12 June 2017, Fund Forum International, Berlin, Germany
No transcript available
Richard Denniss: 'Money. Power. Freedom', Victorian Women's Trust, Breakthrough - 2016
25 November 2016, Melbourne Town Hall, Melbourne, Australia
Richard Denniss is the Chief Economist at the Australia Institute. This is a speech unpacking the three big lies holding women back. It is republished with permission of the Victorian Women's Trust. Donate here for the advancement of Victorian women.
Ah thank you very much; it’s an honour to be here. Congratulations to Mary and everyone else who made this happen. I must say I was just talking to Clare [Wright] about her fantastic speech, that we were all privileged to hear, and I didn’t have time to point out to her that I was shocked and even a little disappointed because in that whole history of how women had tried to improve matters in Australia and globally, I didn’t hear any mention of economic modelling.
-Laughter-
No talk of submissions, parliamentary inquiries, a collection of the evidence base required to transform public policy. It’s probably because it’s not necessary or true.
So I want to talk today about how it is that a society as rich as Australia could for a century, for more than a century, overlook the needs of half of its population. I’m going to talk a little bit about the economics, and then we’ll end with the politics. But I just want to start with a true story. A couple of years ago I was invited to speak at one of these retreat type things that executives go to, to learn more about themselves. I often get wheeled in to be confronting, I don’t know why I get offered this role but they always latch on to it. Anyway, I was sitting there in this small group of people, about 15 or 20 people, mainly blokes but a few women. They’re all talking about career and work life balance, and how hard and stressful it is to be so rich.
-Laughter-
Oh you don’t understand the anxiety some of them go through, until they meet me. And I said, you know, people never realise when you’re setting them up, so I asked a few leading questions.
“Who here uses pay rises and bonuses to motivate their staff?”
“Oh yes, yes, yes, very important.”
“And who here thinks that if you’re recruiting new staff that, you know, the better salary you offer the higher quality of candidates that you select?”
“Oh yes, yes. Very important, get the incentives right.”
And I said, “Has anyone here got kids in childcare?”
A few hands go up. I said, “So how does it feel that your kids are being looked after by some of the lowest paid people in the country?”
-Applause-
You’re not going to like how this ends.
-Laughter-
Because I said, “You know, if you accept that you need good pay and good conditions to attract good staff, you must be alarmed that your kids are being cared for by some of the lowest paid people in the country?”
And one bloke, now I credit him for this because he was honest, he said, “Richard, I feel good about that.”
I said, “Why’s that?”
He said, “Well, I don’t want the people caring for my kids to be motivated by money.”
I said, “What, you don’t want them to be cared for by people like you?”
-Laughter-
You can see why I like my job, can’t you?
-Laughter-
And to his credit, he said, “Yeah, that’s exactly what I mean.”
That’s what you’re up against. That’s what you’re up against. The inequality in the Australian labour market is not some accident. It’s not some undiscovered problem that is yet to percolate to the top of the political agenda because of the lack of evidence. A lot of powerful people in Australia are entirely happy with it. That, is what you’re up against.
So what I want to talk to you about today, I want to tell you a story of lies and deception. It’s not Game of Thrones; it’s the Australian policy process. So basically I want to spell out what I think are the three big lies that are used to not cover up, but silence, they’re different. The three big lies that are used to silence our public debate when it comes to issues of gender inequality in Australia, and one big truth. Now you’ll hear lots of statistics over the course of the next couple of days, only a handful from me, but all of the statistics will pretty much lead you to the same observation. A girl born in Australia today, unless things change radically, will earn a lot less money in her lifetime than her brother. She will retire with less income, and less wealth than her brother. She will be more likely to suffer violence than her brother. This is the Australia we have built, and all of the statistics just keep telling us that this is true. The question is; will we do something about it? That’s what’s up for grabs, and that’s what’s exciting about being in a conference called Breakthrough.
