challenge.

The Turnbull Government and the Shorten Opposition are agreed on the principle of needs-based school funding, and quarrels exist only over detail. Parliament could therefore form a long-term commitment in 2017 on that locks a needs-based funding model in for the long term.

  1. Modernising the industrial relations system

The World Economic Forum ranks Australia 103rd in the world for cooperation in industrial relations, which is irrational and incompatible with future prosperity. A Grand Compact, as originally proposed by KPMG Partner Paul Howes, “in which business, unions and government all work out a deal that we all agree to live with for the long haul” may seem utopian in our current climate. Yet other OECD nations have shown such broad agreement to be eminently achievable.

  1. Making a start on tax reform

The Opposition and key crossbenchers have indicated they will not support a tax cut to 25 per cent for larger companies. Rather than fight an intractable battle, parliament could given consideration to a reform that would have a similar effect on the economy: allowing investors to claim an up-front deduction on new capital expenditure. Parliament might also consider accelerating existing depreciation allowances.

  1. More effective action on climate change

The Paris Agreement will require Australia to do better than its current projections. Climate change has become a political football, but not so long ago there was bipartisan consensus. It can still be reached.

Direct Action is a government subsidy scheme, but its architecture would permit adding the domestic trading of permits. This would effectively evolve it into a stable emissions trading scheme as favoured by most business peak bodies.

  1. Indigenous economic empowerment

A generation of Indigenous leaders has argued passive welfare is destructive
to dignity, and that long-term economic empowerment must be built through employment and entrepreneurial activity.

Mainstream political consensus could potentially be reached on a range of initiatives aimed at igniting the Indigenous economy, like the creation of an Indigenous Community Development Corporation, so communities could more effectively hold assets, make investments, and receive income from royalties.

None of these potential consensus points would be easy to achieve, but nor should they be considered inconceivable. KPMG proposes that the National Reform Summit of 2015 be reconvened in 2017 to identify more common ground.

Read the full paper. 

John Somerville is the co-author of ‘A new reform agenda for Australia,’ published this week by KPMG.

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