Government tax and welfare policies, by favouring homeowners and property investors over people who rent, are increasing the divide between Australians who own housing and those who do not, a new Grattan Institute report finds.

“The divide is income-based and it is generational,” says Jane-Frances Kelly, Grattan Institute Cities Program Director and author of the report, Renovating housing policy.

“While home ownership is stable or declining slightly in Australia, there are sharp falls in ownership rates among households with low incomes or aged under 45.”

The report quantifies major government outlays on the private housing system to reveal the cumulative impact of tax and welfare policies on housing, economic productivity and inequality in our cities.

Through policies such as exemptions for the family home from land and capital gains taxes and the eligibility test for the aged pension, governments provide benefits to homeowners worth $36 billion a year, or $6,100 on average for each homeowner household.

Through negative gearing rules, and the capital gains discount introduced in 1999, the Commonwealth provides residential property investors with nearly $7 billion a year, or $4,500 on average for each property investor.

Private renters, by contrast, receive very little support through the tax and welfare system, even though they make up nearly one in four households.

By increasing demand for residential property, these policies help to push up property prices and lock many homebuyers out of the market.

Combined with rules that restrict development in established suburbs, they force many households to buy on the city fringe, further from transport and jobs.

“It’s a rising form of inequality that damages economic productivity and the fair go,” says Ms Kelly.

Renovating housing policy urges governments to take a systemic approach to housing policy – to set clear principles and objectives over time and to produce policies that combine to achieve these goals.

“First we need a public conversation about who wins and loses from current policy, and how the playing field can be made more fair,” Ms Kelly says.

“If governments want to increase home ownership and at the same time give the many renters a better deal, they should reject policies that reward those who already own homes while making life harder for those who don’t.”

Australia’s top teachers should be able to earn $80,000 a year more, and top school-leavers should get $10,000-a-year scholarships if they take up teaching, according to a new Grattan Institute report on how to boost teacher quality and student performance.

Attracting high achievers to teaching proposes a $1.6 billion reform package to double the number of high achievers who choose to become teachers, and increase the average ATAR of teaching graduates to 85, within the next decade.

With this higher-achieving teacher workforce, the typical Australian student would gain an extra six to 12 months of learning by Year 9.

The report details an Australia-first survey of nearly 1,000 young high achievers (aged 18-25 and with an ATAR of 80 or higher) which found that more bright young Australians would take up teaching if it offered higher top-end pay and greater career challenge.

The report recommends a three-part reform package:

1. Offer $10,000 cash-in-hand scholarships to high achievers to study teaching. People who get the government-funded scholarships should be required to work in government schools for at least several years.

2. Create two new roles in schools – ‘Instructional Specialist’ and ‘Master Teacher’ – so the best teachers can get extra pay, time, and responsibility to improve teaching at their schools and in their regions. About 5-to-8 per cent of teachers would become Instructional Specialists, paid around $140,000 a year – $40,000 more than the highest standard pay rate for teachers. About 0.5 per cent of teachers would become Master Teachers, paid around $180,000 a year – $80,000 more than the highest standard pay rate for teachers. 

3. Launch a $20 million-a-year advertising campaign, similar to the Australian Defence Force recruitment campaigns, to promote the new package and re-position teaching as an attractive, challenging, and well-paid career option for high achievers.   

The report shows that bright young Australians are turning their backs on teaching.

Over the past decade, demand from high achievers for teaching fell by a third – more than for any other undergraduate field of study. Only 3 per cent of high achievers now choose teaching for their undergraduate studies, compared to 19 per cent for science, 14 per cent for health, and 9 per cent for engineering. 

‘Australia needs more high achievers in teaching, because great teachers are the key to better student performance,’ said the lead author of the report, Grattan Institute School Education Program Director Peter Goss.

‘The low status of teaching in Australia has become self-reinforcing, putting off high achievers who might otherwise want to teach. By contrast, high-performing countries such as Singapore and Finland get many high-achieving students to apply, and then select the most promising candidates.’

The report recommends all three schools sectors in Australia – government, private, and Catholic – implement the reform package. State and territory governments, some of which have failed to properly fund their schools, should pay for the reforms in government schools. Private and Catholic schools should fund the reforms themselves, without extra taxpayer money.

‘Our reform package would transform Australia’s teaching workforce,’ said Dr Goss. ‘In the long term it would pay for itself many times over, because a better-educated population would mean a more productive and prosperous Australia.’

Read the report

For further enquiries:
Pete Goss, School Education Program Director, Grattan Institute
T. 03 8344 3637 E. media@grattan.edu.au

Australia has not yet won the battle against COVID-19, and coming out of lockdown risks a second wave of infections, according to a new Grattan Institute report.

Coming out of COVID-19 lockdown: the next steps for Australian health care uses new modelling to show that reopening shops, schools, and workplaces heightens the risk of new infections, especially if people think the threat is over and ignore social distancing rules.

Workplaces are particularly high risk and should be re-opened slowly, with as many people as possible continuing to work from home to minimise the potential for the virus to spread.

Schools should enforce social distancing policies, and close if a COVID-19 case is detected.

Mandatory quarantining of international arrivals must remain in place.

And if a second wave of mass infections breaks out, governments will have to reimpose lockdowns.

‘It’s dangerous for people to think this fight is over,’ says lead author and Grattan Institute Health Program Director Stephen Duckett.

‘The nature of the virus hasn’t changed – our behaviour has.

‘If Australians go back to a pre-COVID normal, the virus could spread quickly and wildly, like it has elsewhere.’

Some of Australia’s states have effectively eliminated local transmission of COVID-19, and are keeping their borders closed to states where it persists. States should maintain different restrictions if they have different rates of local transmission.

Restrictions are obviously needed much less in states which have effectively eliminated the virus from their local population.

Australia should learn lessons from the way the health system responded to the pandemic.

Telehealth has been embraced by doctors and patients; it should now be expanded to give more people quicker access to care.

Mental health and hospital-in-the-home services should be bolstered.

And the federal and state governments need to strengthen supply chains to ensure adequate supplies of personal protective equipment and ventilators in the event of a second wave of COVID-19 infections.

‘If we get this transition to a “new normal” wrong, we won’t benefit from the overdue health system changes that the crisis forced on us,’ Dr Duckett says.

‘That would be another tragedy on top of the trauma caused by the pandemic itself.’

For further enquiries: Stephen Duckett, Health Program Director

M. 0447 837 741 T. 03 9035 9881 E. stephen.duckett@grattanintstitute.edu.au
W. www.grattan.edu.au

Private health insurance premiums could be cut by up to 10 per cent if private hospitals were made more efficient and stopped over-servicing, according to a new Grattan Institute report.

Saving private health 1: reining in hospital costs and specialist bills also shows that a handful of ‘greedy’ doctors charge their patients more than twice the official Medicare Benefits Schedule fee.

Only about 7 per cent of all in-hospital medical services are billed at this rate, yet these bills account for almost 90 per cent of all out-of-pocket costs for private hospital patients – and patients are often not told of these costs in advance.

Some doctors also charge ‘booking fees’ on top of procedure and consultation fees. These covert fees are not recoverable from private health insurance or Medicare – the patient is left to foot the bill.

‘The higher fees have nothing to do with the skill of the surgeon or the adequacy of the Medicare Benefits Schedule,’ says Grattan Health Program Director Stephen Duckett. ‘The small minority of specialists who charged more than twice the schedule fee are simply greedy.’

If these high-charging specialists had imposed fees at 50 per cent more than the schedule fee but no more, patients would have saved more than $350 million in 2018-19.

And patients should get a single bill if they are treated in a private hospital, instead of the present avalanche of separate and often surprising bills from the hospital, the surgeon, the anaesthetist, and pathology and radiology companies. 

As well as reducing the bills paid by private patients, private health insurers should pay less to private hospitals as well. The report debunks the myth that private hospitals are more efficient than public hospitals. In fact, patients stay 9 per cent longer in private hospitals than public hospital patients with similar conditions.

Paying private hospitals for treating a patient, rather than for keeping the patient longer, doing more tests, or ordering more drugs, could reduce costs by more than $1 billion a year.

The report also finds that private hospitals provide more care than public hospitals that is of little or no value to the patient. Private health insurers could save about $1 billion a year if they no longer had to play for low-value or no-value care.

The total identified savings of about $2 billion each year could fund cuts in private health insurance premiums of 7-to-10 per cent.

‘Capturing these savings and passing them on to patients in the form of lower insurance premiums could save private health care in Australia,’ Dr Duckett says.

‘Patients would be the winners under this blueprint, because their out-of-pocket medical costs and private health insurance premiums would be lower.’Dr Duckett will speak to this report at the National Press Club in Canberra on Wednesday 4 December. Grattan’s next report will identify specific policies to make private health insurance work better.

Read the report

Further enquiries: Stephen Duckett, Health Program Director
T. 03 8344 3637 E. media@grattan.edu.au

More than a million Australians living in rural and remote areas are denied the access to basic medical care that most city dwellers take for granted, a new Grattan Institute report has found.

Access all areas: new solutions for GP shortages in rural Australia shows that in seven rural areas containing one in 20 Australians, limited access to GPs is imposing severe costs on individuals, doctors and the health system.

“This isn’t just unfair, it’s irrational,” said Grattan Institute Health Program Director Stephen Duckett.

“People in rural areas with low access to GPs are more likely to have serious health risks.

If they can’t get care it will cost them, and the taxpayer, much more in the long-run.”

These areas include Tamworth, Goulburn and Mount Isa, as well as the Northern Territory and most of Western Australia.

The report argues that an investment of around $30 million a year would go a long way towards solving Australia’s worst shortages.

It would also generate health benefits that could reduce the cost of hospital visits by an amount equivalent to the $30 million investment.

The funds would support a greater role for pharmacists, especially in providing repeat prescriptions and vaccinations, and the introduction of a new health worker, the physician assistant, to expand care in remote areas.