Now of course inequality has many dimensions; gender is but one of them. But an inequality that effects more than 50% of the population, is a different kind of inequality, it’s a choice. You can’t pretend that there’s any form of oversight. You can’t pretend that there’s some form of transition or accumulation explanation. And often, if your Facebook feed looks anything like mine, you’ll see countless debates about “Was Trump elected because he’s a racist?” “No, no, it’s because he was sexist.” “No, no, it’s because he paid attention to the working class.” The reality is that it might be bits of all of those things and that when we try to divide things up into one and only one explanation, we end up with smaller and smaller, less powerful groups. What Donald Trump did with his racism and his sexism and his talk of class and his talk of everything, was build an incredible support base. But each of his supporters disagree with other supporters on many things, for those of us who oppose him, we have to understand that about ourselves as well as about them. But again I do think that gender inequality, while it’s not the only form of inequality in Australia, is a fundamentally important one if, and this is a big if, IF we want to build a better country. Again, there are plenty of people that like it just the way it is.
Now I know you’re excited to be here listening to a bloke talk about economics. I know there’s not enough of that in your lives, and credit to the organisers for wanting to fill that gap for you.
-Laughter-
But I can at least assure you that unlike most economic presentations you’ve heard; there will be no PowerPoint from me. I think power corrupts and PowerPoint corrupts absolutely.
-Laughter-
You can’t tell a good story, or, I can’t tell a good story without a point. So back to the big lies, the first of the three big lies is that inequality in Australia, gender inequality in Australia, in some way reflects some form of choice. That women are making the wrong choices, and because they’re making the wrong choices they get bad outcomes. If only women would make better choices, some of their inequality might go away. Let me just quote the great economic thinker David Koch.
-Laughter-
In a story entitled, perhaps I should say essay, “Why women need to take control of their super”. It talks about how women earn less than men. It talks about how women have a lot less money and super than men. Then he offers up some advice. I’ll skip through the advice quite quickly.
Step one, consolidate your funds, and don’t have multiple superannuation funds. Because if women consolidated their funds, that would solve the gender pay gap, wouldn’t it?
Look around, take advantage of government contributions, and let us know if you find any just for women. He didn’t say that bit, I added that. There are no women-centric government contributions to make up for the incredible disparity between men and women’s balances.
Maybe participate in salary sacrifice, he urges. Because let’s face it, low paid women have got so much money left over, having paid the rent.
Seek advice, maybe from people like David.
-Laughter-
Again, is this really gender specific advice to help overcome the structural difference between men and women’s incomes? And then step five; focus on your career. Quote, “Don’t be afraid to negotiate fairly when the time comes.” He says to the childcare worker, to the cleaner. “Negotiate fairly”, he says. Not even hard. He concludes that taking control of your super, “control”, taking control of your super by following these five steps, is a simple but powerful way towards gender equality in this country.
Now, I hope you’re a little bit angry, because I’m about to make you very angry. Please listen carefully and understand that this comes from a desire to help. If, and this is a big if, you want to close the gap between women’s superannuation balances and men’s, if that was your goal, then under the existing rules I will give you four bits of advice. It might sting a little, but my advice would work.
Step 1) Don’t go into the caring professions. Don’t. You will never, ever, match men’s super if you “choose” low paid work.
2) Don’t take time out of the labour market to care for children. If you understand the genius of compounding interest, you’ll know that the more you put away when you’re young, the more you’ll have when you’re old. So if you “choose” to take five or ten years out of the workforce to care for kids, don’t come and complain later when your super balance is a little low.
3) Don’t take time out of the workforce when you’re older to care for your parents, or your partner’s parents. Don’t do that.
4) And this is the summary one; be a man.
-Laughter-
We invented superannuation. It’s the last vestiges of the male breadwinner harvester man model. It works well, for well-paid people like me who don’t take lots of time out of the workforce. And to tell the ladies to shop around? Get your low fees, like superannuation is a bargain like a pair of shoes that if you look hard enough you will find, is obscene. But it is not an accident.
