The Agenda

Outline of some issues raised in a series of articles and a conference on 4-5 April 2002 organized by the Melbourne Institute and The Australian. The latter event was promoted as a 'top level conference to set the policy agenda for the nation's future".

The following are based on published media reports, and also includes a few CPDS comments which may point to further potential advances.

Overviews

It is time to end the disconnect in Australian politics between political dialogue and real needs. Broadly agreed principles are needed for a new and different reform agenda that rekindles the art of statecraft. The framework for such an agenda was canvassed at a recent conference. The agenda that emerged was a complex amalgam of education, health, equity, excellence, productivity, sustainability and national development. Melbourne Institute director called the new reform agenda - 'hard heads, soft hearts'. After a decade of market based economic reform, the agenda focuses on the individual. There was considerable agreement amongst the academics involved - and a huge gap between this and present policies. Market based reform that retained the principles of access and equity was advocated. The role of jobless households (rather than low incomes) as the driver of poverty and disadvantage was emphasized. Income inequality was seen to be rising. The lesson is that Australia's stunning 1990s productivity performance has been weak in job creation. Much of the productivity growth was taken as wage increases. The views of the 'five economists' that it is unsafe to rely on economic growth to solve unemployment was restated. The need for a new policy for universities was stated - which various models proposed. A health economist wanted a philosophy of managed competition introduced into the health system. Escalating costs can only be contained by increased efficiency. There were differences over immigration - both for and against more immigration. Fertility rates are heading towards population slowdown - not because people don't want children but because of current family / career policies. Environmentalists argued that Australia's current consumption is unsustainable - and raised question about responses to future environmental refugees. An economists called for strong economic growth as the best way of boosting equity. Better integration of retirement and superannuation policies was suggested. Fundamental to this conference was that the abolition of the old Deakonite protectionist-welfare settlement was best for Australia. The better integration of economic and social policy does not require a resurrection of state paternalism, but new ideas to promote market efficiency and social equity. (Kelly P. 'It's time to shut the rhetoric action gap', Austraian, 6-7/4/02)

Australia's economic reforms over the past 20 years have produced prosperity, and targeted social policies have improved position of disadvantages. But challenges remain. 1 in six children live in jobless households. Joblessness is due partly to targeted welfare system which creates poverty traps. Welfare and labour market reforms are required to deal with this. Demand for labour (especially unskilled labour) must also be boosted not just reliance on growth. This requires keeping minimum wages low and boosting incomes with tax credits. Raising educational and skill levels are also required - through greater accountability and autonomy of schools. resources must be used increasingly efficiently in the health system. Population ageing is an issue requiring management - but it is not a crisis because of rising productivity. Work and family life need to become more complementary. Sustainable energy policies are required - though it is not clear that Kyoto is the way to go. The question of faster population growth also needs to be addressed. The reform market liberalization agenda of the 1980s has further to go, but must be complemented by new reforms of welfare, education and health (Dawkins P. 'Hard heads, soft hearts', Australian, 6-7/4/02)

Productivity and growth (2A)

The world has changed dramatically over the past 15 years. The victory of free enterprise over communism was seen as 'the end of history' with only one ideology (free markets) likely to prevail. Prosperity then flowed as other countries deregulated their economies, increased trade, embraced the market economy and improved communications made the world smaller. But confusing things happened. One Nation emerged in Australia with policies that would wind back the clock. The WTO meeting in Seattle was disrupted by protestors opposed to free trade. A reaction to the market approach to economic management blames free markets and globalization for many ills. Reform fatigue has set in. Micro-economic reforms in Australia in the 1980s and 1990s occurred because of the dangerous state of the economy at that time - high debt levels, low savings, and lagging productivity. The results were extra-ordinary. The debt to GDP ratio - which had been prdicted to rise to 60% of GDP - stabilized at 40%. Australia became more efficient and achieved a surge in exports, and a reversal in our trade deficit. Australia weathered the Asia financial crisis with few ill-effects. A similar resilience occurred last year when all other Western economies were in recession and commodity prices were falling. past reforms have stabilized the economy, allowed unemployment to fall. But stability is fragile. Export-led recovery depended on a depreciating currency. More economic reform is needed. (Chaney M. 'Damn the flak, full steam ahead', Australian, 10/7/02)