“Pharmacists and physician assistants could take on some of the less complex tasks performed by GPs, without compromising quality and safety,” Dr Duckett said.

“That would save money and free up GPs to do the complex work they are trained for.”

Dr Duckett said successive government policies over decades had failed to fix the problem: at current rates of improvement it would take more than 65 years for very remote parts of Australia to catch up to the levels of GP services that big cities have today.

“Luckily there is a relatively cheap and simple answer that could be in place within five years, if we’re willing to adopt new responses to an old problem.”

Student fees now comprise a fifth of public university funding – almost $6 billion a year – according to a new background paper from Grattan Institute’s Higher Education Program.

University fees: what students pay in deregulated markets shows that in 2013 about $4.3 billion of these fees were paid by international students. The rest were paid by domestic students, with postgraduate students paying more than $900 million.

Last year 312,500 international students were enrolled in Australian universities, nearly twice as many as in 2001. They comprise nearly a quarter of all enrolments.

The paper shows that annual median international undergraduate fees range from $21,000 to $28,000, depending on discipline, but that many students prefer more expensive universities, even when they charge twice as much as the cheapest universities do.

However, Australian students are far less willing than international students to pay a large premium for entry into prestige universities, according to Higher Education Program Director Andrew Norton.

“Australian students know that research rankings are not a reliable guide to graduate quality. And Australian employers know this, too, from having hired graduates from many different universities,” Mr Norton said.

In high-cost disciplines such as science and engineering, universities receive only a little more per student from international undergraduate fees than they do for domestic government-supported students. But they receive twice as much from international undergraduate students in low-cost disciplines such as commerce and arts.

The paper finds that in the domestic postgraduate market, by contrast, universities do not always take a commercial approach to setting fees, choosing instead to charge lower amounts for some courses to fulfill their social mission.

In some fields, such as nursing, it is not unusual for universities to receive less from a fee-paying student than from a Commonwealth supported student.

More than half of all bachelor-degree international students study commerce, with engineering the next most popular course.

By contrast, the most popular courses for domestic undergraduates are in the society and culture category, which includes arts and law degrees. Only 18 per cent of domestic bachelor-degree students take commerce-related courses.

A future Grattan report will explore what profits universities make on fee-paying students and the policy implications of what happens to the money.

Read the paper

For further enquiries:
Andrew Norton, Higher Education Program Director
T. 03 8344 3637 E. andrew.norton@grattan.edu.au

Extending the goods and services tax to cover many of the categories currently exempt could raise $17 billion a year, while increasing the rate to 15 per cent would generate about $27 billion, according to a new Grattan Institute report.

A GST reform package finds that raising more GST revenue, either through a higher rate or applying it to more goods and services, is preferable to most other means of raising revenue, including higher income taxes.

Current governments face many challenges, such as funding growing healthcare costs, reducing deficits, and cutting inefficient taxes. A broader or higher GST could fund any of these initiatives – although not all of them.

‘Broadening the GST base to include fresh food, health and education would be more efficient, and would reduce compliance costs,’ says Grattan Institute CEO John Daley.

‘But if the politics of taxing those categories proves too fraught, then raising the rate of the GST would be a satisfactory second best.’ The report works through the implications of a reform package that increases the rate to 15 per cent.

A well-designed GST package could lead to a tax and welfare system more progressive than at present. Higher welfare payments and targeted tax cuts would make low and middle-income households on average better off.

Drawing on new household-level modelling, the report shows that spending about 30 per cent of the additional revenue on welfare – increasing the base rate of pensions and allowances by about five per cent – would leave two-thirds of low-income households better off overall.

Committing a further 30 per cent of additional revenue to income tax cuts would allow the government to shave 2 to 2.5 percentage points off the bottom two tax rates. With the welfare increases, these cuts would fully offset the GST increase for households earning up to $100,000 a year.

These measures would leave $11 billion of additional revenue that could help the states address the looming hospital funding gap, fund tax cuts that promote economic growth or reduce Commonwealth budget deficits.

But not everyone can be fully compensated, says Mr Daley.

‘Government budgets are in deficit, and promising “no losers” will be a sure-fire way to erode the revenue benefits from the package.’

Read the report

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Building an extra 50,000 homes a year for a decade could leave Australian house prices 5 to 20 per cent lower than they would be otherwise, and stem rising public anxiety about housing affordability, according to a new Grattan Institute report, Housing affordability: re-imagining the Australian dream.

Within living memory, Australia was a place where housing costs were manageable, and people of all ages and incomes had a reasonable chance to own a home with good access to jobs. But home ownership rates are falling among all Australians younger than 65, especially those with lower incomes.

Owning a home increasingly depends on who your parents are, a big change from 35 years ago when home ownership rates were high for all levels of income. Those on low incomes – increasingly renters – are spending more of their income on housing.

Affordability will only get a lot better if governments ensure more homes are built. State governments should fix planning rules to allow more homes to be built in inner and middle-ring suburbs of our largest cities. More small-scale urban infill projects should be allowed without council planning approval. State governments should also allow denser development ‘as of right’ along key transport corridors.

Development in middle suburbs has increased in recent years, especially in Sydney. But today’s record level of housing construction is the bare minimum needed to meet record levels of population growth driven by rapid migration. Meanwhile a decade of accumulated shortages are forcing younger people to set up their own homes later in life.

The Commonwealth government can improve housing affordability somewhat – and immediately – by reducing demand. It should reduce the capital gains tax discount to 25 per cent; abolish negative gearing; and include owner-occupied housing in the Age Pension assets test. And unless the states are prepared to reform their planning systems, the Commonwealth should consider tapping the brakes on Australia’s migrant intake.

“It took neglectful governments two decades to create the current housing affordability mess. They preferred the easy choices that merely appear to address the problem,” says Grattan CEO John Daley.

“The politics of reform are fraught because most voters own a home or an investment property, and mistrust any change that might dent the price of their assets. But if governments keep pretending there are easy answers, housing affordability will just get worse. Older people will not be able to downsize in the suburb where they live, and our children won’t be able to buy their own home.”

Read the report

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Any Commonwealth Government move to end its university open access policy would reduce the number of students from disadvantaged backgrounds, hurt university innovation and shrink the supply of graduates into areas of shortage, according to a new Grattan Institute report.

Keep the caps off! Student access and choice in higher education finds that the policy, initiated by the current government, has been a major success.

“More university applicants are getting into their preferred course, enrolment growth is strong in areas of labour market shortage and the number of students from disadvantaged backgrounds is increasing,” says Grattan Institute’s Higher Education Program Director Andrew Norton.

“Universities are also innovating to draw in more students, starting online courses and collaborating with TAFEs. But all these policy achievements are now at risk.”

The government, supported by some university leaders, is considering limiting public university enrolments. This would end the demand-driven funding system that began with bipartisan support last year, for a small saving in expenditure.

The report shows that a proposal to set a minimum Australian Tertiary Admission Rank of 60 for university entry would be unfair to many university applicants. Completions data show that students entering with ATARs below 60 have a good chance of finishing their degrees. A minimum ATAR would cut the number of students from low SES backgrounds.

“Putting caps back on the higher education system would hit the people who miss out hard. Many students who do get a place would also be worse off. They would be less likely to be able to enrol in their preferred course or university,’ says Andrew Norton.

Australia is set for more than a decade of deficits between 2008 and 2019, with Commonwealth net debt projected to peak at 18 per cent of GDP in 2017, higher than any year since the mid-1990s.

But the reality may be even worse than projections, according to a new Grattan Institute working paper.

Fiscal challenges for Australia is the first in a series of Grattan working papers on Australia’s weakening fiscal position and some of the revenue measures to address it. It finds that both Coalition and Labor Governments have been hoping that bracket creep and favourable economic conditions will return the budget to balance.

Their short- and medium-term projections have all contained highly optimistic assumptions about revenue growth and spending restraint.

For six years budget outcomes have been worse than projections, and for six years the Commonwealth has run headline deficits, five of them larger than two per cent of GDP.

“Hope is not a budget management strategy: it simply justifies putting off hard decisions, and shifts the costs and risks of budget repair onto future generations,” says Grattan Institute CEO John Daley.

Grattan research shows that each $40 billion dollar deficit increases the lifetime tax burden for households headed by a person aged 25 to 34 by $10,000.

Deficits are not likely to improve as the falling terms of trade and lower nominal economic growth drag on revenues at the same time as the Government needs to fund substantial new policy initiatives.

State government budgets are also under pressure from growing interest bills on borrowing to fund infrastructure, the rising costs of health and education, and the Commonwealth’s decision to no longer contribute to real increases in spending per person in these two areas from 2017-18.

“Given the size of the task, Commonwealth and state governments will not be able to repair their budgets without both cutting costs and boosting revenues,’ says John Daley.

“That’s not an appealing prospect for politicians, but sustainable budgets require tough choices and brave leaders willing to make them. A vital first step is to face up to the scale of the problem.”

Coming papers in the Budget Repair series will show how budget deficits could be reduced through changes to property taxes, the GST, superannuation tax concessions, and capital gains tax and negative gearing arrangements.

Read the paper

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Seventy per cent of Australians want to die at home, yet only 14 per cent do so, according to a new Grattan Institute report showing that dying in Australia is more institutionalised than in most countries in the world.

Dying Well finds that despite their wishes, about half of Australians die in hospital and a third in residential care.

Medical and community attitudes plus a lack of funds for formal, home-based care mean that Australians die at home at half the rate that people do in New Zealand, the United States, Ireland and France, among other countries.

The report urges policy and attitudinal change to enable more people to die comfortably at home and in home-like environments, surrounded by family, friends and effective services.

“More than at any time in history, most people die when they are old, and are more likely than past generations to know when in the near future they are going to die,” says report co-author, Professor Hal Swerissen.

“That gives us a great opportunity to help people plan to die well – but we’re not taking it.”