So the first lie is that inequalities in Australia are somehow reflective of bad choices. Now when of course we say bad choices, we mean choices that don’t look like choices that blokes typically make.
Lie number two; oh we need more evidence. We need more evidence. We can’t make big policy changes until we acquire the evidence. Sure, we’ve seen inequality for 100 years. Sure, we’ve seen other countries around the world have managed to address it. But we need more evidence. We don’t want to be rash. Wouldn’t want to act hastily, except of course if you’re Barnaby Joyce. I kid you not I’m going to urge you to emulate Barnaby a bit later, so don’t laugh too hard.
At a joint press conference with the Prime Minister Malcolm Turnbull, the Deputy Prime Minister Barnaby Joyce was talking effusively of the need to build a new dam in Queensland. And he said, and I’m quoting verbatim, “We need to get yellow things pushing dirt around, so we can get this country moving.” “Yellow things pushing dirt around”, said the Deputy Prime Minister. When quizzed by a journalist as to whether perhaps the yellow things weren’t pushing dirt as fast as he might like because the dam that he wanted built was yet to even prepare a business case he said, and I quote “Are the Queensland government fluffers? Or doers? Are they going to get stuck in? Are they gonna have a go?”
Must be fascinating to sit in cabinet these days. Someone comes along and says;
“Oh I’d like to spend a couple of hundred million dollars of tax payers money on a dam.”
“Yeah have a go! Get stuck in!”
Someone says, “Oh is there a business case for that? Is there any evidence to suggest that that’s a good dam?”
“What are you? A fluffer or a doer?!”
Yet, I’m glad you’re laughing, because that money is not going to be spent on domestic violence shelters for women. It’s not going to be spent doing anything to address low paid work in the publicly funded care sector. That money is going to the “doers” that are “pushing the dirt around” and that are “getting stuck in”. No one is sitting around asking for highfalutin business cases and evidence and stuff, because when you’re powerful you don’t need evidence. Evidence is what you tell powerless people to go and collect, to keep them busy, to come up with an obscene veneer for your inaction.
The third big lie is that we, in Australia, cannot afford to tackle these sorts of problems. That even if we could agree that we needed to spend a lot more money not just to make sure that kids got better childcare, but that carers got a wage that could pay the rent, and even allow a salary sacrifice or two, can’t afford to do it. Well let me be clear, you sit here today in one of the richest countries in the world in one of the richest cities in one of the richest countries in the world, at the richest point in world history. Australia can afford to do anything it wants. What it cannot afford;
-Applause-
Thank you. What it cannot afford to do is everything that it wants, and that’s what politics is about, deciding what’s important and what’s not. We can afford to do anything, but we cannot afford to do everything.
Last year the federal government spent around $430 billion dollars on goods and services and transfers, $430 billion. It gave away a further $130 billion in tax concessions, tax expenditures. So all up, federal government policy alone is shifting $560 billion a year. 1%, one per cent of $560 billion is $5.6 billion. $500 million would be 0.1%, 0.1% of government spending last year. Only an economist can say this, but $500 million is rounding error. It’s rounding error, you wouldn’t find it if you went looking for it in the national accounts. You reckon you guys could get $100 million for domestic violence crisis centres across the country? You reckon? Barnaby could get the yellow thingies pushing dirt around mate, get the country moving.
We are one of the richest countries in the world, but making us feel poor, making you feel poor, making women’s groups feel that there is some shortage of money is central, central, to the political strategy of the people who are winning. When I say the people who are winning I mean the people who are happy with things as they are, who have no intention of closing the gender pay gap or anything else. And I can prove this, that they have no intention of doing it, because we went to the last election promising, this government went to the last election promising $50 billion in tax cuts. That’s what a crisis they think the shortage of funding for childcare, aged care, and domestic violence policies is. That when faced with a choice between spending money on it or $50 billion in tax cuts, they went for the tax cuts.