There had been concern during the dot-com bubble that Australia has an 'old' economy. But even unemployment, which has remained high, will fade as a problem. Australia's productivity surge is not the result of good luck - but of deliberate policy (noting paper by Parnham of Productivity Commission). Australia's 1990's productivity growth was not only impressive by Australia's post-war standards, but by international standards. The main explanation of this is micro-economic reform. From a long term perspective this performance is less impressive. But Macfarlane listed several positives: a productivity surge; a longer than normal period of expansion; and coping with two international shocks (Asian financial crisis, and global 2001 recession). And unemployment may peak at 7%. For most of postwar period (to 1990) Australia underperformed OECD average per capita growth rates - but this reversed in 1990s. This growth can continue as Australia's productivity still below OECD countries. Skeptics argue that this is limited by Australia's 'old economy' status (ie dependence on resource exports in hi-tech world). Macfarlane offers rebuttal - arguing that producers most likely to face price declines are manufactures. Australia's terms of trade have been rising in recent world recession - especially relative to manufactures. Thus policies to push the economy towards areas such as information and communication technologies are dangerously misguided. The second obstacle is seen in aging population - but this is mainly a consequence of revolution in female education and workforce opportunities - which will raise productivity and capacity to pay *Wood A. 'Grey expectations', WA, 6-7/4/02)

Australia benefited significantly from economic reforms of 1980s and 190s - with nine years of continuous growth. Australia is changing - and competition policy has been a catalyst for change. From 1993-94 to 1998-99 productivity growth was about 1.7% pa - compared with 0.5-0.9% over previous 20 years. This has brought employment growth - and higher incomes. All but one of 57 regions studied benefited from competition reforms. Implementation of competition reforms is complex (Samuel G. 'Policy equips economy for global marketplace', A, 18/2/02

Australia's economic performance has been good - but people still are grumpy. ABS economic, social and environmental stock-take now suggests why (Megalogenis G. 'Good life under the gun', Australian, 6-7/4/02).

Inequality (2B)

The debate about rich and poor in Australia is dishonest. The Smith Family tried to prove that poverty has increased by using a disputed formula. The CIS replied that the poorest have become better off - but forgets that relative poverty is what really counts. Also unemployment and under-employment are high. Long term unemployment is significant. Aborigines continue to die early. Three things are needs to overcome the problem (a) focus not on defining poverty but on relieving long-term unemployment (b) redirecting government largess to bid end of town to poor (c) old fashioned socialism of education and health standards. Government can't be passive (Megalonigenis G. 'Poor logic deepens the divide', A, 25/2/02)

Reducing the number of households where no one has a job is the key to reducing income inequality (Dawkins P. 'Many approaches to a bright, inclusive future', A, 25/2/02)

Many people have a vision of Australia as a relatively equal society - yet there is growing evidence of increased inequality mainly due to rapidly growing affluence of the top end of town (Harding A. 'Research highlights a nation growing apart', A, 25/2/02)

Tax credits are a useful way of helping build a strong economy and a just society (Crean S. Opposition leader, 'The way to a just society', Australian, 6-7/4/02)

The Government's emphasis on individual liberty has overlooked the social dimension of poverty. While the elites in Canberra debate poverty in abstract terms, and concentrate on evidence rather than theory. Poor people have more to teach than to learn. The chief demand in public housing estates is not for more government handouts, but for normalization of the neighbourhood - more sense of community. Without a strong sense of society there can be no end of the poverty cycle. (Latham M. 'Empower communities to change the neighbourhood', A, 25/2/02)

Population (2C)

The debate between growth and the 'small is beautiful' approach of environmentalists is changing. There will now be pressure for international flows of people, similar to that for goods and money. There could be 20m environmental refugees in the southern hemisphere (eg as a result of global warming). Australia thus needs to be a world leader in technology of sustainable growth. Many know of Australia's rainfall and top-soil limits - but there is no action. Some argue for slow population growth - but it does not take much to get a decline. Others argue that stagnant population growth does not have to result in problems given high rate of productivity growth. However higher consumption spending with childlessness can also lead to extinction. Demographic trends tend to be very slow to change - and thus population forecasts are not subject to great errors (Steketee M. 'The problem with people', WA, 6-7/4/02)

Australia has a choice between the approach to migration of US and Japan. The former is open to migration, youthful and more economically successful, than the closed approach of Japan (Megalogenis G. 'Let us avoid picking the wrong model', A, 11/3/02)

