Earlier this week, Malcolm Turnbull sought to present himself as being on the economic front foot by calling a snap economic summit to seek a consensus on “reform priorities”. That anything other than symbolism could be achieved in a two-to-three hour mini talkfest is debatable, but one major step forward would occur were the new prime minister to announce the banishment of the word “reform”.
The use of reform has long been one of my greatest bugbears. The word is so loaded with spin that it is meaningless. And yet such is its power that, to paraphrase Godwin’s law (call it Jericho’s law of economic debate), “the longer any speech or opinion article on Australia’s economic future goes, the greater the probability of the speaker calling for reform”.
Newspapers are filled with pieces bemoaning the lack of reform, and arguing that without great change, reform will be unable to occur.
Well rubbish, says I.
Just three years ago, the government introduced a price on a substance which up till then had been effectively free. Despite having a huge negative externality (ie a negative impact that was not reflected in the price), carbon emissions in this country had no price. The ALP government put a price on them, set up a framework by which that price would shift from fixed to floating, and it was done in a way in which the economy continued to grow, and our emissions fell markedly.
It was a policy which affected virtually all aspects of our economy, but achieved its aims in a much more economically efficient manner than otherwise proposed. If you don’t believe that was a reform then you forfeit your right to use the word.
But that’s the point about the word – our current minister for the environment would not consider the carbon price a reform.
It highlights, as I have written previously, that “reform” just means “policy that I agree with”.
Was the carbon price dumped because our “reform culture” is dead? Did our combative polity, or the 24-hour news cycle or social media kill it?
Or was it because Julia Gillard foolishly said she would not introduce a carbon tax and then even more foolishly agreed that if you wanted to call what she introduced a carbon tax then that was OK?
Sure our political system is filled with bile and our media is angry, but maybe our politicians just haven’t been good enough?
But none of that negates the fact that reform is a meaningless word and the challenge to any participant at the economic summit, or anyone who writes or speaks on economics, is to argue for their favoured policy without using the word.
Alas it would seem right this moment we have a secretary to the Treasury in John Fraser who would fail such a test. In a recent speech on “Australia’s long-term economic challenges” he used the word reform 40 times.
He talked of “structural reforms”, “supply-side reform”, “road reform”, “workplace relations reform”, “competition reform”, “fundamental reforms,” “tax reforms” and even “reform-focused efficient taxes”.
Yes, taxes that have a focus on reform.
A more meaningless phrase of economic jargon could scarcely be contrived, and yet this is what is uttered by the man charged with advising our government on economic matters.
Fraser has also recently stated his belief in the need for austerity – telling the Financial Review that “tough policies can beget good growth”, which is fine so long as you ignore the reality that the UK’s best growth occurred once they stopped the tough policies.
Fraser also suggested that the US unemployment rate of 5.5% was “testimony to their more flexible product and labour markets”.
As Scott Steel, an economist for Queensland’s public sector union noted, that flew in the face of research which has shown that the US’s industrial relations model failed miserably during the global financial crisis. It also paints an absurdly rosy picture of the US employment situation compared to Australia.
In January 2008, 62.9% of American adults were employed, now it is 3.5 percentage points lower at 59.4%. By comparison Australia’s employment to population ratio is now just 1.75 points lower than it was in January 2008:
And a major reason the US’s unemployment rate is 5.5% is because the number of people looking for work has dramatically fallen over the past six years.
Prior to the GFC, the US had a higher participation rate than Australia, now ours is nearly 2.5 percentage points higher:
When comparing Australia and the US’s employment performance over the past six years, the only way you could look favourably at America is if you think ideology trumps evidence.
Moreover, as I noted at the time, Fraser’s talk of flexibility also flies in the face of the findings of the Productivity Commission’s draft report into the workplace relations framework which found that “contrary to perceptions, Australia’s labour market performance and flexibility is relatively good by global standards, and many of the concerns that pervaded historical arrangements have now abated”.
It also noted that “wages are responsive to economic downturns and there are multiple forms of employment arrangements that offer employees and employers flexible options for working”.
It’s a bit of a worry that one of those pushing such perceptions is the head of Treasury.
As I have also noted before, the desire for industrial relations reform is one of the biggest abuses of the word “reform”. There is close to bugger-all evidence that can link the workplace relations system, let alone flexibility, to improved productivity – certainly no data over the past 15 years can:
But the Treasury itself seems clueless as to what constitutes productivity. In May when Treasury was negotiating a new staff enterprise agreement, a Treasury spokesperson outlined three “productivity offsets” that staff had to agree with to get the pay rise.
The three offsets were increasing the standard work week from 37.5 hours to 38, removing the half-day shutdown on the last working day before Christmas and having one formal appraisal per year for executive level staff.
That’s all great, except they have nothing to do with productivity. Getting people to work longer hours might improve profitability, it may reduce labour costs in a government department, but it has nothing to do with increasing output per hour worked.
And this type of crud comes out of the Treasury!
Such a use is a direct result of very serious people in politics and the media over the past decade or so stripping actual meaning from words like reform and productivity instead turning them into smart sounding buzzwords.
You want to change Australia’s tax system, our IR system, our competition laws? Great, but tell us why and how that will improve our economy, and tell us who will be affected and how. If you need to say it will improve productivity, tell us how and explain what you mean by that word – because profit does not equal productivity.
And if you use the word “reform” – you fail.
