Students Vital to Growth, Australian Financial Review, 28 September 2010
The noughties may well be remembered by historians as a terrific decade for gadgets. But when it comes to productivity, Australia has had a disappointing decade. Although we don’t yet have all the data, the noughties looks set to record a rate of productivity growth about half as fast as we enjoyed in the nineties.
Since productivity is the key to raising living standards, the challenge for the future is to crack the nut of higher productivity. During the 1980s and 1990s, tariff cuts, competition policy and enterprise bargaining were among the underpinnings of productivity growth.
Today, one of the policies most likely to raise the rate of productivity growth is education reform. Raising the human capital of the workforce is essential if we are to adapt to changes in the labour market. This agenda involves raising the quantity of education – boosting the average number of years of schooling that each person receives.
A higher school leaving age recognises the simple fact that today’s school leavers will be in the labour market until the 2060s. Over the next half-century, students who drop out in year 9 are likely to struggle with the advance of technology and the need to keep updating their skills.
As the OECD’s Andreas Schleicher puts it: ‘In 1930, all the coded information for a GM car could be captured in 230 pages. Now a single car involves some 15,000 pages of coded knowledge which workers will need to be able to access, manage, integrate and to evaluate.’ As electric cars replace petrol vehicles, the job of a mechanic will change substantially.
By 2015 the Government hopes to have 90 per cent of students completing year 12 or an equivalent level of study. Recognising that costs of raising a teenager increases as they get older the Government has committed to increasing the Family Tax Benefit A by up to $4,000 from 1 January 2012 per year for teenagers aged 16 to 18. Supporting students is an investment in our future productivity.
Another part of the quantity agenda is boosting the number of university places. The Government is delivering a critical reform to ensure places in Australian universities will be set based upon student demand from 2012, ensuring every student who has the marks to get into university will have a government funded place.
The other way of boosting human capital is through raising the quality of Australian education. Work by Eric Hanushek (Stanford University) and Ludger Woessmann (University of Munich) demonstrates that countries with higher mathematics and science scores on international tests such as the OECD’s PISA exam tend to experience faster rates of economic growth. This implies that if Australia were to increase our scores to the level of Finland, our economy would grow 0.5 percentage points faster in the long-run.
Reforming schools is contentious, but the evidence points clearly towards the benefits of school accountability. As the MySchool website is updated with value-added data and school financial information, it will play a significant role in driving change.
Another reform that will enhance educational outcomes and contribute to the Government’s productivity agenda is improving the salary structure of teachers, in order to encourage the most talented young people to become teachers, and create incentives for high-performing teachers to be recognised for their achievements. During the election, Federal Labor promised to implement a performance pay system that will see the top 10 percent of teachers paid rewards worth around $8000 per teacher. Under the proposal, performance will be based on criteria set out by the Australian Institute of Teaching and School Leadership, including raising student achievement and assisting other teachers.
By boosting the quality of the education system, Labor will increase the level of innovation in the Australian economy, and allow for more rapid diffusion of new technological changes. Creating the incentives for students, teachers and principals to perform at their best would rival the great economic reforms of past decades.
By focusing our reforms agenda on the neediest students, there is another payoff too. Education is a social policy as good as any we’ve yet developed. Because unemployment is the best predictor of disadvantage, having the skills to do the jobs of the future is essential to staying out of poverty. By raising the performance of schools in low-income neighbourhoods, as well as raising the overall growth rate, education reform will narrow the gap between the rich and the poor.
Andrew Leigh is the Federal Member for Fraser.
JOINT MEDIA RELEASE
ACT Chief Minister
Senator for the ACT
Member for Fraser
NBN public consultation for Gungahlin announced
ACT Chief Minister Jon Stanhope, Senator for the ACT Kate Lundy and Member for Fraser Andrew Leigh have today welcomed the announcement that there will be an open public consultation on the early NBN deployment to approximately 3000 premises in the Gungahlin region, which is planned in the second quarter of 2011.
The consultation will be held by the Gungahlin Community Council at their October 13th meeting at the Palmerston Community Centre on Tiptree Crescent at 7.30pm.
Glenn Holdstock, the NBN Co Community and Stakeholder Relations Manager will speak about the early NBN deployment to Gungahlin, and then will open the floor for community discussion and questions.
“I welcome this opportunity in Gungahlin to see what is possible in terms of the benefits for economic productivity, local businesses, e-health and digital education,” ACT Chief Minister, Jon Stanhope said.
“NBN Co really want to hear from the community about their needs, and how they want to utilise a high speed network in their communities, whether it be for families, schools, businesses or health and community services, just to name a few examples,” said Senator Lundy.
NBN Co will also be meeting with territory and federal representatives, local businesses, domain experts and community groups for consultation.
“This an opportunity for the Gungahlin community to drive the roll out of high-speed broadband, ensuring NBN delivers in service areas important to Gungahlin residents,” Member for Fraser Andrew Leigh said.
