Andrew Leigh

Before parliament rose last Thursday, I spoke in favour of a bill to provide dad and partner pay. In fact, mine was the last speech before parliament rose (with the exception of some guy who trash-talked the economy for half an hour).

Paid Parental Leave and Other Legislation Amendment (Dad and Partner Pay and Other Measures) Bill 2012
10 May 2012

The work we do in this place impacts on people's lives—often far more than we imagine at the time. This bill, the Paid Parental Leave (Dad and Partner and Other Measures) Bill 2012, is one such example. I want to start off by sharing with the House the story of a friend of mine, Damien Hickman, and how he felt about the two weeks leave that he took when his first child arrived. Liesel Grace Hickman arrived on 23 June last year. Damien said: 'I just did not want to be anywhere else. My whole world shrank to this tiny four-kilogram bundle and the three-hourly cycles.' He said: 'It was like nothing I had experienced or could have prepared for. I was placed under this spell. She was the ultimate timewaster. I would just stare at her and half an hour would go by like 30 seconds. To be there for my partner, look after the house and be there as an extra pair of hands and support was pretty special.'

Damien said: 'I wanted to be part of it all. I was Liesel's dad and I wanted to be with, and care for, my little girl. I can still remember how scared I was the first time I gave her a bath. I remember how she would fall asleep on my chest, so small her feet barely made it to my bellybutton.' Damien said that for him the joy of being a dad was being there for all of those firsts; being there with Liesel and Kate was a great privilege. Liesel probably will not remember any of this but it is a memory that Damien will take to his grave.

That is why this legislation is so important: it allows dads and partners to take time off work and be at home to support new mothers in those crucial early days. It builds bonds that will extend to a lifetime of love, encouragement and support for children. It is the kind of encouragement and support that all kids need as they venture into life and face the challenges and opportunities that it presents—opportunities that are the foundation of the ideas and innovations that will inevitably drive a nation's prosperity.

Before outlining the measures in this bill let me share with you why dads being there in the early days is so important to their newborns and partners. Research from children's experts has found that, the more dads are involved right from the start, the better it is for the dad, for the mum and, most importantly, for the baby. Hands-on dads are important in developing social skills, independence, a strong moral sense and intellectual skills. Parenting expert Pam Linke of the children's, youth and women's health service in South Australia says:

When a man holds a baby they get a sense of security that's quite different from a mother's. While Dad's role may be only a supporting one for things like breastfeeding, it's absolutely critical in a baby's development.

Dr Kyle Pruett, clinical professor of psychology at Yale University, says, 'What dads actually do with their kids matters more than how often they do it,' so it is important that every dad gets time in the lead role. Pam Linke's advice is 'let him change nappies', and I can attest to having changed plenty of nappies in my few years as a dad. In fact, studies show that sons who are nurtured by their fathers are more likely to be more hands-on with their own children. Fathers who interact with their daughters reduce the rate of emotional problems in those girls when they reach their teenage years. Dads help daughters, even when they are young, feel competent—an essential prerequisite for self-esteem.

For us politicians, bringing up young children can come with additional risks. It might be apocryphal, but the story goes that the member for North Sydney received a phone call at home from John Howard after one of the elections. The former Prime Minister said, 'What are you doing?' 'Changing nappies,' replied the member for North Sydney. Prime Minister Howard apparently then said, 'I have something similar for you—industrial relations.' As the Work Choices episode shows, the similarity is more than passing.

I have found my own role as a politician and a father to be a constant and at the same time delightful juggling act. There are many challenges and changes with a newborn baby, and it is vital that dads can be there to support the partner and the child; to share the joys of the new baby; to give some respite—some time-out—for the partner to do little things such as take a bath, have a cup of tea and relax in front of the TV; and to share the responsibility for what is, especially to first-time parents, a vulnerable and mysterious creature. Liesel's mum, Kate, told me, 'It was so good to be home together as a family—to see her and Damien just be together. To see her respond to his voice or be fast asleep on his chest was just magical.'

