"A NEW PRODUCTIVITY PUSH"
SPEECH TO THE AUSTRALIAN ECONOMIC FORUM
28 JANUARY 2016
Princeton economist Paul Krugman once put it neatly: ‘Productivity isn’t everything, but in the long run it is almost everything.’
As an economist, I love hearing real-world examples of how firms are raising productivity. A couple of years ago, I visited a manufacturing firm that makes mining machines. So baroque had the production line become that when they revamped the layout, the firm found that it was able to get the same work done on a line just one-thirteenth the length. The result was a one-third improvement in productivity for the company.
Visiting Fortescue’s operation in the Pilbara, I heard about its company-wide competition called ‘Have a Crack’, with the prize being $50,000 for the best productivity-boosting suggestion. The winning idea increased the efficiency of the machines that load iron ore onto bulk carriers, saving the company tens of millions of dollars each year. Not a bad return on investment.
This kind of innovation is what companies like the ones represented here today do so well. Coming up with the creative improvements which let workers do more with fewer resources. Honing in on the little productivity gains which make a big difference to profits and growth. As you well know, this is work that never ends. Companies like yours are always looking for fresh ways to stay ahead of the curve as technology and the global economy evolves.
Smart governments need to do the same.Read more
SPEECH TO THE JUSTICE CONNECTIONS CONFERENCE 2015
PRISONS DILEMMA: AN ECONOMIST’S PERSPECTIVE ON INCARCERATION
Rosie Anne Fulton is an Indigenous woman from Alice Springs who suffers Foetal Alcohol Spectrum Disorder. She has endured a lifetime of abuse and disadvantage. Far from attracting help and support from government agencies, her problems landed her in a Kalgoorlie prison.
After being caught driving without a licence and whilst intoxicated in Western Australia, Rosie Anne was incarcerated under that state’s mental impairment laws. She was detained indefinitely without any conviction and ended up serving 22 months in custody before being released thanks to the advocacy of the Aboriginal Disability Justice Campaign.
Marlon Noble’s situation is no less shocking. Charged with sexual assault when he was 19, the court quickly found him to be mentally impaired. Like Rosie Anne, it was decided Marlon was unfit to stand trial and he was instead held in custody. The Department of Public Prosecutions eventually withdrew Marlon’s charges after finding that there was little evidence to support the original allegations that had landed him behind bars. Marlon was released, but not before languishing in prison for a decade without a conviction. Marlon said of his experience: “I don’t like it in jail. Scary place. You got no families in there, no brothers or sisters to talk to. You’re on your own.”
How did Australia become a place where locking people up for long stretches is the default setting in our justice system? And how can we, in good conscience, allow this to continue as the incarceration rate skyrockets?
Economists would be familiar with the famous thought experiment in game theory known as the ‘prisoners’ dilemma’. The nub of it is that two people, by virtue of being unable to communicate, end up making a decision that is bad for both of them.
I want to argue today that Australia’s justice policies suffer from what we might call a ‘prisons dilemma’. For want of a serious conversation about what works and what doesn’t, we’ve become stuck in a situation where we spend huge amounts on jails yet end up perpetuating cycles of disadvantage, poverty and crime. As a result, our community suffers, and so do the individuals who are incarcerated.
To turn that situation around, we need to lower Australia’s incarceration rates. Achieving that will demand a recipe of responses rather than any single solution – in my time with you today I’ll talk a bit about what I believe our priority responses should be. But to get Australia’s imprisonment rates down, and keep them down, we also need to adopt a rigorous, evidence-based mindset which evaluates all current and future policies against this objective. We already know that a lot of what we do in the justice system doesn’t ‘work’ if this is our goal, yet we continue with existing policies anyway. Putting the question: what works? at the centre of justice policymaking would be a big step forward for Australia.
Before I go about prescribing policy, let’s take a step back. I first want to paint a picture of the trends in our incarceration rates, and then look at what is behind those trends. This will help us better understand the ‘prisons dilemma’ that we face in Australia today.
The future of Australia's tax system: opportunity, growth and integrity
Speech to the Corporate Tax and Transfer Pricing Summit
It is always very gratifying, when I come to events like this, to see so many smart people coming together to work through the hard questions about what our tax system should look like for the future.