More information about the meeting is on the GCC website at http://gcc.asn.au/
Please find more information and related links about the early NBN deployment to Gungahlin at http://www.katelundy.com.au/2010/07/14/fact-sheet-about-the-early-nbn-rollout-to-gungahlin/
Jess Wurf (Stanhope) 0411 772 700
Annika Hutchins (Lundy) 0418 488 295
Shobaz Kandola (Leigh) 0421 838 038
The Outlook for Australian Trade in the 21st Century
Member for Fraser
Global Access Partners’ National Economic Review 2010
Sydney, 17 September 2010
I would like to begin by acknowledging the traditional owners of the land on whom we are meeting today. I would also like to thank Peter Fritz, Catherine Fritz-Kalish, and Lisa Middlebrook for involving me in this really stimulating discussion.
As I understand my role, it is to provide a relatively high-level overview on trade to kick-start discussion with the other speakers, who will focus on more direct policy-relevant topics.
My interest in trade comes about partly as an economist - it's almost a stamp of entry into the profession that one must be a free trader. But also then having a policy interest through having worked for 18 months for the later Senator Peter Cook.
Peter Cook was at that stage the Labor spokesperson on Trade and somebody who believed passionately that if you were committed to globalisation you must be a social democrat. And if you were a social democrat then you had to be committed to globalisation. Peter Cook was a man who very much took the argument on free trade to his Labor colleagues. He taught me a lot about how a great politician ought to behave.
The underlying approach I have to trade is to think of it as an official case of the principle of comparative advantage. Most things I attempt in life have been better done by other people. If I were to appear before you today having cut my own hair and my own clothes, I would be a rather more dishevelled person than that stands before you today. If I had fixed my own car I probably would not have even got here.
The notion of comparative advantage was described by Paul Samuelson as the best example in the social sciences of a principle which is true and non-trivial. That is that many educated people still do not understand the subtleties of comparative advantage. And, of course, in the world of free trade what comparative advantage means is that the person who can perform the service or supply the good better than you, is sometimes a foreigner. That means that when countries trade with another then they both benefit from that.
It is a simple proposition, but one which policy makers been extraordinarily unsuccessful at persuading the general public of. I have not been able to find a recent public opinion survey looking at free trade versus protectionism. However, the last one I could find, about a decade old, suggests that when you ask Australians whether they prefer free trade or protectionism, the protectionists outnumber the free traders two to one. This is despite the fact that Australia has seen a substantial reduction in tariffs over recent decades.
There has been a strong bipartisan consensus in the Australian parliament that trade liberalisation is good for Australia. But we failed to convince Australians that as a nation we benefit from being free traders.
This is despite the historical record, which shows large social welfare large gains from freer trade. For example, Federation can be thought of as a battle between the Free Traders and the Protectionists within the national parliament. But Federation itself is a huge free trade movement, because the Constitution required that the former colonies not impose trade barriers on interstate commerce. There were huge economic gains in Federation delivered by getting rid of those different colonial borders.
In more recent years, we have seen large social welfare gains from removing barriers to trade across national borders. For example, the Department of Foreign Affairs and Trade estimates that the tariff reduction that have taken place in the last two decades have delivered somewhere between three and four thousand dollars back into the pockets of the typical Australian household. That is a substantial boost in anyone's language.
I think back to when I was a kid, and buying a new pair of school shoes was a really big deal. Those school shoes were an expensive item my parents had to shell out for each year. And the largest proportion of that cost came from footwear being subject to very large tariffs, sometimes over 100 percent. The removal of the tariffs on kids' school shoes has made many households better off and meant that the typical working household in Australia today does not have to worry about scrimping and saving for a new pair of school shoes at the beginning of the school year.
Thinking also about the impact that trade liberalisation has on social welfare, it is important to recall the great backsliding that occurred in the 1930s, when the US raised tariffs and Australia followed suit. That huge increase in tariff barriers made Australian consumers dramatically worse off, but it also hurt Australian businesses. It means that Australian businesses were much less exposed to the new ideas, less exposed to the new innovation that that occurs when competing with the best countries and firms in the world. In more recent times, those competitive benefits that Australia has enjoyed over the last couple decades have been to a large extent due to more recent tariff reductions.
There is also other sort of other, less tangible benefits from free trade. Tim Harcourt just joined us now and his terrific book The Airport Economist has a lot of wonderful little anecdotes talking about trade building those little interpersonal ties. Business people travelling across borders meet friends who speak other languages, have other customs. School children are encouraged to learn a language not their own, and in that sense Australia becomes more deeply enmeshed in the region in which we live. So trade has definite interpersonal benefits.