They also found $50 billion for 12 new submarines, to replace the 6 of which we haven’t used yet. Because you can’t be too careful, can’t be too careful. And sure they were only going to cost $30 billion when we were going to buy them from overseas, but to create Aussie jobs, we’re going to spend $50 billion to build them in marginal seats in Adelaide. Because the current government that was adamant that there was no need to build them in Australia because it would be cheaper to buy them from overseas, was even more adamant that winning an election was more important than saving $20 billion. When powerful people want money they get it, when powerless people want money they’re told to collect some evidence.
So the big lies are all victim blaming, let’s be clear. Women are disadvantaged in the labour market and the income distribution because they make bad choices; that is blaming the victim. Women have failed to change policy in ways that would address these disadvantages because they haven’t collected enough evidence; is victim blaming. And we’d love to help, we’d love to help, oh we’d so love to help. It would be a priority to address gender disadvantage in Australia, but if we gave more money to women’s groups we’d have to take it from other people who need it more than you. And make you feel greedy for asking. Those are the three big lies that dominate and have dominated for decades, the economic lies that sit underneath the political comfort with entrenched inequality in Australia.
So what, if anything, are we doing to do about it? When I say we I mean Australia, and it’s an if. It’s not obvious that we’re keen to fix this problem. It’s not obvious that George Christensen wants to see abortion law reform in Queensland. It’s not obvious at all. So IF this group of people, or another group of people, wants to fix this, what are we going to do about it? Well my first bit of advice, I’m shifting now from the bizarre economics that we cannot do anything about it to the politics of what could we do about it, well the first bit of advice I’d give is to be like these conference organisers and think big. It’s actually easier in politics to solve big problems than small ones sometimes, because you can unite a larger group of people and you can cut through the processes and excuses that are used to divide and conquer. Division is death in politics, and it’s easy to divide desperate groups by playing them off against each other.
I have a confession to make; I sometimes lie to my children. I know you don’t, I’m a bit worried about the person sitting next to you though. My kids would love me to take them to Disneyland; they really want me to take them to Disneyland. I couldn’t think of anything worse. So I lie to them, and say we cannot afford to go. I’m comfortably middle-class, I’m very well paid by community standards, and I’m certainly paid a lot more money than cleaners and childcare workers. We could afford to go to Disneyland, but I can think of a dozen better things to do with the money. But I don’t debate with my children about what my priorities should be. I just lie to them; tell them we have no money. But that’s not how democracy is supposed to work. It’s all right because I’m a parent; I’m not an elected representative of the family. But your elected representatives lie to you; they lie to you and say that we cannot afford to do things. And what they meant to say is that we don’t want to. We don’t want to, we don’t want to spend more money on your priorities, we choose not to. Go away.
But it’s actually more polite to lie, isn’t it?
“Oh you’re a priority, that sounds tragic, I’d love to help, if only there was some money.”
“Could you get some money?”
“No, I’ve got tax cuts to give.”
This is not an accident. So IF my kids really wanted to put pressure on me. Well, so step one, understand that it’s one of the richest countries in the world. The notion that we, “cannot afford” to solve something is ridiculous. What we mean to say is that we would rather do something else. Democracy is designed to resolve those fights. IF my kids were to figure this out, they might come at me hard, “Dad, we’ve figured it out. We’ve found your bank balance. We know you’re well paid. We want to go to Disneyland.” They’ve got no chance, one of them loves Harry Potter, and one of them loves Disneyland.
“Hey kids, you choose, do you want to go to Harry Potter World or Disneyland? You choose. Fight amongst yourselves.”
That would never work would it? You would never be able to divide people by saying, “What do you think we should do? Should we be spending more money on childcare? Should we be spending more money on aged care? Should we be spending more money on paid parental leave? You choose. You choose. You all sort it out among yourselves and when you can agree on the one thing you want, come clap your hand and I might give it to you.” I’ve never heard The Business Council pushed on whether they want industrial relations reform or corporate tax cuts. If they were pushed, they would refuse to answer. They’d say, “You don’t understand economics.” That’s pretty funny, because no one does. “We need all of it. We need a package deal of reforms. We need industrial relations reform. We need it to be easier to sack our workers. We need lower tax cuts. We need free trade agreements. We need all of it.”