After the 2010 election, Labor made a commitment to give dads the chance to have two weeks off to support new mums at home. The government's historic Paid Parental Leave scheme has now benefited more than 150,000 new mums. Labor's Paid Parental Leave scheme is funded by the government and paid through employers, so employers can stay in touch with their long-term employees while they are taking time off to care for a new baby. That was the approach recommended by the Productivity Commission after their extensive inquiry. It reflects the fact that Paid Parental Leave scheme is a workplace entitlement, not a welfare payment. It is critical that we maintain that link to employment, and it is maintained in Labor's Paid Parental Leave scheme as the Productivity Commission recommended.

Under this bill, eligible fathers and partners will receive two weeks dad-and-partner pay at the same rate per week as paid parental leave is paid, which is currently $590 a week before tax. Dad-and-partner pay will begin on 1 January 2013. The eligibility criteria for dad-and-partner pay—including the income test, the work test and residency requirements—will be consistent with those for parental leave pay. Dad-and-partner pay cannot be transferred to the primary carer; it has a use-it-or-lose-it provision to encourage fathers to take more time off work. It also signals to employers that a father's role in caring for a new baby is important. The government expects that employers will retain their existing parental and paternity leave provisions and continue to set themselves apart as employers of choice for parents. We are working with employers to provide fathers the maximum opportunity to take time off work so that they can be involved in their child's care from an early age. The dad-and-partner payment gives families more options to balance work and family commitments. It is good for dads, it is good for mums and it gives newborns the best possible start in life.

For the last two years, I have held a welcoming-the-babies event, which was originated by the Treasurer in the electorate of Lilley. Welcoming the babies is a chance to recognise Canberra's new parents and for them to meet other parents, connect with community services and find out what is available. For last year's welcoming-the-babies event we had a terrific weather, and around 150 parents and children turned up. They grabbed a coffee or a sausage sandwich, enjoyed the sunshine and chatted to stallholders about playgroups, breastfeeding, maternal health, immunisation, toddler sports and other supports. First-time dad Tito Hasan told me: 'It's been great to see kids having fun. My wife and I see the range of things out there for first-time parents. I'm looking forward to coming back next year.'

This year we had horrendous rain and Commonwealth Park was closed on the weekend of welcoming the babies, so, in lieu of us having the event outside, around 30 parents and children enjoyed morning tea in my electorate office, shared stories and met with service providers. They all took home a baby pack and a formal certificate. As the saying goes, it takes a village to raise a child, and now dads can stay in the village for another two weeks and enjoy this special time without having to worry about the family finances.

I have a story to share about my own experience of being a new dad. I remember that first hour of my eldest son's life. It was an extraordinary period, because my eldest son was born by caesarean section. For those who have not seen a caesarean section performed, what is most amazing is how quick it is. From the first incision to when the baby comes out is only about seven minutes but then the remainder of the operation takes about an hour. So, as a dad, you then have an hour on your own with the newborn.

I remember being struck by how relaxed and peaceful my son was. I just talked away to Sebastian. I babbled away and started to think about the advice that a father should give a son. I had never given father-son advice before, so after about 10 minutes of babbling, I finally settled on the one thing I wanted most of all: I wanted him to be curious. Five years later the conversation sometimes floats back to me—when he asks questions like: dad, why is the sky blue?—and I wonder whether I should have encouraged him to be quite so curious when he is in his cupboard-opening mode.

Those first weeks are an extraordinarily precious time, and encouraging fathers to spend more time bonding with their sons is a critical thing to do. It is a great privilege to be a dad. It is really important that we as policymakers encourage that bonding. It is good for early childhood and it ensure that dads enjoy that precious time with newborns, because a newborn child is too important, too precious and too loved to miss out on those early weeks with their father.

I commend the bill to the House.

Debate adjourned.

(For ease of reading, I've omitted the three times that the chair had to ask the opposition to quieten down.)http://www.youtube.com/embed/hhoqOa8Lxp0

The Chronicle this week has a story about one of the first Canberrans to be connected to the National Broadband Network. You can read it here.

I'll be out and about with two mobile offices tomorrow morning, and a community forum next Tuesday. Do drop by and say g'day.

Mobile Offices - Saturday 12 May

• Charnwood Shops (outside Woolworths), 10-11am


• Kippax Fair (Hardwick Crescent), 11.15am-12.15pm

Community forum -Tuesday 15 May

• Dickson Quality Hotel (Trevor Scott Room), 6pm

Times don't suit? More events here.