We’ve come together at a time when these questions could not be more topical, or their answers more contested. For those of us who’ve been toiling away in the tax space for some time, it has been both surprising and exciting to see usually-esoteric issues of tax system design move to the front and centre of the political debate in recent months. People care about tax at the moment; people are interested in tax at the moment, and that means there has rarely been a better time for your ideas to have an impact in the wider community. To be a tax expert today is like releasing a breakthrough pop hit after years of playing in grungy pubs – one morning you wake up, and lo and behold, the world wants to listen to you.
We’ve been hearing a lot recently about how important Australia’s tax system is – how it can support or obstruct growth; how it can encourage investment or scare it away; how it can make us an international magnet for business or see us lag behind in international competitiveness.
As the member of Labor’s shadow ministry whose primary responsibility is tax, I wholeheartedly agree that our tax settings matter. But just as the federal budget is not the entire economy, we shouldn’t confuse building an efficient and equitable tax system with the much bigger task of setting Australia up to grow and flourish.
In my time with you today I want to look at how the tax system intersects with a range of other policy settings and choices which have as much – if not more – influence over whether we can continue as a country of fair opportunity and strong growth. In looking to the global picture and questions about multinational tax policy, I’ll also argue that we should be thinking about Australia’s international competitiveness in far broader terms than how big a tax break companies can get if they do business here.
Robots, remuneration and restructuring: how do technology and inequality shape one another, and what should we do about it? - Speech
ROBOTS, REMUNERATION AND RESTRUCTURING: HOW DO TECHNOLOGY AND INEQUALITY SHAPE ONE ANOTHER, AND WHAT SHOULD WE DO ABOUT IT?*
Annual Sir Leslie Melville Lecture
Australian National University
Sir Leslie Galfreid Melville was a remarkable Australian. Born the year after federation. Trained in engineering and science before wisely settling on economics. Inaugural professor of economics at Adelaide University at age 27. Founder of what would become the Reserve Bank’s research department. Leader of Australia’s delegation to Bretton Woods. ANU Vice-Chancellor for most of the 1950s. Appointed to chair the Tariff Board by McEwen, it is to Melville’s enduring credit that he quit the post rather than succumb to McEwenism.
Having been born at the dawn of the twentieth century, Leslie Melville lived to see the start of the twenty-first. As one obituary noted, ‘there has not been another Australian economist to hold the range of jobs that Melville did’.
It is virtually impossible to think about Melville’s life without being conscious of the technological changes that took place during it. The twentieth century – or the ‘Melville Era’, as Australian economists might call it – saw an explosion in technologies. In transport: planes, helicopters, mass-market cars and space shuttles. In communications, radio, television and the Internet. In health, antibiotics, sewered cities, the pill, and genetic engineering. Not to mention atomic bombs, vacuum cleaners, smartphones, radar, the bra, and plastic. And yet for most of the twentieth century, we not only saw rising living standards, but falling inequality. Melville’s working years – the 1920s to the 1970s – saw the largest reduction in inequality in Australian history.
My focus today is on two challenges: how do we continue the pace of innovation in the twenty-first century that we saw in the twentieth? And how do we ensure that prosperity is broadly shared? By acknowledging the tendency of technological change to increase inequality, we can harness the gifts of Prometheus without suffering their destructive tendencies. As it happens, I will argue that a single policy recommendation offers the greatest promise to make us more entrepreneurial and more equal.
CLOSING THE INCOME GAP
2015 Economic and Social Outlook Conference
University of Melbourne
If you returned from work one day and found your home flooded by a gushing faucet, the first thing you’d do is turn off the tap. But once you’d stopped the water rising, could you then go about your evening as though nothing else was amiss? Only if you’re willing to overlook the rather pressing problem of everything you own being underwater.
That’s the approach some would have us take in response to the news that there has been a pause in the growing gap between the rich and the rest in Australia over the past few years. When the OECD released a report earlier this year showing that some measures of inequality had been stable in Australia between 2006 and 2012 – some newspaper columnists and political commentators welcomed this as a sign people like you and me should stop worrying about how much better Australia’s billionaires are doing than our battlers.