“Which is your priority?”
“All of it!”
They never divide, they never undermine each other. You never hear one business leader saying, “Oh I’d take the tax cuts and I’d give up on the push for higher reform if I got my tax cuts”, because powerful people unite. They don’t allow themselves to be played off, like hopefully my kids will one day. So, times up, it’s flashing, never accept the false choice. The big truth, the big truth, and the big opportunity, is that there are so many lies. But the big truth is that tackling gender inequality isn’t a women’s problem, it’s an Australian opportunity. Good lobbyists ask their government for some money, great lobbyists find some money for their Minister to solve their problem. Great leaders build a new country that’s big enough to fit their ambitions in. Go build a bigger and better Australia. Thank you very much.
Thanks to the Victorian Women's Trust for allowing speech to be republished. Visit their site.
Ken Henry: 'Narratives are stories, in whatever form they take', Address to Curtin Public Policy Forum - 2007
4 September 2007, Perth, Western Australia, Australia
Ken Henry was Secretary to the Department of Treasury 2001-11. The speech is entitled 'Challenges Confronting Economic Policy Advisers' and this is only the concluding excerpt. The full speech is here.
I have argued that economic policy advisors must provide ministers with advice which is analytically-sound, strategically-focused and compelling. When advisors do this, they contribute to the development of broader economic narratives. They furnish ministers with a set of themes, priorities and strategies which can be woven into compelling economic stories – stories, which, if told well, can powerfully shape policy debate in the community.
Narratives are stories, in whatever form they take – oral, written or visual. Conventional narratives in literature or the cinema have a beginning, middle and end. Good ones provide drama, arising from a predicament that ensnares the principal character; they have plenty of action, the steps the character takes to escape the predicament, with unexpected plot twists and complications thrown in; and there is a resolution, culminating in the achievement of a visionary aspiration or objective.
Economic narratives can be viewed in a similar way. They are stories about our economic development: they describe a context of economic opportunities and risks we face as a society; they detail the policy actions we should take to respond to these; and they talk about the goals and aspirations we can realise, if we are successful.
Economic narratives have played a significant role in Australian public life. Each phase of Australia’s economic development – the Federation of the Australian colonies in 1901, the Great Depression, post-World War II reconstruction, the period of stagflation in the 1970s and early 1980s, and the subsequent internationalisation of the Australian economy, continuing to this day – has been accompanied by its own economic narrative. These narratives drew on deeply-held community values and fears; they were invoked in support of policy reform and institutional change; and they gave meaning and coherence to events as they unfolded.
Narratives are a powerful, and perhaps poorly understood, leadership tool. They provide depth, focus and context for policy debate, furnishing advocates with persuasive arguments in favour of, and sometimes against, policy reform. They can be a force for good or ill. Good narratives are grounded in sound economic thinking and policy analysis. They foster support for reforms which strengthen market frameworks, improve the allocation of resources and, over time, increase the wellbeing of the Australian people. Dysfunctional narratives, on the other hand, are often associated with narrow interests and misguided policies – they can be invoked to resist necessary reforms, to the detriment of the community; they can stimulate fears and anxieties, without offering solutions.
Public debate inevitably involves a contest between alternative, overlapping and conflicting narratives. One of the enduring benefits of an open society is the opportunity it provides for this contest to be played out. It is quite significant that the contest is not always played out between the major political parties. On many issues, the government and opposition of the day find themselves in broad agreement. Yet there is still a contest. In a pragmatic, somewhat sceptical, and empirically-motivated society like Australia, narrative contests often turn on practical results and commonsense. But they also turn on values – the capacity of a narrative to ‘speak to’, or ‘connect with’, the average person’s experiences and aspirations. I’ll return to this point.