This week, I met with a delegation of three Burmese members of parliament, newly elected to represent Aung San Suu Kyi's National League for Democracy Party. The photo shows me chatting with MP Phyo Zeya Thaw, who was also a hip-hop artist (in fact, that's what got him into trouble with the regime). I asked Mr Thaw whether the regime had jailed him for his activism. His reply: "Only for 3 years and 3 months." It was a humbling conversation.

Ministers from the Republic of Miramar meet the Prime Minister of Australia, the Hon Julia Gillard MP , 07 May 2012.

Ministers from the Republic of Miramar meet the Prime Minister of Australia, the Hon Julia Gillard MP , 07 May 2012.

I welcomed the announcement by the Minister for Infrastructure and Transport, the Hon Anthony Albanese MP that the Gillard Labor Government is providing $500,000 to the ACT Government as part of the Liveable Cities Program to help 'Realise the Capital' in our great city.

The media release is below.

MINISTER FOR INFRASTRUCTURE AND TRANSPORT

THE HON ANTHONY ALBANESE MP

MEMBER FOR FRASER

ANDREW LEIGH MP

JOINT MEDIA RELEASE

Gillard Government Support Plan for More Liveable Capital

I’m pleased to announce that Canberra will soon be home to an innovative project showcasing the best in urban design, planning and renewal, funded as part of our efforts to make the nation’s major cities more productive, sustainable and liveable.

The Gillard Labor Government is providing $500,000 to the ACT Government for a major planning project to unlock the potential of the city’s CBD and better integrate it with public transport, residential buildings, surrounding parklands  and ANU and CIT campuses.

The Canberra community will be invited to provide input into the masterplan – Realising the Capital in the City - which will become a blueprint to encourage people to visit, live and invest in the CBD.

It will support Walter Burley Griffin’s original vision for Canberra as a highly liveable city where people can participate with ease in its cultural, business and political activities.

The plan will also look at the feasibility of introducing a rapid transit system down Northbourne Avenue and the redevelopment of public housing immediately to the east and north of the CBD.

The ACT Government will work closely with the National Capital Authority to set out clear strategies for investment in the urban quality and amenity of Canberra’s city centre.

From a national perspective, this project is a great example of the kind of cooperation between governments needed to address the big challenges facing our cities such as climate change, a lack of affordable housing, traffic congestion and a growing, ageing population.

That’s why Federal Labor has ended the Commonwealth’s self-imposed, decade long exile from our major cities and is again engaging with the states and territories and local councils to bring about a much needed urban renaissance.

As one of the most urbanised societies on the planet, Australia’s future economic prosperity and social cohesion will depend largely on how successful we are at making our cities more productive, sustainable and liveable.

Realising the Capital in the City ($500,000 in program funding) is being funded as part of the Gillard Government’s Liveable Cities Program.

Federal Member for Fraser, Andrew Leigh, welcomed the announcement.

‘I believe that Canberra is the best city in Australia’, said Dr Leigh. ‘But we should always be thinking about ways of making a great city even better. With Canberra’s centenary coming up in 2013, this major planning project couldn’t be more timely.’

I spoke in parliament this morning about the new Trade Training Centres at Francis Xavier College and Merici College.

Trade Training Centres, 10 May 2012

The Australian government is establishing Trade Training Centres to help increase the proportion of students achieving year 12 or an equivalent qualification. Since parliament last sat it has been my pleasure to open two sites of an ACT trades training centre. The lead site of the Trade Training Centre is St Mary MacKillop College, and that was opened by the Prime Minister and Minister Garrett on 17 February 2012. It was my pleasure on 26 March to open the site at St Francis Xavier College and on 2 May to open the site at Merici College.

The site at St Francis Xavier College includes a large workshop, a machine room, a covered outdoor workshop and flexible learning areas, and works in with the Canberra Institute of Technology. I acknowledge College Captains Chloe Kelly and Nick Mahony; the Director of Catholic Education, Moira Najdecki; Archbishop Mark Coleridge; CIT's Adrian Marron; and Principal Angus Tulley.

The Merici College site includes a restaurant and a commercial kitchen. I acknowledge Principal Catherine Rey; College Captain Anne Cusack; and Spirituality Captain Danielle Farrell; the school board chair, Graeme Plenderleith; guest speaker, Callum Hann, from the Jamie Oliver cooking skills program; and Monsignor John Woods.