Dying Well finds that because most people do not speak up about the way they would like to die, they often experience a disconnected, confusing and distressing array of services, interventions and relationships with health professionals.

The report recommends more public discussion, including an education campaign, about the limits of health care as death approaches and the need to focus on end-of-life care.

It also proposes the widespread adoption of advance care plans that ensure people’s desires for the end of life are met.

Finally, it recommends greater investment in community-based care to enable services for those dying of chronic illness to shift their focus from cures and institutional care to supporting people’s wishes to die at home.

Doubling the number of people who die at home will cost $237 million a year, but about the same amount of institutional care funds could be released to pay for it.

“The baby boomers are growing old and in the next 25 years the number of Australians who die each year will double,” Professor Swerissen says.

“We need the courage to promote a national discussion about a subject that we might dislike but cannot avoid.”

Read the report

Further enquiries: Hal Swerissen
M. +61 (0) 418509062
E. hal.swerissen@grattaninstitute.edu.au

The economic benefits of Australia’s 10-year mining boom far outweigh the costs, yet the Federal Government has not saved enough of the $190 billion it earned from the boom to ensure the health of future Australian budgets, according to a new Grattan Institute report.

The mining boom: impacts and prospects finds that the incomes of most Australians – not only those from mining states – have risen faster during the boom decade than in the one before.

And while the boom has pushed up the dollar and made it hard for industries that compete internationally, Grattan’s analysis of comparable events overseas suggests that manufacturing and other trade-exposed industries will bounce back quickly once the exchange rate falls.

“Our report examines the fears some Australians have about the potential adverse consequences of the boom,” says Grattan Institute Productivity Growth Program Director Jim Minifie.

“People worry about the damage caused by the high dollar, the impact of the boom on non- mining regions and the risk we will turn into a quarry economy. These concerns are all understandable but they’re not borne out by the evidence.”

“There is always the risk of a downturn as resources investment and prices decline, but Australia has low inflation and a recession is far from inevitable.”

The report finds, however, that one community concern is well-founded. Tax decreases and spending increases have been larger than Australia can afford in the long run.

Some spending was justified by the response to the Global Financial Crisis and some has been well invested, but underlying budget deficits must now be repaired in more difficult times.

Governments should resist the temptation to protect affected industries, but continue to invest in skills and education to help workers and citizens adapt to an ever changing, globalised economy, Dr Minifie said.

“These skills will be even more important as the longest and largest boom in 150 years winds down.”

The widely held belief that powerful firms control the Australian economy is a myth, according to a new Grattan Institute report.

Competition in Australia: Too little of a good thing? shows that the market shares of large firms in concentrated sectors in Australia are not much higher than in other countries and that they have they not grown much lately.

But the report shows that where a few firms dominate markets, they earn higher profits.

Up to half the total profits in the supermarket sector (dominated by Coles and Woolworths) are ‘super-normal’ – that is, profits that exceed the cost of compensating shareholders.

In the banking sector (dominated by the Big Four), super-normal profits account for 17 percent of total profits.

Other companies and sectors with substantial super profits include Telstra, some major city airports, liquor retailers, internet service providers, sports betting agencies, and private health insurers.

“There’s nothing wrong with profits – they play an important and legitimate role in the economy and society,” says Grattan Institute Productivity Growth Program Director Jim Minifie.

“But where profits become super-profits because firms face little competition, they can come at the expense of customers or suppliers.

“There are no policy silver bullets here, but governments can do more to improve competition in the private economy.”

The report urges governments and regulators to do more to ensure customers get a good deal, especially in highly concentrated sectors where big firms have market power and potential competitors face high barriers to entry.

To intensify competition in banking, governments should free-up customers from the control of their current bank by making it easier for people to switch banks.

In the supermarket sector, where the big incumbents have expanded into liquor and petrol retailing, governments should consider relaxing zoning restrictions that limit the entry of new competitors.

Constraints on competition in retail pharmacy should finally be removed, as many reviews have suggested.

Regulators can put more pressure on electricity distributors, ports and airports, and on health insurers.

And governments need to make it less complex and confusing for people to compare and switch providers of retail energy, and superannuation.

Read the report

Further enquiries: Jim Minifie, Productivity Growth Program Director
T. 03 8344 3637 E. media@grattan.edu.au

The popular perception that Australia’s electricity supply has become less reliable with more renewable energy, and that this is inevitably going to get worse, is wrong and dangerous, according to a new Grattan Institute report.

Keep calm and carry on shows the idea is wrong because almost all outages are caused by problems in transporting electricity, and have nothing to do with whether the power was generated from new renewables or old coal or some other technology.

And it’s dangerous because if politicians over-react to public concern and rush to intervene in the market, electricity bills could rise even higher.

Political leaders and media commentators have linked the 2016 state-wide blackout in South Australia with that state’s high level of wind power. But they haven’t recognised that the electricity market operator has since changed management practices to better suit the changing shape of the energy system, and a combination of regulatory obligations and market mechanisms are being applied to support grid stability as the system continues to evolve.

Equipment failures, falling trees, inquisitive animals and crashing cars can all cause the power to go out in the local distribution network. Over the past 10 years, more than 97 per cent of outages across the National Electricity Market could be traced to the poles and wires that transport power to homes and businesses.

But it would be prohibitively expensive to try to prevent all these outages. The NSW and Queensland governments spent $16 billion more than was needed on distribution networks over a decade, while achieving only very small improvements in reliability – and households and businesses are still paying for this through their power bills.

Regulators and network businesses need to carefully balance cost and reliability as technology and consumer preferences change. Consumers will not be happy to pay for another round of network ‘gold-plating’.

Events in Victoria and SA in January highlighted the current tight balance between supply and demand. As old coal generators are closed and summer heatwaves become more severe, outages will increase unless investment in new supply follows. But a lack of generation capacity on hot days caused only 0.1 per cent of all outages over the past decade. To encourage investment and keep this problem rare, governments need to create a stable policy framework to reduce greenhouse gas emissions and ensure that retailers have enough supply.

“What Australia needs now is not panic and politicking, but cool-headed policy responses to manage electricity reliability without unnecessarily adding to consumer bills,” says Grattan Institute’s Energy Program Director Tony Wood.

“Increased renewable generation does create challenges for managing the power system. But if we keep calm and carry on, these challenges can be met without more big price increases for households and businesses.”

Read the report

The Commonwealth Government should create 2500 teaching- focused positions in universities as part of a national effort to raise the quality of teaching in higher education, a new Grattan Institute report argues.

Taking university teaching seriously argues that as higher education enrolments expand toward 40 per cent of young people, much more attention needs to be given to how students learn.

“When about a quarter of students going to university on lower entry scores never complete their degrees, the time, talent and money of a large group of people are going to waste,” says Grattan Institute Higher Education Program Director Andrew Norton.

Student surveys suggest that Australian students rate the quality of university teaching less highly than do their American counterparts.

Australians rarely report being pushed to do their best work, are often not actively participating in classes, and have little interaction with academic staff outside of class.

“One problem is that our academic culture is narrowly focused on excellence in research,” Mr Norton says.

“Australian academics are usually appointed for their subject expertise not their teaching skills, and many of them prefer research to teaching.”

Grattan Institute research found that the conventional view in Australian universities that better research led to better teaching was not borne out by the evidence.

Students in high-research environments were no more likely to report satisfaction with teaching than students in low-research environments.

The report proposes a cost-neutral program to create 2500 new jobs over the next six years in order to double the number of teaching- focused positions in Australian universities.

Universities would compete for the positions, and only 12 would receive them, in order to create a critical mass within those institutions to raise the profile and quality of teaching.

“The aim is to create a circuit-breaker to the institutional culture of focusing on research,” Mr Norton says.

“If these positions are successful, they would begin to spread a culture of top-quality teaching right across our higher education system.”

Grattan Institute is delighted to announce the appointment of Peter Goss as School Education Program Director.

Peter is a Harvard-educated biologist who has worked on primary school education with Cape York Indigenous leader Noel Pearson and advised the Commonwealth Government’s International Education Advisory Council in preparation for the 2013 Chaney report.

Raised overseas but based in Melbourne, Peter is a Principal at The Boston Consulting Group, with a focus on human and social services, health care and education. He has been at BCG since 2007.

Prior to BCG, Peter completed a PhD in systems biology at Harvard University in 1998, and had a range of leadership roles in biotech commercialisation before moving into management consulting.

Grattan Institute chief executive John Daley said Peter would bring a wealth of insight, private sector knowhow, and local and overseas experience to the role.

“He’s passionate about the role of school education in creating a good society, and I am certain he will sustain Grattan’s leadership in school education policy in Australia.”

He replaces Ben Jensen, Grattan’s first School Education Program Director, whose groundbreaking work on restoring teaching and student learning to the centre of the Australian education debate can be accessed under the School Education section of this website.

For further enquiries: John Daley. CEO
M. +61 (0) 407 004 231 T. +61 (3) 9035 6660 E. john.daley@grattan.edu.au

Trying to create more competition among schools, as many school systems are doing, will not lift student performance, according to a new Grattan Institute report.

The myth of markets in school education shows that at least 40 to 60 per cent of Australian schools face no or very limited competition, and there is very little government can do about it.

Providing more information on schools, cutting private school fees or increasing the capacity of government schools will do little to increase school competition, let alone improve student performance.

The report also finds that some school systems are focussing too much on giving schools autonomy at the expense of giving school leaders the direction and support to lift the performance of students.

“Empowering school leaders to run their schools well is vital, but empowerment requires much more than autonomy,” said Grattan Institute School Education Program Director Ben Jensen.

“The world’s best systems have varying levels of autonomy, but they all articulate the best way to teach and learn, then they develop teachers and school leaders to carry it out.”

Grattan Institute’s report is the first analysis of a 20-year policy in some Australian school systems to give schools more autonomy and to try to increase competition among them.

“These systems have led the world in increasing autonomy and trying to create markets and many other countries are following suit, but in key areas of school improvement, autonomous schools have the same bad practices as centralised schools.” Dr Jensen said.