Victoria would like to take more migrants to boost its population - even if other states do not want to (Bracks S. 'Much to be gained from more Australians', A, 11/3/02)

At National Population Summit it was popular to suggest that Australia should have a 38m population by 2050 compared with the 25m that come from current population projections. This can not be achieved by natural increase - as fertility rates are more likely to fall than rise. Thus immigration would need to rise to about 275,000 each year - which is triple current levels. This could only be achieved by significantly lowering entry qualifications. The net result would be providing plenty of domestic staff for the relatively affluent (Ruddock P. 'Quality of our way of life is at stake with mass migration', A, 11/6/02)

Environment (3C)

Industry and government argue that carbon emissions must be cut to avoid global warming. There is disagreement about whether Kyoto Protocol is the way to do this. Warming predictions from models range from 1.4 to 5.8 degrees over 1990 by 2100. Australia's emissions increased 17% in the 1990s - showing a lack of action because of economic dependence on coal, and policy disarray. Much more is needed on alternative energy, and reduced carbon use. A Queensland coal company is preparing to plant forests to provide carbon credits for Japanese power stations buying coal. Failure to reduce carbon dependence will harm Australia. There may be little time left before climatic change becomes irreversible. The Great Barrier reef is likely to be lost to rising sea temperatures. (Yallop R. 'Carbon: slash or burn', WA, 6-7/4/02)

Water is one of the defining features of Australia - because it is a dry continent. There is perennial debate (for example) about how the Murray should be used. State have been unable to resolve the gridlock - despite their constitutional responsibilities. We have now half-embraced a market solution to the problem - but have not clarified the underlying rights to water that would let the market operate effectively. Farmers have invested in the belief that they can get plenty of cheap water - and have varying legal rights to water. Everyone is dis-satisfied. There is increasing urban and rural demand for a degrading resource. Environmentalists are concerned that governments are taking so long to restore environmental flows to rivers. Farmers are concerned about the effect on their businesses. Governments can't balance the competing interests. There is a need to complete the reforms started a decade ago - to give land-owners clear legal right to water and the ability to trade this. A National Rivers Corporation should be established to buy water needed for the environment (Cullen P. 'Patience runs dry on water gridlock', Australian, 25/3/02)

Australia claims to be clean and green - but it is not green due to effect of dry-land salinity - which is the product of too much water in a dry environment. Natural vegetation which was perennial and deep rooted, was replaced by annual crops that let water seep past and into the water table - where it lifted salt accumulated over thousands of years. Irrigation, subsidized by government to populate the inland, resulted in a total disaster. 5.7m hectares are now at risk from salinity - rising to 17m by 2050. It affects agriculture, towns, roads, waterways and biodiversity. This problem is now recognized. But Australia uniquely for developed economies, exports 75% of its agricultural products to discerning markets. But if Australia refuses to ratify the Kyoto protocol, it could be excluded from trade deals. Also one solution to salinity is tree planting, which would earn carbon credits under Kyoto protocol. Also Australian scientists lead the world in solar technologies - yet the country is stuck in fossil fuel mode. Australia is an ancient, dry land - and 2 centuries of agricultural experiments have basically been at the expense of the land. Farmers are now finally gaining the benefits of their skills and adaptability - outcomes that now appear likely to be lost due to failures of environmental policy (Wahliquist A. 'Clean and green not all it seems', A, 25/3/02)

Australia is a dry land, and water management has long been a source of dispute. Currently Australia has endorsed a market solution to managing water resources - but have not clarified the underlying rights to water that would allow the market to operate effectively (Cullen P. 'Patience runs dry on water gridlock', A, 25/3/02)

The National Land and Water audit is concluding that many of Australia's surface and groundwater resources are in poor condition. Organizations like the Murray Darling Commission say that without changes, the situation will get worse. One reason is that property rights and pricing arrangements give the wrong signals. Many markets encourage degradation. Households respond to the signals by wasting water. Farmers cause salinity. Pricing signals are often back to front. There is a need to value ecosystems as if they mattered, and reward good environmental managers. A 1% income tax rise could be rebated to those who live in a household or have a business which uses water wisely. (Young M. 'Imagine if we valed ecosystems as if they mattered', A, 25/3/02)