But to extend the analogy a little further: turning off the tap is not the same as draining out water. The fact that inequality has stopped rising for the moment does not mean that we’ve suddenly achieved an egalitarian idyll. Across the advanced world, Australia sits in the top third for our level of inequality.
Fall 2015 Distinguished Public Policy Lecture
Institute for Policy Research
In 2006, chess world champion Vladimir Kramnik was beaten by chess computer program Deep Fritz. In 2011, quiz show champions Brad Rutter and Ken Jennings were beaten on Jeopardy! by IBM’s Watson computer. Modernist composers are experimenting with singing software that can mimic a human voice box, but without its physical limitations. Earlier this year, Google announced that their driverless cars had completed over 1 million road miles in Nevada, Florida, California and Michigan. Among the newlyweds who stand at the altar this year, more than one in three couples were brought together by a computer algorithm.
Breakthroughs in processing power, data availability and machine learning have affected all our lives. Within the past decade, fields such as image search, voice recognition, language translation and robotics have seen huge breakthroughs. While a digital assistant might have seemed fanciful a decade ago, the advances in Apple’s Siri technology suggest that it may not be far off. Surgeons who now use computer-guidance to tell them where to cut may soon be stepping back so that a robot can do the job. Within a decade or two, Douglas Adams fans who admired the Babel Fish may be able to pop a simultaneous translation device in their ear.
For well-educated professionals earning six-figure salaries, the world of artificial intelligence seems exciting, optimistic and – well – cool. And yet I want to argue today that no serious economist should be thinking about the aggregate benefits of technology without considering its distributional implications. Since the path breaking work of Wolfgang Stolper and Paul Samuelson in 1941, trade theorists have known that cutting tariffs raises aggregate living standards, but can make some workers worse off. So too we need to intertwine our understanding of technology with recognising its impact on inequality.
But putting yourself in the shoes of others isn’t easy. So I want to scare you a little, by drawing on an idea that’s increasingly coming out of science fiction and into the newspapers. Perhaps then, when you realise that the monster might in fact be living under your bed, we can talk about what to do about it.
INVISIBLE AUSTRALIANS: PUTTING A SPOTLIGHT ON POVERTY
Address to the Anglicare National Congress
Every Thursday and Friday morning, Reverend Doug Newman and his team of volunteers at St Paul’s Church in Spence run the Helping Hand Food Pantry. Since 2007, the pantry has helped people in need access staple foods as well as fresh fruit and vegetables at low cost. Anyone who is struggling to afford their weekly grocery bill can stop by and stock up on food donated by local businesses and community groups. If you stop by one morning, you’ll see all sorts of people using the service. Single men in need of a shave, with their socks showing through the holes in their shoes. Neatly dressed mums with three kids in tow, carefully counting out their grocery budget. Seniors who’ve travelled an hour on the bus to get there and so make their pension stretch a bit further.
What’s striking about the Helping Hand Food Pantry is not that Reverend Newman and his team turn up rain, hail or shine to run it, or that Canberrans give so generously to support it – although both of these things are very laudable.
What’s really striking about this service is that it operates in a middle class suburb in one of the wealthiest cities in Australia. Even in a prosperous, white-collar place such as Canberra there are people who find it so hard to make ends meet that they rely on the Helping Hand Food Pantry to stretch their finances through the week.
These people have become almost invisible in our public debates. So today, I want to talk about the ‘invisible people’ in Australian public life – those living in poverty.
After a quarter of a century of economic growth in this country, there’s a sense that poverty isn’t a problem anymore in Australia. Or at least, we have come to believe that being poor is something that happens through catastrophe – like a debilitating accident or an all-encompassing addiction. We’re loath to admit that there are still structural inequalities in our society – inequalities which see some people struggle from their first day to their last simply because of the family they were born into.
Our complacency about this problem is partly explained by the fact that for many of us, poverty exists in our blind spots. Unlike in North American cities such as Chicago and Los Angeles, our poorest communities ring the edges of our major cities instead of living in the centre. So you and I don’t have to drive through Struggle Street to get to the GPO. The poorest Australians can also be found in regional and remote Australia, in run-down places where industry long ago left town and tourism rarely reaches.
There’s also the fact that Australia has an extensive and well-targeted social safety net. With pensions, NewStart, family tax benefits and the other forms of support available through our welfare system, some people can’t quite understand how poverty can still be a problem.