But The myth of markets shows that neither competition nor what is too often an excessive focus on autonomy are the best ways to improve Australian schools.” Dr Jensen said.

Australia could save $1.5 billion a year on health spending by improving the safety of patient care in hospitals, a new Grattan Institute report has found.

Safer care saves money shows that safer hospital care doesn’t just reduce harm to patients, it also saves money for taxpayers.

One in nine patients who go into hospital in Australia suffers a complication. The report finds that those complications cost public hospitals more than $4 billion a year, and private hospitals more than $1 billion a year. If all hospitals in Australia lifted their safety performance to match the best 10 per cent of hospitals, an extra 250,000 patients would go home complication-free each year and the health system would save about $1.5 billion every year, freeing up beds and resources so another 300,000 patients could be treated.

Public hospitals get extra funding for treating a sicker patient even if the patient became sicker because of a complication suffered in the hospital. But Grattan analysis of Australia’s 20 biggest public hospitals shows that in every case, the cost of complications to the hospital was larger than the extra funding. On average, a complication cost the hospital more than three times the extra revenue it received.

The report concludes that hospitals don’t need extra financial incentives to reduce complications. Instead, they need better information, and accreditation systems that encourage useful improvements rather than ticking boxes. Complication rates and accreditation outcomes should be public, so that governments are held to account. And medical students should learn only in hospitals with lower complication rates.

State governments should make it clearer to their hospitals that improving patient safety also boosts the bottom line. States should give public hospitals – and the public – information on the estimated cost of and revenue from complications. Private health insurers also benefit from lower complication rates: their costs and future premiums fall. Insurers should increase pressure on hospitals to improve their safety performance, through contract negotiations and by making information on complication rates available to their members, either directly or through GPs.

Australia’s hospital accreditation system has failed: it does not improve patient outcomes; doctors dismiss it as irrelevant or a waste of their time; it provides no incentives for excellent safety performance; and accreditation reports are kept secret. Practically every significant hospital safety failure in recent decades – from Bundaberg in Queensland to Camden and Campbelltown in NSW, Bacchus Marsh in Victoria and, most recently, a gas mix-up at Bankstown-Lidcombe Hospital in NSW– has happened in a hospital that had passed accreditation with flying colours.

The report recommends replacing ‘one size fits all’ accreditation with a system based on measurable safety outcomes, tailored to each hospital’s situation.

“Hospitals would no longer be spruced up for a once-a-year visit by accreditation inspectors,” says Grattan Institute Health Program Director Stephen Duckett.

“Instead, surveyors would conduct safety tests without notice, but concentrate on helping hospitals to give safer care.

“And for the first time, patients and taxpayers would have access to detailed accreditation reports on all hospitals, so Australians could hold their governments to account on the quality and safety of hospital care.”

Read the report

Further enquiries: Stephen Duckett, Health Program Director
T. 03 8344 3637 E. media@grattan.edu.au

A new national report card on NAPLAN school results reveals big differences between the states on the rate of progress students make over the course of their schooling.

The Grattan Institute report, Measuring student progress, shows Queensland is the star performer in primary school. Queensland primary students make two months more progress in reading than the national average between Year 3 and Year 5, and about one month more progress in numeracy over the same two years.

NSW stretches advantaged secondary students, but is not so good at supporting disadvantaged secondary students.

Victoria is the reverse: students in disadvantaged Victorian schools make four months more progress than the national average from Year 7 to Year 9, but the state does not do as well in stretching advantaged students.

Contrary to popular perception, Tasmanian and Northern Territory schools are not under-performers. The report shows that their students progress broadly in line with students in schools of similar socio-economic advantage in other states.

South Australia’s primary students make slightly less progress than the national average; Western Australia’s make progress roughly on par with the national average.

The ACT is the worst performer on the Grattan Institute’s measure of student progress, which takes account of the fact that some states and territories have more advantaged students than others. On this like-for-like basis, students in the ACT make two to three months less progress than the national average in both primary school (between Year 3 and Year 5) and secondary school (between Year 7 and Year 9).

The report challenges the idea that students in Australia’s high-achieving schools are ‘cruising’. In fact, students in low-achieving schools make only half the progress in numeracy from Year 7 to Year 9 as students in high-achieving schools, and 30 per cent less progress in reading.

“This finding should ring alarm bells in cabinet rooms and education departments across Australia,” Grattan Institute School Education Program Director Peter Goss says.

“If governments are serious about delivering on the Gonski vision of ‘at least one year’s growth in learning for every student every year’, then disadvantaged schools must be a big priority.”

The report finds that whether a student attends a government, Catholic or independent school has little impact on how fast they progress in NAPLAN. Low rates of progress in regional and rural schools are mainly explained by their high levels of disadvantaged students. And whether a student goes to a big or small school has little relationship to how well they will learn.

“The Grattan report card provides new insight on what’s happening in schools and contains important lessons for education policy makers,” Dr Goss says.

“Governments should investigate why students make more progress in some states than others, with the goal of identifying the teacher practices and school policies that produce the best results for our children.”

Read the report

For further enquiries:
Pete Goss, School Education Program Director, Grattan Institute
T. 03 8344 3637 E. media@grattan.edu.au

The global gas revolution is poised to significantly raise bills for Australian households and some gas-using businesses, but government should resist calls to intervene to keep prices low, according to a new Grattan report.

Getting gas right: Australia’s energy challenge finds that development of Australia’s liquefied natural gas export industry, which could be the world’s largest by the end of the decade, could lead to price rises for households of up to $170 a year.

“For years local prices have been low by world standards, but when suppliers can get a higher price exporting than on the domestic market, the domestic price has to rise,” says Grattan Institute Energy Program Director Tony Wood.

“Not everyone likes it, especially when electricity prices have also been rising, but it’s a natural consequence of an evolving market.”

Grattan Institute’s report examines the creation of an east coast gas export market – which will join with Western Australian exports to produce an estimated $50 billion-a-year industry by 2017 – and Australia’s role in a gas revolution created by surging demand in Asia and new discoveries of shale gas in the United States.

The report also examines Australia’s possible shortage of supply, arguing that government must resolve the impasse over coal seam gas in New South Wales, while industry must ensure that enough infrastructure is built to ensure that gas flows.

Governments should also move to create a more transparent and competitive market by accelerating the development of gas trading hubs, introducing a published price index, freeing up trading in pipeline capacity and more tightly constraining joint marketing arrangements by gas producers.

Beyond that they should resist calls for a moratorium on new LNG developments or the reservation of a proportion of gas for domestic consumption.

“These demands for intervention are all pleas for protectionism,” says Tony Wood. “They will lead to distorted price signals, inefficient industries, lower investment and ultimately higher prices.”

“For three decades, the Australian economy has thrived from opening trade and removing protection. We should not turn the other way now.”

Federal Parliament should pass the Government’s Stage 1 tax cuts immediately but should defer consideration of the controversial Stage 3 cuts, according to a new Grattan Institute working paper.

Budget blues: why the Stage 3 income tax cuts should wait finds passage of the Stage 1 cuts would give the economy a much-needed boost at a time of low growth and stagnant wages.

The Stage 2 cuts would help most Australians by giving back bracket creep and are likely to be affordable.

But the Stage 3 cuts, scheduled to come into effect in 2024-25, would cost the budget $85 billion over the subsequent six years. We do not know now whether these cuts are affordable or the right size and shape for the economy so far into the future.

‘The economy is softening, the budget position is weakening, and calls for the Government to use fiscal policy to stimulate the economy are growing,’ says Grattan Institute’s Budget Policy Program Director Danielle Wood.

‘Tax cuts now could provide that stimulus but there are big risks from locking in major tax cuts on the never-never.’

Government would have to substantially reduce growth in spending to deliver both the Stage 3 tax cuts and promised surpluses, particularly if the economy worsens.

The Stage 3 tax cuts would reduce bracket creep and boost people’s incentives to work, but they are far from the best way to do so. Committing to Stage 3 now could also ‘crowd out’ the chance of meaningful tax reform over the next decade.

If the Stage 3 cuts pass, the top 15 per cent of income earners would pay a lower share of their income in tax, but middle-income earners would pay a higher share. The income tax system in 2024-25 would be less progressive than it has been at any point since the 1950s. Whether this is desirable is a value choice, but it is a choice that Australia should make with its eyes open.

By contrast, the temporary and targeted Stage 1 tax cuts are well timed to boost consumer spending and economic activity at a time when inflation is virtually non-existent, the labour market is weakening, new building approvals are drying up, and per person living standards have gone backwards for three consecutive quarters.

‘Given the softening economy, passing the Stage 1 tax cuts should be a priority,’ Danielle Wood says.

‘But there is absolutely no need for the Government to tie its hands by committing to the Stage 3 tax cuts now.’

Read the working paper

For further enquiries:
Danielle Wood, Budget Policy & Institutional Reform Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Simple reforms to Australia’s health system could help save more than $320 million a year on avoidable hospital admissions and provide better care for people with diabetes, asthma, heart disease and other chronic conditions, according to a new Grattan Institute report.

Building better foundations for primary care says that the primary health system, Australians’ first point of contact for health care, was designed in and for another era and is now failing in the prevention and management of chronic disease, the heaviest burden on today’s health system.

The government spends more that $1 billion each year on planning, coordinating and reviewing chronic disease management, yet many people with chronic conditions do not receive best care and end up having hospital stays that could have been avoided with better care.

The report says Medicare’s fee-for-service payment system for one-off visits to GPs needs to change, in favour of broader payments to health teams for integrated, long-term care of patients with chronic conditions. GPs would be financially rewarded for getting the best results for their patients, rather than for seeing their patients more often.

The bickering and blame-shifting between the Commonwealth and the states needs to stop. The federal government should sign an agreement with each state that sets specific goals for disease prevention and management.