The 2001 State of the Environment report showed that Australia is not yet managing its environment sustainably. (Kemp D. 'Sustainable future is everybody's business', A, 25/6/02)

Globalization (4)

Globalization and free trade have an important moral dimension that is seldom recognized - because they can deliver hundreds of millions of people from poverty. But critics of globalization and of the WTO paint a different picture. However a recent World bank study compared 24 countries that had opened to globalization with 49 countries that hadn't. In 1980 the average incomes in the former were below the latter - but by 1997 the globalizers were ahead. No countries have moved up the global income ladder by closing to trade and investment, and in the period of de-globalization between WWI and II poverty rose strongly, and inequality widened. After September 11 it seemed possible that a new round of world trade talks could be seen as the best way to reduce the poverty and ignorance that are the basis of terrorism. Though the Dowa round started well, it could be derailed. A major problem is that environmental conditions were included as part of the negotiating package - thus perhaps allowing Europe to impose its environmental standards on the rest of the world, and thus impose highly centralized controls on trade. The problem is that using the WTO to impose the policies of European countries and various anti-globalization NGOs on countries such as Australia is contrary to the intent of the WTO - and could undermine the world trading system (Wood A. 'Green monsters threat to global prosperity', Australian, 9/4/02)

Globalization has been shown by World Bank research to have reduced international income inequality, and reduced poverty - contrary to popular assumptions (Henry K. 'Globalization shows off its good side', A, 25/2/02)

Knowledge, Education and Innovation (5A)

Higher Education at the Crossroads addresses issues related to (a) learning experiences and outcomes (b) equitable access (c) institutional specialization (d) regional engagement (e) efficiency and effectiveness (f) governance and management (g) workplace relations (h) revenue diversification (i) financing (j) red tape ('The great stocktake sale', A 1/5/02)

Innovation and education are the drivers of global knowledge economy. Stephen Dowrick (ANU) highlighted economic importance of education and research - as shown by economic theory and empirical studies. Australia's growth could be increased by 0.5% pa. Yet boards are timid about R&D investments. Universities are the cradle of R&D - yet reform has slowed. The HECS reform has not been matched. But funding cuts and loss of staff to better funded overseas institutions has hurt. Old arguments have continued on university funding. Reviews have abounded and are continuing. Everyone agrees on the need for more money for research and education. Suggested options include: partial deregulation; extra government funding; many additional funding mechanisms. Universities increasingly gain private funding - and the line between public and private institutions is blurring. But most of the proposals are merely rearranging the deck chairs. Yhere is a need for a mechanism to make a major difference to funding (Richardson J. 'In the cash-flow know', WA, 6-7/4/02)

Education and R&D are important sources of sustained economic growth. One extra years' schooling can be expected to increase output by about 8%. There are dynamic or growth effects linked to a countries' ability to implement new technologies. Australia needs to increase education levels to match leaders such as USA and Scandinavia. Private rates of return on R&D are high - and social rates of return are even higher. There can be benefits from offshore R&D - but the benefits of local R&D are greater - so Australia needs an increased research effort. (Dowrick S. 'Economic growth through learning', Australian, 10/4/02)

[CPDS Comment: Increased education is undoubtedly associated with higher economic output - but does not in itself cause those economic gains and such inputs may merely be wasted unless other conditions are also met (See Queensland's Lack of Serious Public Policy: A Comment on Smart State)]

Australia is relatively low in funding of education by OECD standards. The increased funding needed might be obtained from a small inheritance tax (Megalogenis G. 'Rising cost of staying in top league', Australian, 4/4/02)

According to the OECD's Science Technology Industry Review No 27 Australia is 14^th out of 24 countries in terms of spending on schools, science and software that are the basis of a knowledge economy. The heart of this problem is spending $3-4bn less in real terms than in 1990. Australia, Canada and Italy were three countries whose knowledge investment fell in 1990s. Recovery in education spending will need to come from government, as 1/3 already comes from private sources. In terms of R&D, the situation is not more complex with spending up during the 1990s, and government spending already high. A tax on inheritance might be a way of funding further education spending (Megalogens G. 'Rising cost of staying in top league', A, 4/3/02)

There is considerable emphasis on human capital in economic productivity. There has been variable success in funding education in recent decades. One thing that has been successful is introduction of changes for undergraduate students - through HECS. This should be extended across the board for higher education (Chapman B. 'Up-front fee mortgages the system', A, 4/3/02)