Saints Francis Xavier and Angela Merici were both alive 500 years ago—St Angela Merici, a teacher in Brescia, Italy; and St Francis Xavier, a missionary from Spain who travelled to India, Japan, Borneo and the Moluccas. They never met one another but I think in the stories of both of them we can learn something about the Trade Training Centres today. Like St Francis Xavier, Australian school graduates will travel the world. They will go through different careers and work in different industries, and they need to be ready for the unexpected that accompanies them. But as St Angela Merici so passionately did during her life, they need to be provided with the best quality of education. They need that sustenance that education provides to the soul and to the mind to allow them the flexibility to adapt to a changing environment.

I commend both schools on the work that they have done, in conjunction with the fourth site, St Clare's College in the electorate of Canberra. The work that these schools and the school communities are doing as part of these Trade Training Centres is essential in equipping young Canberrans for a future of change and a future in which they require all the skills that we can equip them with.

I've spoken twice in parliament this week about the economics of the budget and the opposition's problematic costings.

• Matter of Public Importance, 8 May 2012


• Tax Reform, 9 May 2012

In the latest issue of Labor Voice, I argue that progressives should like economic growth. Full text over the fold.

The Pro-Growth Progressive: How Economic Reform Can Make Us Happier, Labor Voice, Issue 3, 2012
Andrew Leigh


As Australians, we’re used to economic growth [1]. It’s the benchmark by which governments are often judged. Yet it is easy to forget how unusual growth is in human history.

Go back a few centuries to the Victorian era and the average person was no better off than the average caveman [2]. There were a lucky few who enjoyed tea in china cups, but the true living standards of 1800 were better captured by Charles Dickens than Jane Austen.

Indeed, economic historian Greg Clark makes the point that on some measures, the vast mass of the world’s population were worse off in 1800 than their ancestors of 100,000BC. For example, Britons in the Victorian era were shorter – reflecting their poor diet and exposure to disease in childhood.

In 1800, life expectancy was around 30-35 years, pretty much what it was on the savannah. Citizens of 1800 probably worked longer hours than cavemen. From the Stone Age to the Renaissance, most people ate around 2000 calories a day, compared to the 3000 calories a day that we consume.

In fact, most of us would find it difficult to get by on 2000 calories a day, because our bodies are significantly bigger than those of our ancestors.

There’s something slightly shocking about the thought that our ancestors – just seven generations ago – experienced stone-age living conditions. For them, it was normal to go to bed hungry. Everyone knew someone who had lost a baby in childbirth – sometimes with the loss of the mother too. Illness was normal and uncontrollable.

There was simplicity in a world without economic growth. An artisan would engrave his prices on the stone wall of his workshop, knowing that his son would be charging the same. Life for most was, as Thomas Hobbes famously put it, ‘nasty, brutish and short’.

Then – beginning in a little island off the coast of Europe – something changed. With the industrial revolution, people began to experience rising living standards. Average income tripled from 70 cents
per person per day in 1800 to $2.30 by 1900. In the 20th century, average incomes worldwide rose tenfold to $22 per person per day [3].

That transformation had immediate effects on people’s health. A person born in 1900 could expect to live to 40. By 2000, babies born in a developed nation could expect to live until their 70s.

People aren’t just living longer – we’re living healthier. A survey of elderly veterans in the US found that in 1910, nearly all were suffering from digestive disorders. By the end of the 20th century, just one-fifth suffered from digestive disorders.

Underpining economic growth has been a massive rise in productivity. Workers today create more value in an hour than their predecessors. A century ago, it took 1700 hours of work to buy a year’s food supply for a family. Working a typical week, that’s 10 months’ labour. Today, a family’s food supply takes a month and a half of work.

That’s true of other products too. Since the late 19th century, the number of working hours to buy various products has dropped dramatically. It used to take 260 hours of work to buy a bicycle – now it takes seven hours. It used to take two hours of work to buy a dozen oranges – now it takes six minutes. Not surprisingly, that’s meant an increase in the number of leisure hours: from two hours a day in the late 19th century to six hours a day now.

The Easterlin Paradox

If you had to name one central fact to characterise the past two centuries, it would be income growth. It has made us healthier and allowed us to enjoy more leisure. It has lengthened our lives and allowed us to
be more generous.