While good narratives can be very powerful motivators, it’s worth bearing in mind that they can also become dysfunctional. A good story isn’t necessarily based on assumptions and propositions of enduring relevance, and it can take one down paths of unintended, perhaps even perverse, consequences.
I’ve been speaking at a rather abstract level. Let me make things more concrete by referring to the most important, and arguably enduring, Australian economic narrative in the past quarter century – the proposition that Australia had to open its economy to the world to achieve sustainable growth and rising living standards. Or, to put it slightly differently, the imperative of developing an economy in which international engagement and economic security were in harmony.
I am talking about the broad sweep of economic reforms that started in the early 1980s, were deepened and broadened in the 1990s and added to in this decade. The same economic narrative continues to drive policy development today. You are all familiar with the main elements of the story, but the bits I’d highlight include: the floating of the currency in 1983 and the liberalisation of the capital account, the liberalisation of the domestic financial sector, the progressive dismantling of industry protection, competition-enhancing product market reforms and greater labour market flexibility.
Market liberalising measures exposed sheltered parts of the economy to competitive forces, both external and internal, making the economy more flexible, and ultimately more resilient and productive. They drove access to cheaper, better and a wider range of inputs and final goods and services; a more efficient allocation of labour and capital, supporting specialisation in areas of comparative advantage; access to international financial markets, enabling the financing of investment, smoothing of consumption, and management of risk; transfer of technology and skills; and enhanced competition in domestic markets, promoting innovation and competitive pricing. And they were complemented by a wider range of reforms designed to enhance the efficiency of resource allocation and support macroeconomic stability, including: tax reform; strong medium-term frameworks for monetary and fiscal policy; a clearer articulation of the operational independence of the Reserve Bank of Australia; and measures to boost national savings, including through superannuation, and reduce public sector debt.
Taken together, these reforms fundamentally changed Australia’s system of economic governance. They took us from a highly-protected and over-regulated economy with a short-term and reactive macroeconomic policy focus, to an open, flexible and dynamic economy, with expectations anchored by credible macroeconomic policy frameworks.
The results of the economic transformation have been well documented. Australia is experiencing its 16th consecutive year of growth; our living standards, measured by real GDP per capita, are now well above the OECD average; unemployment is at 32 year lows; workforce participation is at [ ] year highs; and inflation is well contained, the headline rate having averaged just [ ] per cent a year since the economy emerged from the recession of the early 1990s. Just as importantly, our more flexible economy has proven extraordinarily resilient in the face of major shocks, including the Asian financial crisis of 1997-98; the bursting of the tech-bubble in 2000; the United States recession in 2001; a very severe drought; and, in recent years, the global commodities boom that has given us terms of trade that, at other times in our history, would have sparked damaging inflation breakouts and macroeconomic policy crisis.
The story I have outlined above is well known, but it is important not to lose sight of the powerful narrative which underpinned, gave direction to, and marshalled support for these changes: The proposition that Australia had to open its economy to achieve sustained growth and rising living standards.
The ultimate mark of this narrative’s success is that it is today taken for granted. When it was first articulated, however, it challenged a long-established conventional wisdom – the view, held by many policy-makers and opinion-leaders throughout Australia’s history, that economic security, that is, both prosperity and stability, could be achieved only by insulating the economy from market forces, both international and domestic. The new narrative did not overturn this protectionist belief-system overnight, but in the course of the 1980s it increasingly set the tone for national debate on economic policy. A small number of academics, policy-makers and political figures had always championed its insights, but it was eventually accepted, grudgingly in some cases, by a much wider array of opinion leaders and interest groups, including unions and formerly protected industry sectors. Ultimately, it won the support of a large section of the Australian community. It told them a story about Australia’s place in the world, and the changes we needed to make to secure our economy, that was both credible and compelling.