OECD suggested that several countries including Australia have picked up in multi-factor productivity due to a higher rate of innovation. Sound macro-economic fundamentals are most important to encouraging even more innovation - so investors can have confidence in stability (Costello P. 'Smart moves boost a clever country', A, 4/3/02)

Australian students rank well by international standards. However there are problems in schools that need to be addressed because of disparities amongst students. There needs to be policy emphasis on performance by all students in all situations. The extra-ordinarily high degree of centralization in Australia's education system needs to be redressed. Government funding of non-government schools also needs to be resolved. Competition amongst schools does not (as widely believed) lead to some being left behind, but to pressure on all to improve their performance. Professional development for teachers is also required (Caldwell B. 'No resting on out laurels, schools need a shake-up', A, 4/3/02)

Investment in human capital is essential for productivity growth. Major gains have been made over the past decade through introducing a particular form of fees for undergraduate students - based on recognition that most students are from privileged backgrounds, so taxpayer funded education was a tax on the poor for the benefit of the affluent. But the HECs scheme did not create obstacle for the poor. This scheme should be carried forward to other areas of higher education (eg for postgraduates) (Chapman B. 'Up-front fees mortgages the system', Australian, 4/4/02)

Unemployment (5B)

Unemployment is too high - though Australians have learned to live with it. Tough decisions are needed about wages, welfare and human behaviour. One traditional mistake is to assume that labour market flexibility will produce full employment at a market clearing wage. Falling wages will create jobs - but not those people want. Another error is assuming that the problem is lack of work - as many firms can't get suitable staff. Both ignore the effect of welfare on people's desire for work. The Howard Government's efforts have been to create more jobs; create more job capable people; and increase work incentives via changes to welfare. Work for the dole helps because more or less any job can be a stepping stone to the future. More work for the dole participants get off benefits than non-participant. There is also a need for attention to poverty traps - eg through a working credit system. (Abbott T 'Job mart needs firm hand', A, 5/3/02)

While there was some agreement that tax credits could be a solution to unemployment in Australia, discussion of this matter tended to reinforce the proposals of the five economists (Dawkins, Keating, Freebairn, Garnaut and Richardson - see Social justice 6/3/02) who identify the need for further macro and micro reforms, as well as tax credits instead of minimum wages to deal with unemployment. The ACTU however argued that freezing wages did not help - based on international experience (Strahan N. 'Critic challenges Five Economists', Australian, 6-7/4/02)

Health (5C)

Australia's Medicare system is under strain. Health spending is $45bn pa and there are long waiting lists for non-urgent treatment; the national drugs scheme costs grew 20% pa. Efforts to encourage medical benefits fund membership have helped - but costs continue to rise. There is duplication between state and federal services. Rural communities lack services. Costs are driven up by technological advances. Health spending, now 8.5% of GDP could be 14.5% by 2030. Medicare founder Scotton believes system should be changed to managed competition in the provision of basic services - with payment for private or higher care. Health services providers would be paid annually for members - depending on age and health - and be able to contract out service provision. Managed competition would encourage keeping members healthy. Richardson, Health economics at Monash, supports ending wasteful commonwealth state structure. Each individuals health costs should be paid by a single body - to prevent cost shifting. Very few services have been tested properly for medical efficiency, or for cost effectiveness. Australia needs a single government regional scheme - with a minor role for private healtth insurance (Kerin J. 'System in need of a transplant', WA, 6-7/4/02)

Health costs are growing - but it is hard to overcome this problem (Steketee M 'Better care a matter of coordination', A, 18/3/02)

Problems in health care relate to lack of access to services, complexities of commonwealth state involvement. Capping of benefits due to state budget limits is probably the major difficulty (Duckett S. 'Pick up the bill for our elders', A, 18/3/02)

Medicare is relatively good - because most health systems are very bad. It is also unfair and inefficient. Economists can't answer all these problems - because they involve policy value judgments - but economic analysis would provide better information about the consequences of the present polices. (Richardson J. 'Long term cure a premium choice for Medicare ills', A, 18/3/02)

Medicare is a reasonable system because it ensures reasonable equality of access to health and hospital services. Problems arise from lack of access - and waiting times. But attempts to solve this by encouraging private insurance were ideological, and risked creating two tier health system. Frther funding for health system would have been better. (Blewett N 'Where public service ends in two tiers', A, 18/3/02)