Yet some now argue that economic growth has gone too far. In Growth Fetish, Clive Hamilton argued that once a society has developed to the point at which the majority of people live reasonably comfortably, the pursuit of growth is pointless and should be curtailed. Internationally, books like Tim Jackson’s Prosperity Without Growth became bestsellers.

“If anything, money seems to buy more satisfaction as you get richer.”

At the core of many of the anti-growth arguments was the contention that once incomes reach a certain threshold, more money doesn’t buy more happiness. The person most closely associated with this idea is Richard Easterlin, who wrote a famous article in 1974 that looked at the relationship between Gross Domestic Product (GDP) and happiness across nine countries. Easterlin found that there was no statistically significant relationship, and concluded that across countries, money didn’t buy happiness. The relationship became known as the ‘Easterlin Paradox’. His article has since been cited over 2000 times, and has become one of the most famous ideas in the social sciences.

A few years ago, a pair of economists at the University of Pennsylvania – Betsey Stevenson and Justin Wolfers – decided to revisit the Easterlin Paradox [4]. But rather than using data for just nine countries, they exploited the fact that we now have more happiness surveys. A lot more.

The centrepiece of Stevenson and Wolfers’ analysis is a massive 2006 survey, in which Gallup asked nearly 140,000 people in 131 countries about their life satisfaction. Across those countries, the relationship between satisfaction and GDP is almost perfectly linear. There is no evidence of satiation. If anything, money seems to buy more satisfaction as you get richer. When we move from nine countries to 131 countries, the Easterlin Paradox simply doesn’t hold up.

Interestingly, money doesn’t just buy more happiness. In countries with higher levels of GDP per capita, people are more likely to say they experienced enjoyment, and more likely to say they were pleased at having accomplished something. People in affluent nations are less likely to have experienced physical pain, loneliness depression and boredom. Indeed, people in richer countries are more likely to tell an interviewer that they experienced love in the previous day. That’s right, Paul McCartney, money can buy you love.

Environmental Concerns

A popular belief is that economic growth and environmental damage go hand in hand. This concern comes in two forms – some people argue that we will use too many inputs (like natural resources), while others argue that we will produce too many outputs (like pollution).

The view that our economy will eventually use up all the stuff in the world is based on a static view about where our GDP comes from. If it were the case that all workers produced goods requiring non-renewables and if we never became any more efficient at producing those goods, then rising incomes and population would eventually use up all the world’s resources.

But it turns out that neither of these things are true. Most workers don’t produce goods from nonrenewables. In fact, three-quarters of Australians work in the service sector. For detectives and doctors, barristers and baristas, the product of their jobs doesn’t weigh much, leading some to dub the phenomenon ‘the weightless world’ of work. In fact, the entire output of the United States weighs only marginally more today than it did a century ago [5]. There are more Americans, and they’re much better off than their great-grandparents – but the product of the country isn’t getting much weightier.

Productivity too, is always increasing. Today’s cars use less fuel. Our computers use less electricity. And, thanks to recycling, our paper uses fewer trees. Our economy is also shifting from one resource base to another, a phenomenon that economist Paul Collier characterises (not very reassuringly) as ‘running across ice floes’ [6]. In the nineteenth century, the British government worried that it was going to run out of tall trees for the masts of ships. We will probably look back at arguments about ‘peak oil’ in the same way [7].

The other environmental concern about growth is that people say it leads to more pollution. Here, the best example is urban air pollution. In the 1950s and 1960s, people became concerned that growth would inexorably choke cities like London and New York. Yet through cleaner cars, cleaner factories, and by shifting industrial pollution away from the largest urban areas, we have managed to reduce urban air pollution while still enjoying economic growth [8].

Today, our major environmental challenge is climate change. Here again, I am optimistic that we can decouple growth from carbon pollution, in the same way as we successfully did with urban air pollution and with the CFCs that were damaging the ozone layer. I do not believe that the best way to deal with climate change is by abandoning economic growth. Indeed, I think that growth will help us address dangerous climate change, since higher incomes will provide more resources to assist with the transition.