Some might argue that the market-opening reforms of the past quarter century could have taken place without any supporting narrative. They might point out that by the early 1980s it was obvious to all that Australia’s pre-reform economic model was not working. And they might add that once the initial reforms were in place – those that exposed the economy to the discipline of international markets – the pressure for subsequent measures, especially to increase the flexibility of product and labour markets, was unavoidable. There is something in these observations, but they are overstated. Moreover, it doesn’t follow that the narrative I have been talking about played no role. By the early 1980s it should have been obvious to all that the inward-focussed, heavily regulated, protectionist model was failing. But it was far from obvious to all that the market liberalising initiatives of late 1983 and 1984 were necessary. They were, in fact, quite controversial. One reason for their being so controversial was the fact that, at the time, the compelling narrative I have been talking about had not been clearly articulated. Indeed, it wasn’t until after Treasurer Keating’s famous ‘banana republic’ statement in the middle of 1986 that the narrative started to gain traction.
Further support for the power of the narrative comes from noting that when governments in other countries have introduced ambitious reforms without persuasive narratives that could be understood and accepted by their citizens, the reforms have met with strong resistance; in most cases, reforming governments have lost office. Australia’s dominant, market-opening economic narrative, in contrast, has proved remarkably resilient. Its core promise – to bring international engagement and economic security into harmony – took some time to realise. In the early years, there were some dramatic setbacks. The early steps to open the economy exposed it more directly to the harsh judgements and frequent vagaries of international capital markets. In the course of the 1980s, we experienced dramatic swings in the value of the currency, our current account blew out and our foreign indebtedness escalated. Yet throughout this period of instability and turmoil, mainstream political and community support for the market-opening narrative did not seriously falter. Even in the midst of the recession of the early 1990s, with the unemployment rate climbing to 11.2 per cent, the narrative wasn’t seriously damaged. While there certainly was some vigorous debate, as one would expect in an open society, the reform imperative had developed sufficient momentum to sustain forward progress in those difficult years. Perhaps nothing better makes that point than the fact that in 1992, with unemployment at 10.8 per cent, tariffs were cut.
The dominant economic narrative of the past quarter century has proved remarkably resilient and influential. It’s worth considering why that has been the case. I would highlight three things. First, the narrative articulated clearly an embarrassing failure – our standard of living was falling relative to that of an increasingly integrated developed world. Second, it appealed to deeply-held community values and aspirations – our nation’s enduring quest for economic stability and prosperity, and, at the individual level, the high value we place on opportunity. And third, it provided a clear statement of the reform strategy, grounded in well-reasoned economic principles – setting out what we needed to do, as a society, and why, to respond to the challenge.
Ultimately, as I have said, the particular power of this narrative was its ability to reconcile, to bring into harmony, two seemingly contradictory realities, our desire for economic security, on the one hand, and the necessity of international engagement, on the other.
The dominant narrative of the past 25 years is no less relevant today. The Government’s wide-ranging and ambitious international policy agenda attests to that – our hosting of the G-20 forum of finance ministers and central bankers last year, our hosting of APEC this year, our commitment to institution-building in the Pacific, the effective partnership we are building with Indonesia, our close ties with other key regional powers. Important parts of the domestic reform agenda can also be seen as part of that dominant narrative.
But I wonder whether the very success of the narrative – reflected in the fact that Australia’s economy is now open, flexible and resilient – won’t have some people wondering about a broader narrative that might support the next phase of our economic development.
I don’t have such a narrative in my top drawer; and even if I did, it would be presumptuous of me to start reading from it. But if I were to sit down and write one, I reckon I would start by observing that most of the big policy issues we talk about today concern attempts to reconcile, or bring into harmony, the ideas of opportunity and sustainability. These are broader concepts than international engagement and economic stability – the two key elements of our current narrative – and they have been with us for centuries, not decades.