Under these agreements, Primary Health Networks should be given more responsibility to create more effective and efficient primary care systems in their local areas, and should be held accountable for making improvements that reduce unnecessary hospital admissions.

GPs should be paid to provide more data on why people visit their doctor and what advice and treatment they get.

“These are simple reforms that will save money for taxpayers and improve care for patients,” says Grattan Institute Health Program Director Stephen Duckett.

“The 2017 federal budget is expected to commit more than $500 million over the next few years to lifting the Medicare rebate freeze. The Government should seize this opportunity to buy system change.”

Read the report

Further enquiries: Stephen Duckett, Health Program Director, Grattan Institute
T. 03 8344 3637 E. media@grattan.edu.au

A broad-based property levy could raise $7 billion a year and would be the best way for states and territories to raise revenue to address their deteriorating budgets, according to a new Grattan Institute working paper.

Property Taxes, the second in a series of Grattan working papers on tackling Australia’s weakening fiscal position, finds that a levy of just $2 for every $1000 of unimproved land value would raise $7 billion a year with an annual charge of $772 on the median-priced Sydney home, $560 on the median-priced Melbourne home, and lower average rates in other cities and the regions.

Grattan’s recent working paper, Fiscal challenges for Australia, found that state budgets are under pressure, with spending in health, education and other areas growing faster than GDP. State revenues are also threatened by the Commonwealth’s decision in last year’s budget to substantially reduce promised funding to the states for hospitals and schools.

“Attention is focussed right now on the worsening Commonwealth deficit, but states and territories have a looming funding gap, and have provided little insight into how they are going to fill it,’ says Grattan CEO John Daley.

Property Taxes argues that a broad-based property levy calculated from the council rates base would be the best revenue measure to fill that gap.

“While property taxes can be unpopular because they are highly visible and hard to avoid, they are also efficient and fair, and don’t change incentives to work, save and invest.”

“Unlike capital, property is immobile – it cannot shift offshore to avoid taxes. Over the last 25 years, taxes on property and property transactions have been the only significant ‘growth taxes’ for States, with revenues keeping pace with the economy.”

“Our proposal is manageable for property landowners, and protects low-income people. Low-income retirees with high-value houses could defer paying the levy until their house is sold,” says John Daley.

The working paper argues that the levy could also be used to fund the reduction and eventual abolition of stamp duties, among the most inefficient and inequitable state taxes.

Shifting from stamp duty to a property levy would provide more stable revenues for states and add up to $9 billion in annual GDP.

Grattan’s next paper in the Budget Repair series will address reform to superannuation tax concessions.

Read the working paper

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Grattan Institute’s Spreading Smart Ideas series will identify policy reform opportunities to accelerate the spread of innovation, with the aim of contributing to a looming national challenge – improving Australia’s productivity. 

Spreading Smart Ideas will initially tackle the productivity challenges faced by small and medium businesses and the education sector; two crucially important sectors that together contribute over 40% of GDP and employ over seven million people. The series will consist of workshops and conferences for experts and policy makers, with public consultation.

Growth in productivity, or output per person, has been in decline in Australia since 2004. As the economy transitions post-mining boom, Australia will have to achieve strong productivity growth in order to maintain our living standards, or take a pay cut.

Spreading innovative practices has the potential to improve productivity and strengthen the Australian economy. Innovation – ideas successfully applied – happens when businesses do things in new ways. Such improvements are the most important drivers of long-term economic growth, and therefore to social and individual wellbeing. Productivity lifts when a business invents or adopts better ways of doing things.

“The series – made possible with the support of Google – will enable Grattan Institute to contribute to understanding and influencing the complex interplay between government policy and innovation,” says Grattan Institute CEO John Daley.

“Australian governments spend over $10 billion each year that aims to support innovation. Government needs to ensure that this public money is spent where it makes the biggest difference and the innovation encouraged is socially worthwhile.”

Google Australia’s Head of Public Policy and Government Affairs, Iarla Flynn said: “we are delighted to partner with Grattan Institute on this Series, which will make a contribution towards strengthening the Australian economy for the long term by unlocking and sharing the benefits of new ideas and technologies.”

Grattan Institute is an independent, rigorous and practical think tank focused on Australian domestic public policy. Formed in 2008, it has made substantial contributions to public debate through its programs in productivity growth, school education, higher education, cities, energy and health. This new initiative will extend its work to an important area of public interest.

To help Australia recover from the COVID-19 recession, the Federal Government should inject $70 billion to $90 billion in extra economic stimulus, including revamping and extending JobKeeper, according to a new Grattan Institute book.

The Recovery Book: what Australian governments should do now is a policy and strategy blueprint for federal, state, and territory governments, including for hospitals and health care, schools and universities, roads and trains, budgets and energy.

The book urges governments to prioritise ruthlessly. Long term reforms – assuming they’re desirable – such as tax, industrial relations, and skills policy changes should be put on hold while governments tackle a huge agenda of urgent policies over the next six months.

The Federal Government should announce extra economic stimulus – including spending on social housing and shovel-ready maintenance and infrastructure projects – in or before the October Budget, with the goal of getting hundreds of thousands of Australians back to work and dragging unemployment back down to about 5 per cent by the middle of 2022.

JobKeeper should be expanded to include university staff, casual workers, and temporary migrants, and extended beyond September for businesses that are still in strife.

The permanent rate of JobSeeker should be increased by at least $100 a week, and Commonwealth Rent Assistance should be increased by 40 per cent.

The Child Care Subsidy should be raised to 95 per cent of costs for low-income households, to cushion the shock to family budgets as parents start paying for childcare again, and to reduce financial barriers for parents taking on more paid work.

The Recovery Book recommends transport policy reforms to reflect likely changes to patterns of work and commuting in a ‘with-COVID’ world. These include congestion charging to help prevent roads in our capital cities clogging up, higher registration fees for larger cars than for smaller cars, more cycle lanes and paths, and a rethink of major project priorities.

On health, the book calls for governments to refine policies put in place over the past few months: expanding telehealth – telephone and video consultations with GPs and specialists – and using private hospitals better, especially to help clear the elective surgery backlog.

On schools, the book urges the Federal Government to fund a $1 billion, six-month tutoring blitz to help a million disadvantaged students recover learning lost during lockdowns.

The Recovery Book calls for a rapid return of rigorous scrutiny and oversight of government spending and decisions, after parliaments were suspended at the height of the COVID crisis. The Federal Government should establish the promised national integrity commission.

‘This is a massive agenda, almost all needed in the next six months,’ Grattan Institute CEO and lead author Dr John Daley said. ‘Our book maps Australia’s road to recovery from the biggest economic and social shock since World War II. After the recovery has been established, Australian governments will have the resources to focus properly on structural reforms to the economy and the budget.’

For further inquiries on:

• • The Recovery Book overall
    John Daley : 0407 004 231, john.daley@grattaninstitute.edu.au
  • The shape of the economic downturn, the rephasing and reshaping of JobKeeper, JobSeeker, and childcare, and competition policy consequences
    Danielle Wood : 0405 510 763, Danielle.wood@grattaninstitute.edu.au
  • The size of the budgetary and RBA response required, and the implications for unemployment, including the long term future of JobSeeker
    Brendan Coates : 0412 798 229, Brendan.coates@grattaninstitute.edu.au
  • Health strategy
    Stephen Duckett : 0447 837 741, stephen.duckett@grattaninstitute.edu.au
  • Transport implications
    Marion Terrill : 0428 123 323, Marion.terrill@grattaninstitute.edu.au
  • Energy and industry implications
    Tony Wood : 0419 642 098, tony.wood@grattaninstitute.edu.au
  • School education implications
    Julie Sonnemann : 0401 854 371, Julie.sonnemann@grattaninstitute.ed.au

Australia needs a new aged care system. Spending an extra $7 billion a year could provide all older Australians with the care and support they need, according to a new Grattan Institute report.

Reforming aged care: a practical plan for a rights-based system shows the current system has let down older Australians, with unacceptable waiting times for home care, shocking stories of neglect and abuse exposed by the aged care Royal Commission, and hundreds of COVID-19 deaths among aged care residents.

A new Aged Care Act should create a rights-based system that guarantees care and support for all who need it.

Australia should be divided into 30 regions, each with a ‘system manager’ responsible for individual support plans for older Australians in their area. Each older Australian would have the help of a local ‘assessment officer’ to draw up their support plan, and a local ‘support manager’ to act as their advocate in obtaining necessary services.

Many more Australians would receive care and support in their own homes. Rogue proprietors of residential aged care facilities would be driven out of the system. Aged care homes would have to meet minimum resident-to-carer ratios, and provide nursing supervision 24 hours a day. Carers would be registered, better trained, and better paid.

Residents of aged care homes would contribute to their accommodation costs by paying rent, but a means-test would be applied to ensure people who couldn’t afford the rent would pay less or not at all.

The Grattan model would require the Federal Government to spend 35 per cent more than the current failed system – an extra $7 billion a year – and even more in coming decades as Australia’s population continues to age. But it would also create an extra 70,000 jobs, not just improving care but boosting the economy after the COVID recession.

The new system should be phased in over three years, starting next year with a trial in the two smallest states, South Australia and Tasmania.

But before then, the Federal Government should create a one-off $1 billion national ‘rescue fund’ to force the worst providers of residential care to lift their game or get out of the system.

‘Australians already have universal access to health care via Medicare, and universal access to disability support via the NDIS. It’s time older Australians had universal access to aged care,’ says lead author and Grattan Institute Health Program Director Stephen Duckett.

‘Australians should of ashamed of aspects of the present aged care system. Our report is a blueprint for something we could all be proud of – an aged care system that protects the rights, upholds the dignity, and celebrates the contribution of older Australians,’ Dr Duckett says.

For media enquiries contact Stephen Duckett:
0447 837 741, stephen.duckett@grattaninstitute.edu.au

Six books Scott Morrison should read over the summer holidays (and you might like them too).