Reform of health system is urgently needed. The answer is not spending more money (or encouraging private funding), but rather overcoming waste. The private health rebate needs to be ended - requiring political strength. Pressure on hospitals needs to be reduced by more aged funding for respite care. Other services need to be increased. People who go private already get a lot of public support. It would be better to subsidize bed costs, rather than insurance products. And buck passing between different levels of government also needs to be resolved (Lees M. 'Wrong priorities squander billions in health funding', A, 18/3/02)

State governments spend a lot of money on health - because of widespread complaints. But the complaints just get louder. In fact Adelaide actually has too many hospitals. Health system is expensive, inefficient and fails to deliver good health-care. System limits users choices, ignores their preferences and is structured to benefit service providers (doctors and hospitals). John Fairbairn (Melbourne University) wrote about medicine as a weird market - as government sets both quality and price - which was characteristic of Soviet command economy. Political pressures always set price too low, which required controlling quantity or else budgets would explode. Many health services are almost free. And health insurance market is distorted by 30% commonwealth subsidy, and by community rating which involves cross-subsidy of ailing by the healthy. With few price signals, consumption escalates. System needs to be transformed from command economy into something more like a free market. Others asked good questions about lack of effective market economy (Wood A 'Ailing system crying out for a dose of robust competition', A, 17/7/02 )

Welfare Reform (6B)

After a decade of growth unemployment (and under-employment) remain high - and there is no agreement how incentives can overcome this. All agree about the collateral damage (eg 600,000 children growing up in jobless households). Despite discussion of changing the welfare and tax systems, Australians remain in favour of a social safety net. A major challenge is the welfare systems dis-incentive to work. The 'five economists' proposal seeks to address that. There is also discussion of the contribution of labour market deregulation, and of targeted payments. Increasing women's participation would see more households prosper. Removing financial dis-incentives for working mothers was also suggested. Increasing labour demand by reducing access to unfair dismissal provisions is government initiative. The contest between ACTU claims for wage rises for low paid, and government claims that poor can't be assisted properly by award system is the way ahead (Gough K. 'Jobless on the sidelines', WA, 6-7/4/02)

Tony Abbott argued that tax transfer changes are more effective in helping low income families than wage increases. Because those who benefit from wage rises are now those on low income - many have little paid work. In 1998 a tax supplement to the wages of the low paid was suggested to be better than increasing award wages (Five economists, 'Just the way to cut unemployment', A, 6/3/02)

Higher Education Reform (6C)

The governor of the RBA noted the poor state of Australia's universities - and well he might as the Banks ability to fight inflation depends on productivity which in turn depends on educational institutions. However there are parts of universities (eg business schools) that are in world top 100 rank - based on quality of output, rather than funding per student. And they operate espoused at the Towards Opportunity and Prosperity conference - greater autonomy, increased private funding through subsidized fees and HECs style loans. The Melbourne Business School is almost entirely privately funded, and is very similar to North American model. Freedom from federal oversight is the key to success. The principles espoused at the conference work - and don't need further argument. The sticking point is the ability of such a system to provide equitable access (not just to those who are either bright or rich). MBS maintains high standards - without concession to wealth, and can provide scholarships to those who can't afford the fees. The way to reform education was pointed out by Professor's Gilbert, Karmel and Chapman (Harper I. 'Give unis free rein to take on world', Australian (10)/4/02)