Recent work by Daron Acemoglu and Pierre Yared has also shown that countries that do more trade spend less on their military. So far from thinking that we ought to bunker down and produce everything ourselves in case war comes, we are actually better to trade with the rest of the world because by that action we make one another safer. Countries that trade are less likely to go to war. You can name exceptions for this, but a general rule is that as trade expands militarisation declines and military spending goes down.
Trade liberalisation has brought enormous simplifications to business as well. The 1987 tariff schedule, which ran to five hundred pages because it had different tariff rates for everything from bicycle inner tubes to umbrellas. Stripping that away means one less thing that business needs to spend time worrying about. Another simplification which would allow businesses to focus on what they do best.
Trade of course is not universally good. We can easily point to products like AK-47s and heroin that flows freely across borders, but on balance the world is far better off on balance for having greater flows of trade.
What that means in a policy sense is that - as the great Cambridge economist Joan Robinson used to say - we benefit from taking the rocks out of our harbours regardless of whether other countries do the same. The main beneficiaries of trade liberalisation and tariff cuts are Australians. In a secondary sense, overseas countries keen to export to Australia benefit as well, but we are the first to benefit from removing those rocks in our harbours.
In terms of reducing global trade barriers, successive World Trade Organisation deals have substantially boosted world GDP, with the impact of each successful round begin equivalent to a large injection of foreign aid across the world. However, we have not had a WTO round concluded since 1993, a trade deal which was then negotiated by Senator Peter Cook, for whom I worked, and signed off on by Bob McMullan, my predecessor as the member for Fraser.
One reason that a new WTO round has been a long time coming is that there are more countries to deal with now than in the past. At the end of World War II, there were 74 countries in the world. Today, there are nearly two hundred. That means when you get everyone in the room and you try to ask them to strike a consensus trade deal, it is harder than it ever for countries to agree.
Ironically, one of the reasons that countries are proliferating is because of free trade -- as tariff barriers have fallen, splitting up is easier to do. I think there is a little window for another hard push on WTO rounds after the US mid-term elections. It is going to be a tough push in any case, but I think that's the moment at which we can try and get the next WTO round over the line. It will be hard to achieve, but if successful would greatly raise world living standards.
Senator for the ACT Kate Lundy, Member for Canberra Gai Brodtmann, and Member for Fraser Dr Andrew Leigh reaffirm their strong commitment to the political rights of Territorians.
Senator Bob Brown’s proposal regarding the 1997 Euthanasia Laws Act is an issue where there will obviously be strongly held views on all sides of the debate.
The Labor Party has previously allowed Members of Parliament to express their views on this issue with a conscience vote and if, as a result of these discussions, a conscience vote is called for, there is no reason why Members of Parliament would not be afforded this opportunity again.
As members of the Federal Parliamentary Labor Party Senator Kate Lundy, Ms Brodtmann, and Dr Leigh will be urging their federal colleagues not to override the rights of the ACT Legislative Assembly.
Canberrans should enjoy the same political rights as all other Australians.
Senator Lundy, Ms Brodtmann and Dr Leigh will continue to strongly advocate on behalf of Canberrans.
Pensions to increase on 20 September
Senator for the ACT Kate Lundy, Member for Canberra Gai Brodtmann and Member for Fraser Andrew Leigh today reminded Canberrans that due to indexation, around 29,029 people will receive an increase in their pensions from 20 September 2010.
Pension payments will increase by $15.00 per fortnight for singles on the maximum rate, and $22.60 per fortnight for couples combined on the maximum rate.
Following these increases, total pension payments for those on the maximum rate, including the base rate and pension supplement, will be:
- $716.10 per fortnight for singles; and
- $1079.60 per fortnight for couples combined.
“Pensioners in the ACT have received increases of around $115 per fortnight for singles and $97 per fortnight for couples combined in pension payments, as a result of Federal Labor’s major pension reforms delivered in September last year, and higher indexation in March and September 2010,” Member for Canberra Gai Brodtmann said.
“During our first term, we overhauled the pension system to make it adequate for the more than four million Australians who depend on it.
“Local pensioners have been big winners from Federal Labor’s reforms to the pension system, and we are committed to delivering a sustainable pension system,” Member for Fraser Andrew Leigh said.
Pensions are indexed twice a year to the highest increase of three measures: the consumer price index (CPI), the pensioner and beneficiary living cost index (PBLCI), and growth in male total average weekly earnings (MTAWE).
The September 2010 pension rise was driven by movement in the pensioner and beneficiary living cost index in the six months to June 2010.
People eligible for the Age Pension, Disability Support Pension (adult rate), Carer Payment, veteran income support payments, Wife Pension, Widow B Pension and Bereavement Allowance will all benefit from the increases.
For more information visit www.fahcsia.gov.au
Rick Youssef, who worked for Annette Ellis for several years, will be my office manager. My other staff are Lyndell Tutty, Shobaz Kandola, Alex Cubis and Ruth Stanfield.