But those of you here today know that poverty is still with us. People who struggle to keep themselves and their families fed, housed and clothed can be found across our cities, in big and small towns, and especially out bush. You work with them, you support them, you minister to them in hard times.
The theme of this conference is leaving no-one behind. If we are committed to that goal; if we believe all Australians can and should share in this nation’s prosperity, our good work must be backed up by policies and programs which aim to lift Australians out of poverty in a systematic way.
Later on in this speech I’ll have more to say about what some of those interventions might look like. But first I want to spend a few moments bringing the experiences of those living in poverty from our blind spot out into the spotlight.
PARTNERING WITH PHILANTHROPY AND CIVIL SOCIETY – A LABOR VIEW
SPEECH TO THE INAUGURAL PHILANTHROPY MEETS PARLIAMENT SUMMIT
PARLIAMENT HOUSE, CANBERRA
Thank you to Alan Schwartz for that kind introduction, and to Philanthropy Australia for bringing you all into the nation’s Parliament. I would also like to congratulate Tony Stuart on his appointment as the newest member of the government’s Community Business Partnership.
I come bearing apologies from the Leader of the Opposition, Bill Shorten, who would very much like to have been with you today. As many of you would know, it was Bill who developed and delivered the Australian Charities and Not-for-profits Commission when he was Minister for Financial Services back in 2012. He has an abiding interest in the community sector.
For centuries, people have given to help others. Many people give from a sense of religious duty. Whether it’s the Jewish tradition of tzedakah, the Muslim notion of zakat or the Christian tradition of tithing, the faithful have always seen an obligation to give.
Philanthropy is an important form of social capital in Australia. Five years ago, I wrote Disconnected, a book that tracked various metrics of community spirit over the decades. Based on charitable deductions data from the Australian Taxation Office, I estimated that the share of Australians who donate to charity had not risen much since the late-1970s. Other donations data showed the same pattern – the share of people who give blood slipped slightly over the period from 1980 to 2010.
Connected communities: how Australia’s social capital declined, and what we can do to rebuild it - Speech
Connected communities: how Australia’s social capital declined, and what we can do to rebuild it
Address delivered to the Municipal Association of Victoria’s ‘Future of Communities: Power to the People’ National Conference
Manal Kassem had chosen the inner city of Sydney for her wedding photoshoot, but she was a little hesitant. It was Saturday 20 December 2014, and during the week a lonely gunman, brandishing an Islamic flag, had taken eighteen people hostage in a nearby café. After a lengthy standoff and a final gunfight, two were left dead.
In the wake of the Martin Place siege, Manal Kassem feared she would be judged. A Muslim bride from Punchbowl in Sydney’s West, she would be wearing a white hijab at her wedding and inner city photoshoot.
Rather than cancelling or relocating the big day, she chose to offer a gesture of respect to the country in which she hoped to raise her children.
As soon as the wedding ceremony finished, she and her groom ventured to the Martin Place memorial, where she laid her wedding bouquet alongside the other floral tributes.
As the onlooking crowd applauded, Martin Place – not long earlier the site of one of Sydney’s greatest tragedies – seemed to transform into a symbol of our connectedness. A multicultural Australia was united to collectively mourn the loss of lives in Martin Place.
But was this scene unusual? Are we always this connected? Our sense of community spirit is strengthened in moments of tragedy or triumph, but does it also exist in the trivial?
MATTER OF PUBLIC IMPORTANCE
HOUSE OF REPRESENTATIVES,CANBERRA
THURSDAY, 20 AUGUST 2015
Recently scientists have been exploring a creature known as the sea squirt. It is a fascinating creature. It is a simple creature whose job in life is to try and locate a place on the sea floor, where it will sit and feed for the remainder of its life. It takes a little while to discover that place, but once it does, it begins absorbing parts of its body. It absorbs its tail, its eye, its spine and, finally, it eats its brain. That’s right, the sea squirt gets to where it wants to be and then eats its own brain.
I am sure I not the only one in this House who, when I hear about the sea squirt, starts to think about the history of the Abbott government. They had a brain that was devoted to getting where they needed to be and, once they gained power, they just ate their own brain.