In 1943 Winston Churchill described future empires as 'empires of the mind'. Yet Australians inherited a cultural legacy built on exploiting natural resources in agrarian and labour intensive industries. Global pressures for change are strong. Affluent and educated regions are comfortable with this, but Australians in marginal regions feel detached. Philberth (in Revelation) argues that progress leads to chaos if not anchored in tradition - while tradition (if it does not encourage progress) leads to stagnation, and there are other dangers in poor relationships between tradition and progress. This described Australia's situation - and that of education. Those who built Australia question whether the future is being built on what matters to them - and see progressivists as wanting economic and cultural change for its own sake. The key to our future will not be our physical and industrial capital - but our human resources - where the most important factor is not what we know but what we don't know and by our values and beliefs, and by the way we relate to one another and see our place in the world. Higher education will have a significant role in this. Education should allow all to achieved their potential. There should be not implication that those who do do menial jobs are of less value - and there needs to be a balance between education and training. There is no crisis in higher education - when the sector has $20bn in fixed assets; 2% of this in borrowings; and $10bn annual revenue ($6bn from taxes often paid by ow income families who have trouble understanding the importance of education). There are three alternatives in education reform (a) do nothing except promote workplace relations reform (b) use internal government processes to promote reform (c) take ordinary Australians with us. The need is to reconsider how higher education is administered, funded and engages with the community. Key questions are: what defines a university; who attends university and why. There seems to be a one-size-fits-all approach to universities at present. Regional institutions need to have special roles. We need to consider governance and collaboration with the states; commercialization of intellectual property; options for private investment in universities; work practices in universities. Reform of higher education must make us internationally competitive; provide a sound basis for regional and complex community service obligations; and preserve the fundamentals that pass from the soul of one generation to the next. Priority setting for science is also important - and this should be broad and thematic, rather than specific and applied. (Nelson B. 'Bipartisan debate will defend future', Australian, 10/4/02)

A funding regime is required under which (a) each university can set a specific HEC for each course (b) the Commonwealth pays the full HEC (c) students repay 50% of these costs on a deferred basis through the income tax system (d) bursaries are provided to some universities (e) equity scholarships be provided to students from low socio-economic backgrounds. The tax system should be changed to provide strong incentives for private funding of research (Gilbert A. (VC University of Melbourne) 'Fees and tax need overhaul', Australian, 10/4/02)

A consensus may be emerging that funding arrangements may need to be altered to propel one or two of Australia's top universities in the worlds top 100. There is wide recognition that human capital now drives economies. Australia's universities are seen to be substantially under funded. The question is whether targeted elitism is the best solution (Phelan S. 'Going for a just reward', Australian, 29/5/02)

A direct policy of investing in top teaching and research would be better than attempts to 'world class' a university ('Top notch status an average goal', Australian, 29/5/02)

Expanding the opportunities that flow from education needs to be central to any review of higher education - rather than increasing fees and reducing places as seems to be suggested by Higher Education at the Crossroads. Universities need to be seen as national assets that increase wealth, not as liabilities that need to be removed from the books. Education contributes in many ways. By enabling people from diverse backgrounds to access higher education, universities give Australia the best opportunity to go forward. Over the past 5 years, universities have been weakened. Staff student rations are worse. Solving such problems should not be used as a smokescreen for reducing access. Students are already paying more (through HECs) and receiving less. Student access to technology is irregular. Many courses have been cut. Such issues are not mentioned in Nelson's report. Directing resources to one or two world-class universities would be dangerous. Rather than trying to pick winners, or deregulate so that the market can pick winners, we need to improve the system overall (Macklin J. 'We need a fair deal for all', Australian, 8/5/02),

[CPDS Comment: Such views, while raising valid concerns, do not suggest a solution ie how should Australia's universities etc be best managed and funded to produce the goals Ms Macklin sought?]

Economic reform (7A)

Cutting top marginal tax rates to 30% can boost economic growth, and aid the poor. Such a rate is needed to be globally competitive - to complement past economic reforms. (Jonson P. 'Slash tax to secure prosperity', Australian, 29/5/02).

Higher land and payroll taxes or a higher GST could allow lower taxes on income and capital, and thus attract footloose international investment and labour to Australia - according to Professor Freebairn. Australia's tax system has been improved, but special exemptions impede its ability to raise revenue efficiently (especially for payroll and land taxes that are only half their potential. States also must have an important role in tax reform - especially by eliminating stamp duties which act as a deterrent to change and innovation (Henderson I. 'Tax system not working to its potential or our benefit', Weekend Australian, 6-7/4/02)

[CPDS comment: why is it assumed that attracting footloose international investment and labour is the key

The federal government's tax reform agendas (cutting the deficit, introducing GST) are incomplete - as heavy payments were needed to regain support of GST enraged electorate. Further reform is needed in competition policy, freeing up the labour market; better balancing work and family; coping with population aging; retirement savings; health; education; the brain drain; immigration; privatization. The government also gives high priority to improving Murray water quality. One can not stop reform when facing global economy - as NZ's problems show. (Megalogenis G 'Back to the dollars and sense', A, 18/2/02)

From The Agenda: Towards Opportunity and Prosperity 2002
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