The concepts of opportunity and sustainability underpin a range of economic, environmental and social policy debates. Some of their economic policy dimensions are well understood. The Government’s two Intergenerational Reports, issued in 2002 and earlier this year, have highlighted a number of these. Those reports have drawn attention to the fiscal, and broader economic, pressures associated with our ageing population and provided a framework for thinking about how best to respond to them. This framework is summed up in the 3Ps – the truism that our ability to satisfy the aspirations of future generations of Australians depends upon our population, the level of labour force participation, and our productivity. The central message of the two IGRs has been that our ability to satisfy those aspirations, and also to secure the long-term sustainability of the budget, depends on the pursuit of further productivity- and participation-enhancing reforms.
Labour force participation relates to a broader notion of economic opportunity. Policies that lift labour force participation – including vocational education and training, tax and welfare changes to reduce disincentives to work, retraining of the long-term unemployed and employment initiatives for Indigenous Australians – also enhance economic opportunities. As does anything that governments might be able to do to ensure, in Noel Pearson’s compelling words, that Indigenous people ‘have the capabilities to choose a life that they have reason to value’.
The enhancement of economic opportunity, based on positive incentives and robust capabilities, remains the most practical thing governments can do to advance the development of their citizens.
But what about sustainability? Many Australians would see development as being unsustainable, almost by definition, and they would view the enhancement of economic opportunity as being antithetical to sustainability. Because so much of our past expression of economic opportunity appears to have been associated with environmental degradation, they might appear to have a strong argument – being able to point to the destruction of about 99 per cent of our temperate native grasslands and the biodiversity they used to contain; extensive weed infestation, soil erosion and salinity; the extermination, in recent times, of 61 species of flora and 54 species of fauna; and the fact that another 1,551 species of flora and fauna are regarded by the Department of Environment and Water Resources as either ‘critically endangered’, ‘endangered’, ‘vulnerable’ or ‘conservation dependent’.
But this view, understandable as it is, is based on a misunderstanding of economic opportunity and, indeed, of development. Economists see opportunity and sustainability as being very closely related concepts: unless I can sustain past achievements am I not denying myself the opportunity of further development?
Indeed, many economists would agree that our improved living standards have not always been consistent with sustainable development, given that, unlike the people from Europe who came to this continent 220 years ago, we do not have the opportunity to appreciate the existence of species like the thylacine and 114 others. Few of us will ever see a yellow-footed rock wallaby or a hairy nosed wombat. Those who went before us have denied us these opportunities. And in that loss of opportunity there has been, in the language of Nobel Laureate Amartya Sen, a loss of freedom – a loss of ‘freedom to have – or safeguard – what (we) value and to which (we) have reason to attach importance’. And that freedom is a constitutive component of development.
A concern with sustainability, then, can be viewed as safeguarding a fundamental component of development.
And Australians have more reasons than most for thinking about opportunity and sustainability. Ours is the driest inhabited continent on earth and, if the climate change science proves right, the inhabited parts of the continent are only going to get a lot dryer. The energy-intensity of Australian production is well above the OECD average, and climate change mitigation efforts will make energy more expensive. We have the most geographically dispersed population among OECD countries and, if the central forecasts of the future freight task are correct, we will witness, over the next 15 years, a doubling of the number of trucks on roads that are already under considerable pressure. While this is true also of a number of other countries, our population is about to start ageing rapidly as a consequence of the collapse in the birth rate that occurred in the late 1960s and 1970s. Several of our neighbours in the Pacific are becoming increasingly fragile, with increasing expectations on us to assist them address deep seated governance and development challenges. Closer to home, the life expectancy of Indigenous males is 17 years less than non-Indigenous, Indigenous imprisonment rates are 17 times the national rate and Indigenous infant mortality rate is nearly three times the non-indigenous rate. And we have our own governance challenges, with three levels of government operating in an increasingly complex environment reflective of a distinct lack of coherence in roles and responsibilities.
In the articulation of these challenges I can discern the raw materials for a powerful narrative to guide future economic development; a narrative that would appeal to strong community values and aspirations, to sustain what we have and to enhance economic opportunity; a narrative that would be both relevant and compelling.