An Imperfect Measure

One of the curious things about economic growth is that while it closely tracks many of the things that we care about – such as health, longevity and love – it is far from being a perfect measure of wellbeing. Indeed, growth in Australia’s GDP (or our Gross National Income or Gross National Product, if you prefer) captures some things that we would think of as bad, and fails to capture other things that most of us would regard as good.

Robert Kennedy put this best in a speech at the University of Kansas, less than three months before he was tragically shot [9]:

‘Our Gross National Product … counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.’

More recently, Australian economist John Quiggin has argued that there are three things wrong with GDP as a measure of a nation’s economic wellbeing: ‘it’s Gross (doesn’t net out depreciation of physical or natural capital), Domestic (doesn’t net out income paid overseas) and a Product (takes no account of labour input)’ [10].

GDP per person also has the problem that it’s just an average. To see this, let’s suppose that you’re having a drink at your favourite pub, with another eight of your friends. Now, let’s imagine that Australia’s richest person, Gina Rinehart, pops by in her fluoro vest for a drink. According to the most recent BRW Rich List, Rinehart is worth over $10 billion. So if we just look at averages, the average wealth per person in the pub is $1 billion. But, alas, that doesn’t make you a billionaire.

The same problem occurs if economic growth goes only to the richest. In Australia, recent decades have seen an increase in inequality, but that doesn’t change the fact that incomes have risen across the distribution. According the OECD, the past quarter-century has seen incomes for the richest tenth grow by an average of 4.5 percent per year [11]. For the poorest tenth of Australian households, incomes grew at 3 percent per year. Australia’s experience contrasts with the United States, where incomes for the bottom tenth have barely budged in a generation. But it does highlight the importance of talking about both growth and inequality.

Boosting Growth

By now, you’ve probably guessed my secret: I think growth is good. As Winston Churchill said of democracy, it’s not perfect – merely better than all the alternatives. The challenge now is to find the set of policies that are best for promoting economic growth.

In the long-run, the key to boosting growth is raising productivity – producing more with the same set of inputs. During the 1980s and 1990s, tariff cuts, competition policy and enterprise bargaining were among the underpinnings of productivity growth, but what is the answer to the modern productivity puzzle?

In my view, the best productivity policy we can pursue today is to improve our education system. Raising the skill level of the workforce is essential if we are to adapt to changes in the labour market.

We need to raise the quantity of education – boosting the average number of years of schooling that each person receives. That means encouraging young people to complete high school, undertake vocational training and go to university.

We also need raise the quality of Australian education. Reforming schools is contentious, but the evidence points clearly towards the benefits of school accountability. The MySchool 2.0 website – which includes value-added data and school financial information – will play a significant role in driving change. Another reform that will improve educational outcomes and boost productivity is improving the salary structure of teachers. We need a salary structure that encourages the most talented young people to become teachers, and creates incentives for high-performing teachers to be recognised for their achievements.

Getting education right isn’t just good for our economy, it’s also great social policy. A first-rate education is the best anti-poverty vaccine we’ve yet devised.

Education is also good for civic activism. A bit more school, some vocational education or a few years at university are all factors that help make you more likely to join organisations, volunteer at the local sports club, or donate money to a worthy cause. This is music to the ears of someone like me, who cares passionately about strengthening community life.

Another crucial element to the productivity puzzle is technology. As recently as the early-1900s, American jurist Oliver Wendell Holmes quipped that if all the medicines in the world were dumped into the ocean, it would be better for humanity and worse for the fish [12]. A century on, medical advances have vanquished diseases like smallpox, polio and tuberculosis from the developed world. Our emergency departments are considerably better at saving critically injured patients. And in mental health, we are steadily doing better at diagnosing and treating mental illness as soon as it appears.

Maintaining the rate of technological growth in Australia is vital to improving our living standards. That means we need to continue to innovate here, but it also means we need to take up the best ideas from overseas. As a small open economy, it will always be the case that most of the new technologies that boost our productivity are invented overseas. In that sense, open markets are the best innovation policy we can devise.

No place for complacency

There’s an old joke that goes:
Q: How many conservative economists does it take to change a light bulb?
A: None. The darkness will cause the light bulb to change by itself.

While economic growth tends to benefit all Australians, you should not mistake my belief in the benefits of growth with complacency about the need for government to help build a better Australia. Unlike the conservative economist in the joke, I do not believe that markets can solve all problems. Government has an important role to play in providing public investments and managing risks. But it should also promote pro-growth policies, since growth tends to raise wellbeing.