After a busy election year, our Prime Minister might be in need of a holiday. To help him make the most of his Christmas break, Grattan Institute has selected six thought-provoking works, guaranteed to entertain and inform. 

Our 2019 recommendations tackle wide-ranging topics, from secret ballots to cities, Tories to the Testaments. Each selection provides inspiration and warning for how to shape Australia’s future. 

So kick back, grab a democracy sausage, and enjoy our six recommendations for 2019:

• From Secret Ballot to Democracy Sausage Judith Brett (Text Publishing, 2019)
• Kindred Kate Legge (Melbourne University Publishing, 2019) 
• Order without Design Alain Bertaud (MIT Press, 2018) 
• The strange death of Tory economic thinking Stian Westlake (Medium.com, 2019)
• See what you made me do Jess Hill (Black Inc., 2019)
• The Testaments Margaret Atwood (Vintage, 2019) 

Get the summer reading list

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Australia’s education system needs comprehensive reform to tackle widespread student disengagement in the classroom, according to a new Grattan Institute report.

Engaging students: creating classrooms that improve learning reports that as many as 40 per cent of school students are unproductive in a given year.

Unproductive students are on average one to two years behind their peers, and their disengagement also damages their classmates and teachers.

The main problem is not the sort of aggressive or even violent behaviour that attracts media headlines. More prevalent, and more stressful for teachers, are minor disruptions such as students talking back or simply switching off and avoiding work.

What is taught and the way it is taught are crucial in engaging students. But creating a good learning environment in the classroom will also help.

The report calls for an integrated assault on the problem, requiring new approaches by governments, universities, school principals and teachers.

The government and non-government systems should target more support to schools in poorer parts of Australia, where the problem is most severe.

Universities need to change their courses to give trainee teachers more supervised time in classrooms, so they are better prepared for the challenge of engaging students.

Teachers must be given better information about what strategies work best in the classroom, and they need more time to learn how to use those techniques in the heat of the moment.

The report finds that teachers are crying out for more guidance on classroom strategies. As many as 40 per cent of teachers say they have never had the chance to watch colleagues and learn from how they engage students in class. And only about one-third of the practices promoted in textbooks and training courses for new teachers have been shown to work well.

“Australian classrooms are not ‘out of control’, but student disengagement is a hidden problem in schools,” says Grattan Institute School Education Program Director Pete Goss.

“When a student switches off, there is the risk of a downward spiral. If the teacher responds badly, more students can become distracted and the momentum of the class can be lost.

“We owe it to future generations of Australian students to make these reforms now. If we get it right, we will help create a virtuous circle in which students are more engaged, teachers are less stressed, classes become more compelling and students learn more.”

Read the report

For further enquiries:
Pete Goss, School Education Program Director, Grattan Institute
T. 03 8344 3637 E. media@grattan.edu.au

Building more homes in established areas of cities and improving urban transport could substantially boost national prosperity and economic growth, according to a new Grattan Institute report.

Productive cities: opportunity in a changing economy shows that a new divide is opening in Australian cities, with growing gaps between the incomes, qualifications, house prices and access to jobs of residents in inner and outer areas.

The report analyses housing, income and transport data in Australia’s four largest cities to show that while highly paid and qualified workers are living close to city centres, workers with trade skills and low skills, and people on low incomes, are living further from the centre.

“If the trend continues unchecked, then many people risk being locked out of the parts of the city that offer the richest access to jobs,” says Grattan Institute Cities Program Director, Jane-Frances Kelly.

“Our cities have served our economy well for a long time, but there are growing signs that our housing and transport systems are not keeping pace with the needs of an ever more knowledge-intensive and skilled economy.”

The report recommends increasing the supply and diversity of dwellings in existing suburbs, in line with previous Grattan research showing that the greater housing choice that Australians want can be achieved if residents are engaged in decisions about their neighbourhoods and the disincentives developers face are addressed.

It also recommends consideration of road-user charging to ensure that road space is preserved for the most productive uses and as a way to raise funds for public transport.

The report finds that while inner city residents have rich access to a range of jobs, in large outer areas of Australia’s biggest cities, less than 10 per cent of all jobs in the city can be reached within a 45-minute drive.

“People in these suburbs have access to so few of the jobs available in our cities that they are extremely vulnerable in a downturn,” Ms Kelly says. “In this case, what’s good for the economy is good for the fair go.”

Congestion charges should be introduced in Sydney and Melbourne, according to a new Grattan Institute report that provides a uniquely detailed look at road congestion in Australia’s major cities.

Stuck in traffic? Road congestion in Sydney and Melbourne warns that, with their populations growing strongly, both cities could face traffic gridlock in future unless decisive action is taken to manage congestion.

The findings are based on an examination of 3.5 million Google Maps trip-time estimates across more than 350 routes over six months of this year.

In the middle and outer suburbs of Sydney and Melbourne, most drivers have a pretty smooth run most of the time. But commutes to the CBD can take more than twice as long as the same trips would take in the middle of the night.

In Sydney, CBD commuters from Balgowlah in the north and Hurstville in the south can expect delays of about 15 minutes on an average morning, far longer than commuters from other parts of the city.

In Melbourne, the worst delays are for people commuting from north-eastern suburbs, including Heidelberg, Kew and Doncaster. Drivers who have to use the Eastern Freeway and Hoddle Street in the morning peak are often delayed for more than 20 minutes, and the length of the delay can vary greatly from day to day.

The report recommends congestion charges in the most congested central areas of each city. Key bottlenecks in Sydney include The Spit Bridge and the commute to the CBD from Drummoyne via Balmain.

Melbourne should introduce a “CBD cordon” congestion charge, similar to London’s. The cordon could cover Hoddle Street to the east, Royal Parade to the west, City Road and Olympic Boulevard to the south, and Alexandra Parade to the north, with motorists charged when they drive across the cordon into the city during peak periods.

People who pay the charge would get a quicker and more reliable trip, because there would be fewer cars on the road at peak times. People who can travel outside of the peaks would not have to pay, because there would be no congestion charge when the roads are not congested.

To make clear that the new charges are to help manage traffic flows rather than boost revenue, the money raised should be used to fund a discount on vehicle registration fees and improvements to the train, tram, ferry and bus networks.

Melbourne’s CBD parking levy should be doubled, to match Sydney’s and to further discourage city commuters from driving to work.

And public transport fares in both cities should be cut during off-peak periods, to encourage people to shift their travel to times when the trains, trams and buses are not overcrowded.

The report dismisses the idea that new city freeways are the answer to road congestion.

New roads are important for areas of new growth or substantial redevelopment, but close to the city centres it is often more effective and always cheaper to invest in smaller-scale engineering and technology improvements such as traffic-light coordination, smarter intersection design, variable speed limits and better road surfaces and gradients.

“Don’t listen to the politicians who tell you big new roads will be ‘congestion busters’,” says Grattan Institute Transport Program Director Marion Terrill.

“You can’t build your way out of congestion.

“We need more sophisticated solutions. Some of the great cities of the world have successful congestion pricing schemes, including London, Stockholm and Singapore.

“For Sydney and Melbourne, congestion pricing would deliver city-wide benefits: not only reducing the amount of time we spend stuck in traffic, but also funding better public transport and a cut to car registration fees.”

Read the report

For further enquiries:
Marion Terrill, Transport Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Australian government budgets are at serious risk of posting deficits in the next decade of around 4 per cent of GDP, or $60 billion a year, according to a new Grattan Institute report that examines the spending and revenue of Commonwealth and State Governments.

Budget pressures on Australian governments reveals that a combination of rising costs, large political promises from both sides of politics, likely tax shortfalls and the prospect of declining minerals prices will create “significant problems” for budgets.

“Turning these problems around is an alarming task but not impossible,” says the report’s author, Grattan Institute CEO John Daley.

“But it will require tougher choices than those governments have made over the last decade.”

The report finds that the greatest of the pressures that put Australia’s prosperity at risk come from sustained growth in spending, especially health expenditure, which rose by nearly $42 billion in real terms over the past decade.

But contrary to widespread belief, it is not the ageing population that is driving health spending but the fact that people of all ages are seeing doctors more often, having more tests and operations and taking more prescription drugs.

Mr Daley says the current plight of many European countries is more evidence that balanced budgets over the economic cycle of boom and bust are much better than the alternative.

“Even in good times it is hard for governments to run a surplus. They are invariably tempted to raise voter expectations and spend money. Many voters prefer outcomes with no losers.

Mr Daley says running balanced budgets is not necessarily about reducing the size of government.

“Around the world, there are small governments that run big deficits, and big governments that run surpluses.

“For the past decade, though, successive Australian governments have squibbed the hard decisions. Now courageous leaders must step forward and ensure our prosperity for future generations.”

Protest politics is on the rise in Australia, and the main cause is collapsing trust in politicians and the major parties, according to a new Grattan Institute report.

A crisis of trust says that if the major parties and politicians want to rebuild trust with voters, they will need to change the way they do politics: stop misusing their entitlements, strengthen political donations laws, tighten regulation of lobbyists, and slow the revolving door between political offices and lobbying positions.

They will need to stop over-promising and under-delivering, on everything from reducing power bills to making houses more affordable and developing regional Australia. And the major parties will need to increase the size of their ‘gene pool’, by preselecting candidates who have broader work experience than being political staffers or union officials.

The vote share for minor parties and independents has been rising for a decade. At the 2016 federal election it hit its highest level since the Second World War. More than one-in-four Australians voted for someone other than the ALP, the LNP or the Greens in the Senate. First-preference Senate votes for minor parties and ‘outsider’ candidates leapt from 12 per cent in 2004 to 26 per cent in 2016.

Voters in regional and remote areas are particularly disillusioned. The further from a capital city GPO, the higher the minor party vote and the faster it has risen.

The report identifies voter disillusionment with the political establishment as the major cause of the rise in protest politics; it’s an ‘anyone but them’ vote.

Voters for ‘outsider’ politicians such as Pauline Hanson, Jacqui Lambie, Derryn Hinch and Nick Xenophon have much lower trust in government than those who vote for the majors. Australians increasingly believe politicians look after themselves and government is run by a few big interests rather than in the public interest. More than 70 per cent of Australians think our system of government needs reform. Voters are choosing parties and candidates that promise to ‘drain the swamp’.

Economic factors are less important. The rise in the minor party vote doesn’t seem to be about stagnant wages or rising inequality: the vote grew most strongly when real wages were rising and inequality wasn’t. And the biggest increase in the minor party vote was between 2010 and 2013 – a period when Australians were particularly optimistic about their immediate financial future.

But the loss of economic and cultural power in the regions looms large in regional voters’ dissatisfaction. Regions hold a falling share of Australia’s population, and consequently of the nation’s economy. Australia’s cultural symbols are becoming more city-centric – from mateship to multiculturalism, The Man from Snowy River to MasterChef. Regional voters increasing fear they are being ‘left behind’ and that ‘the Australian way of life is under threat’. The rhetoric and policies of some minor parties tap into these concerns and values.

Grattan Institute CEO John Daley says: “Our leaders need to heed the warning signs and focus on what matters to voters: restoring trust and social cohesion.”

Report co-author and Grattan Institute Program Director Danielle Wood says: “Politicians need to take a leadership role, by stressing the common ground between city and country and between communities with different backgrounds.”

Read the report

For further enquiries: Danielle Wood, Budget Policy and Institutional Reform Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

A White Paper outlining a new planning system for NSW could change Sydney for the better, but only if it is accompanied by community engagement on a scale never before seen in Australia, according to the Grattan Institute.

“This is a bold reform,” says Jane-Frances Kelly, Director of the Grattan Institute Cities Program. “It offers the potential for long-term strategic planning, rather than having Sydney develop in an ad hoc manner, as the result of street-by-street battles over particular projects.”

The White Paper proposes streamlining development approvals so that 80 per cent of applications get the go ahead within 25 days. Residents will be informed, but not consulted about these projects.

“This might sound like it’s denying residents a say” says Ms Kelly, “but if the proposals are implemented successfully, then residents should get more influence, not less”.

“As things stand, the only way residents can shape their neighbourhoods is by objecting to the things they don’t like. The White Paper proposes engaging residents up front, so that they help to write rules on what can get built where.”

“If a project is to get streamlined approval, it will have to comply with local codes devised in consultation with residents. This will include the detail of often contentious issues like overlooking and overshadowing.”

Ms Kelly says that there is a great deal to be gained from speeding up project approvals. “Currently developers face long delays, which adds to the cost of housing. Faster approvals will encourage more investment and increase the supply of dwellings.”

But implementing the White Paper won’t be easy, Ms Kelly says.

“Our research shows that this approach to strategic planning can work. It has been implemented successfully in overseas cities such as Vancouver and Seattle. It will only succeed however, if it is based on community engagement of a quality and scale never before seen in Australia.”

The only way that private hospital insurance can survive as Australia’s population ages is to make insurance cheaper for younger, healthier people, according to a new Grattan Institute report.

Saving private health 2: Making private health insurance viable finds that younger consumers are spending more on private hospital insurance but getting less value for their money. The industry faces a demographic death spiral as costs for older people rise and younger people leave.

Insurers’ incentives to keep members healthy, bargain hard with hospitals, and treat all patients efficiently are strangled by red tape and by excessive regulation. They must charge everyone the same premium – no matter what their age – under the ‘community rating’ principle. And if an insurer innovates to keep costs down, it loses much of the benefit through a process called risk equalisation.  

“Red tape has created an administrative nightmare that discourages the industry from innovating to reduce costs,” says lead author and Grattan Institute Health Program Director Stephen Duckett. “Over-regulation has created a complacent industry that is over-reliant on direct or indirect taxpayer subsidies.” 

The Commonwealth spends around $5 billion each year subsidising private hospital insurance and another $1 billion on ‘general’ or ‘extras’ insurance. “This is questionable value for money,” Dr Duckett says.

“Subsidising private health care might be worth it if it takes the pressure off the public system, but our research suggests that too much of the subsidy goes to people who would have paid for insurance anyway, and pays for private care that complements—rather than replaces—public care.” 

The report lays out a transition to make private hospital care better value for both consumers and taxpayers, and viable for the long term. 

Premiums should be partially deregulated for people aged less than 55, so that what a person pays more closely reflects the benefits that someone of their age can expect to receive from hospital insurance. The private hospital insurance rebate should be redirected towards older patients. Overall the net premiums paid by older people would rise a little, and younger people would pay less. Net premiums paid by older people wouldn’t rise at all if governments implemented reforms previously recommended to make private healthcare more efficient. 

The remedy for a complex ineffective system of carrots and sticks is not even more regulation, but less. A range of private health insurance regulations should be phased out or reduced, such as subsidies for extras insurance, Lifetime Health Cover, the Medicare Levy Surcharge and risk equalisation. 

“Unlike self-interested ‘zombie’ reforms that are sometimes floated in the media, these are practical proposals that will help make the private insurance industry more sustainable and will ultimately benefit all members,” Dr Duckett says.

Read the report

Further enquiries: Stephen Duckett, Health Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Information technology could transform teaching and learning in higher education, challenging the traditional lecture format, enabling courses to be tailored to student needs, and opening the sector to new higher education providers, according to a Grattan Institute report, The online evolution: when technology meets tradition in higher education.

With the rapid rise of MOOCs – massive open online courses – some commentators predict that the internet will replace the classroom.

But Grattan Institute Higher Education Program Director Andrew Norton says online education is more likely to enrich than supplant traditional teaching.

“Despite the hype around purely online education, the big question is not whether online courses will replace classrooms, but whether technology will drive the re-design of teaching and learning,” he says.

“In future we might watch a lecture on our tablet, PC or phone before we go to class to discuss specific problems. We might test ourselves regularly online, exposing what we do and don’t know. Use of personal data could lead to courses that adapt to individual student’s abilities. The possibilities are vast.”

The report also considers what government should do to ensure that Australian students benefit from new information technology.

Mr Norton says the advance of online learning provides opportunities for new, low-cost entrants into the relatively closed higher education field. The government should reduce expensive requirements for student admission and welfare services that are less relevant for online students.

The government should seek agreements with other countries for mutual recognition of higher education providers. This would give Australian universities more opportunities overseas, and provide Australian students with increased access to innovative higher education providers from other countries.

“Whether they come from Australia or overseas, if their standards are high, government should help new education providers get in the door,” Mr Norton says.

The Commonwealth Government could save more than $1.3 billion a year if it changed its approach to purchases of prescription drugs on the Pharmaceutical Benefits Scheme, Grattan Institute Health Program Director Stephen Duckett said today.

Launching a new Grattan Institute report, Australia’s bad drug deal, Professor Duckett said that in a time of escalating health costs and pressures on the budget, the savings could be made relatively easily if the political will was there.

“To see what can be done we only need to look at New Zealand, which has capped its drug budget, appointed independent experts to make vital decisions, and taken the politics out of price-setting,” Professor Duckett said.

Public hospitals in two Australian states pay much lower prices than the PBS. In one case, the prices are just a sixth of PBS prices.

In July this year, we released a report, Mostly Working: Australia’s wholesale electricity market. This report concluded that the major contributors to high wholesale electricity prices of recent years were the closure of old, low-cost power stations and the rising cost of inputs, namely coal and gas. We also raised a concern that the current market rules allow generators in certain circumstances to make and change their bids in the market in a way that delivers highly favourable outcomes for them but not to the benefit of the market. We described this behaviour as “gaming” and recommended that the rules be changed or tightened to restrict or ideally eliminate such bidding.

On 11^thOctober, as requested by the former Federal Minister for Environment and Energy, Josh Frydenberg, the Australian Energy Market Commission(AEMC) issued a report on these conclusions. It concluded that “rebidding is contributing to the delivery of efficient market outcomes but can be a problem where there is a lack of competition between generators”. They proposed that no rule changes are required and that the focus should be on policies that reduce market concentration.

We welcome the AEMC’s report and the analysis behind its conclusions. We acknowledged in our report that data access limitations would mean that our definition of gaming could include events that were consistent with an efficient market but could also could exclude the opposite. We also agree with the AEMC that market concentration can contribute to higher prices.

However, we also noted that concerns around bidding behaviour had led to a rule change in July 2016 to replace a requirement that generators bid “in good faith” to one that prohibits making false and misleading offers.  There was no reduction in price spikes due to this change and the only improvement occurred in mid-2017 when the Queensland Government directed the government-owned generators to “reduce volatility and put downward pressure on wholesale prices”.

We remain concerned that the incentives and rules in place lead to bidding behaviour that is inconsistent with a truly competitive market, ie lowest prices for consumers. Market power can arise and be exercised in relatively transient circumstances, such as a combination of high demand and outages of local generation or interstate transmission. Furthermore, concentration is a feature of the energy market that is likely to persist due to economies of scale which lower costs and provide effective risk management. Therefore, rules that are designed to reduce the impact of concentration on prices are likely to be more effective than rules to limit concentration.

The action by the Queensland Government does not solve the underlying problem and it could emerge in other states if transient market power opportunities emerge as the structure of the generation sector changes to include an increasing share of wind and solar power and greater dependence on transmission.

Finally, we note the Commonwealth’s support for the recommendation from the ACCC’s recent report on electricity affordability to give the Australian Energy Regulator powers to identify and remedy market manipulating behaviour. We are optimistic that our concerns will be addressed through the creation and exercise of these powers.

Read the report

For further enquiries: Tony Wood, Energy Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Australian governments would be better at policy reform if they prioritised their agenda better, according to a new Grattan Institute report, Prioritising a government’s agenda.

The failure to prioritise has been identified as one reason for failings of the Rudd Government, the Abbott Government, and the Shorten Opposition.