Economic growth makes us happier, and it need not leave us with a dirtier environment. Indeed, the example of the past shows that we can use the resources from growth to improve our natural surroundings. Sometimes the changes come in unexpected ways. In the early 20th century, some Londoners worried that there would soon be so many horses plying the streets that the manure would become unmanageable. With the advent of the motor car, worries about exhaust fumes quickly replaced concerns about horse manure.

Australia today is in a far better position than most developed nations. Many have double-digit unemployment. Some have debt loads that exceed their annual incomes, and are heavily constrained in their policy choices by the absolute priority of paying off debt. By contrast, Australia has the ability to easily satisfy our creditors and make long-term investments.

Globally, Australia’s geographic position could hardly be better. At the start of the Asian Century, our proximity to fast-growing nations such as China, Malaysia, Vietnam and Korea will prove vital not only for goods trade, but also because it will allow us to plug in to global growth in other ways as well. Thousands of foreign-born students now study in our universities, while many Australianborn students take the chance to complete all or part of their education in an Asian university.

Great fundamentals place the onus on us to do something special. With the right policies and effective leadership, we can lay the foundations for continued productivity growth, ensuring that future generations enjoy steady improvements in living standards. We can make schools and hospitals work even better, providing the building blocks of a happy and healthy life. We can improve trust in politics, engaging with voters about the tradeoffs that are at the heart of decision-making. We can continue to close the gaps between Indigenous and non-Indigenous Australians, applying hard-headed analysis to find out what works, and what does not. Through trade, aid and diplomacy, we can help improve the lives of many in our region.

Ours is an optimistic future, and I am confident that economic growth will be part of Australia’s continued success.

Notes

[1] This article draws on a speech delivered at one of my community forums, held at Ginninderra Labor Club, Charnwood on 18 May 2011. The first half of my title is shamelessly stolen from Gene Sperling, The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity, Simon & Schuster, New York, 2006. I am grateful to Nick Terrell for valuable comments on an earlier draft.

[2] Gregory Clark, A Farewell to Alms: A Brief Economic History of the World, Princeton University Press, Princeton, 2007

[3] Arnold Kling and Nick Schultz, From Poverty to Prosperity: Intangible Assets, Hidden Liabilities, and the Lasting Triumph Over Scarcity, Encounter Books, New York, 2009, p.26

[4] Betsey Stevenson and Justin Wolfers (2008) “Economic Growth and Happiness: Reassessing the Easterlin Paradox”, Brookings Papers on Economic Activity. See also work by Angus Deaton and Alan Krueger, which reaches the same conclusion.

[5] Arnold Kling and Nick Schultz, From Poverty to Prosperity: Intangible Assets, Hidden Liabilities, and the Lasting Triumph Over Scarcity, Encounter Books, New York, 2009

[6] Paul Collier, The Plundered Planet: Why We Must – and How We Can – Manage Nature for Global Prosperity, Oxford University Press, Oxford, 2010, p.98. Our ethical obligation with natural resources, Collier argues, is to bequeath future generations assets of equal value to the natural resources we use. We are not obliged to preserve the world as a museum, but we are ‘custodians of their value’. In the mid-nineteenth century, a generation of prospectors who mined Victoria’s gold and left us with Melbourne’s wide streets and magnificent buildings. We look upon them more fondly than if they had sold the gold and left our generation nothing in return.

[7] On peak oil, see Michael Lynch, ‘Peak Oil Is a Waste of Energy’, New York Times, 24 August 2009.

[8] Economists refer to this tendency of environmental outcomes to worsen and then improve as the ‘environmental Kuznets curve’.

[9] Remarks of Robert F. Kennedy at the University of Kansas, March 18, 1968

[10] John Quiggin, ‘Is Happiness Gross?’, 7 August 2006, http://johnquiggin.com/2006/08/07/is-happiness-gross/

[11] OECD, Growing Income Inequality in OECD Countries: What Drives it and How Can Policy Tackle it? Forum, Paris, 2 May 2011

[12] Quoted in Robert Guest, The Shackled Continent: Power, Corruption, and African Lives, Smithsonian Books, Washington, 2004, p.200