‘Governments need to steer a middle course between doing good and political reality,’ lead author and former Grattan Institute CEO John Daley says. ‘If a reform both serves the public interest and is wildly popular, then it has usually happened already.’

Political capital, ministerial time, and the bandwidth of the public service to design and implement policy are always scarce, and the public has limited tolerance for change. Governments that are more methodical in prioritising their agenda can use their scarce political capital better.

Yet governments in Australia do not publish sophisticated approaches to prioritisation. They rely too much on the budget process, which has limits as a mechanism for prioritisation. Budget processes tend to lead to too many initiatives at once, underplay reforms that pay off over the longer term, and don’t pay enough attention to the limits of political capital.

Governments should look for the reforms that will make more of a difference while minimising the political cost. This means assessing both the value and feasibility of potential initiatives.

Governments should be more articulate about the breadth of the valuable ends they serve. While rhetoric tends to focus on economic growth, there is little dispute that governments are also trying to improve health, education, public safety, social connection, the environment, the scope for individual choice, and cultural identity.

The biggest stumbling block to prioritisation is not disagreement about what is a valuable end, but how to trade off these ends.

Weak supporting evidence, strong opposition (including from political opponents, interest groups, and the public), and complex implementation all make a reform less feasible.

A disciplined assessment can often identify some reforms as much more valuable than others. And an ordered assessment may flag some reforms as more feasible.

Governments should prioritise a small number of reforms that are both high value and more feasible, and therefore worth the investment of the substantial political capital that is usually needed to get big reforms over the line.

‘This kind of disciplined prioritisation is the key to maximising prosperity – and perhaps even to maximising the chances of re-election,’ Professor Daley says.

‘Our research shows that governments in the first 20 years of this century completed fewer of the important reforms on the slate than in the 1980s and 90s. Better prioritisation is one of the keys to doing more of the reforms that matter.’

Contact

John Daley: 0407 004 231, john.daley@grattaninstitute.edu.au

Student debt is at its highest level ever, with Commonwealth government estimates showing that $6.2 billion of the $26.3 billion owed under the HELP student loan scheme will never be repaid.

The increasing debt figures, published in Grattan Institute’s new report, Mapping Australian higher education, 2013 version, are the result of a rapidly growing higher education sector following the abolition of most enrolment controls.

Rising domestic undergraduate student numbers are expected to increase the Government’s bill for tuition subsidies to nearly $7 billion in 2015-16, up from $5.5 billion in 2011-12. The Government lent students $4.3 billion through HELP in 2012.

Grattan Institute’s annual assessment of the health of the higher education sector shows that graduates and universities are doing well.

University graduates improved their financial position between 2006 and 2011, according to a new analysis of census data. Estimated career earnings of a bachelor-degree graduate increased by about $80,000 in real terms between 2006 and 2011, compared to someone with a Year 12 only education.

“Though students are charged more for their education than in the past, this has been more than covered by increasing income” said Andrew Norton, Grattan Institute’s Higher Education Program Director.

While long-term graduate income remains high, young graduates were slightly less likely to be in professional or managerial jobs in 2011 than they were in 2006.

Most other trends in the higher education system are positive. Enrolments in health and engineering courses  areas of on-going skills shortages  have grown more quickly than other areas. Student satisfaction with teaching is increasing. The quality of Australian research is rated more favourably now than in the past.

Hospitalisation rates for diabetes, tooth decay and other conditions that should be treatable or manageable out of hospital reveal how Australia’s health system is consistently failing some communities, a new Grattan Institute report has found.

Perils of place: identifying hotspots of health inequality shows that places such as Frankston and Broadmeadows in Victoria and Mount Isa and Palm Island in Queensland have had potentially preventable hospitalisation rates at least fifty percent above the state average in every year for a decade.

Grattan Institute Health Program Director Stephen Duckett says the problem can be addressed, but only if governments come up with targeted solutions for individual places.

“Australia is not a uniform country and a one-size-fits-all approach will not work. Local, tailored policy responses are required,” Dr Duckett says.

Perils of place finds that reducing potentially preventable hospitalisations in hot spots in Victoria and Queensland — the two states the report studied – would save a total of at least $15 million a year. Indirect savings should be significantly larger.

The report introduces a method of identifying small areas where health inequalities are entrenched and, without intervention, are likely to endure.

To build up the limited evidence of what works in reducing place-based health problems, the report recommends that government combine with Primary Health Networks and local communities to run three- to five-year trials of tailored programs in selected places.

Rigorous evaluation is critical, so that the lessons from successful trials can be applied across the country.

“Because persistent hotspots are rare, targeting them alone will not substantially reduce the growing burden of potentially preventable hospitalisations, but it’s an important first step,” says Dr Duckett.

“Government and Primary Health Networks must ensure that all communities get a fair go. The government will save money and, more importantly, some of the most disadvantaged Australians will get the chance to lead healthier, more productive lives.”

Read the report

For further enquiries: Stephen Duckett, Health Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Grattan Institute is delighted to announce the establishment of a program in health policy, to be run by one of Australia’s leading thinkers in the field, Stephen Duckett.

Stephen Duckett, a former Secretary of the Commonwealth Department of Human Services and Health (now Health and Ageing), has a reputation for creativity, innovation and excellence both in the theory and the delivery of health policy.

An economist, he has held health care leadership positions in Australia and Canada, and is currently a professor in the Schools of Public Health at La Trobe University and the University of Alberta.

As director of Acute Health Services in the Victorian Health Department in the early 1990s, Professor Duckett transformed relationships between hospitals and the Department through the introduction of casemix (activity-based) funding. This was the first introduction of casemix funding outside the United States, and the first in a capped, publicly funded system.

“He is the ideal person to lead our health program,” said Grattan CEO John Daley. “Few people in Australia or anywhere know as much about health policy as Stephen Duckett.”

John Daley said the creation of a health program was an essential step for Australia’s leading domestic policy think tank.

“With an ageing population and health care costs at 10 per cent of GDP and rising, health will occupy the minds of policy makers and the public for decades to come.”

“Yet given its size and importance, there is relatively little policy research in the area. There is a huge opportunity for Grattan Institute to make a contribution to health policy by providing independent, rigorous and practical solutions.”

Professor Duckett said he was excited to work at Grattan Institute, which was “well-positioned to make a thoughtful and independent contribution to the policy debate.”

He said his program would examine the cost to society of poor health care investments – including waste in the system – and consider ways to improve the quality, sustainability and accessibility of Australian health care.

“Health policy is my passion, but it must have a strong analytical and evidence base. Grattan Institute is the ideal place in which to build that base.”

Australian governments spent $28 billion more on transport infrastructure over the past 15 years than they told taxpayers they would spend, a new Grattan Institute report has found.

Cost overruns in transport infrastructure analyses all 836 projects valued at $20 million or more and planned or built since 2001. It finds that cost blow outs account for nearly a quarter of the total budgets of these projects.

Western Australia’s Forrest Highway between Perth and Bunbury cost over five times, and New South Wales’ Hunter Expressway cost nearly four times, the amounts politicians initially promised they would cost.

Premature announcements – when a politician promises to build a road, bridge or rail line without a funding commitment, often in the run up to an election – are the biggest culprits.

While only 32 per cent of projects were announced early, these projects accounted for 74 per cent of the value of cost overruns over the past 15 years.

Cost overruns are rarely analysed from the first funding promise, yet once politicians announce a project, they and the public treat the announcement as a commitment, and two thirds of these projects end up being built.

All main political parties have committed to sound planning of infrastructure, and to making decisions with broad social benefit, yet in practice they continue to promise projects that Infrastructure Australia has not evaluated or has already found to be not worth building.

Governments should not commit money to transport infrastructure before tabling proper evaluation and the underlying business case in Parliament, the report argues.

And once a project is completed, governments should report to the public on how it performed against the cost-benefit estimates behind the original decision.

Governments can also improve project assessment methodologies, collect and publish data that would enable cost estimators to learn from past experience, and not spend contingency funds on add-ons that are poor value for money.

“At a time of declining private investment and historically low interest rates, when many politicians and commentators are calling for more transport infrastructure spending, cost overruns are a vital public policy issue,” says Grattan Institute Transport Program Director Marion Terrill.

“Transport infrastructure has great potential to ease traffic congestion and lift productivity, but unless we can curb politicians’ premature promises, it will remain the bluntest of economic instruments.”

Read the report

For further enquiries:
Marion Terrill, Transport Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Learning gaps between Australian students of different backgrounds are alarmingly wide and grow wider as students move through school, according to an original analysis of NAPLAN data published in a new Grattan Institute report.

Widening gaps: what NAPLAN tells us about student progress finds that the gap between students whose parents have low education and those with highly educated parents grows from 10 months in Year 3 to around two-and-a-half years by Year 9. Even if they were doing as well in Year 3, disadvantaged students make one to two years less progress by Year 9 than students whose parents have more education.

“The really worrying thing is that the learning gaps grow much larger after Year 3, so in fact disadvantaged students are falling further behind with each year of school,” says Grattan School Education Program Director Peter Goss.

“Bright kids in disadvantaged schools lose most, making two-and-a-half years less progress than students with similar capabilities in more advantaged schools.”

The report introduces a time-based measure, ‘years of progress’, which makes it easier to compare groups of students. Rather than saying that a Year 5 student scores 540 in NAPLAN, we can say they achieved two years ahead of their peers.

The new measure captures in plain language the rates at which students are progressing at different stages of their learning. The approach resembles that used in cycling road races, where gaps between riders are measured in minutes and seconds, not metres. Time gaps are more meaningful than distance if some riders are on a flat road, while others are grinding up a steep hill.

“The way we measure learning progress really matters,” Mr Goss says. “Without meaningful comparisons, we can’t see how far behind some students really are.”

The report also shows that in a typical Year 9 class, the top students can be more than seven years ahead of the bottom students. NAPLAN’s minimum standards are set way too low to identify the stragglers. A Year 9 student meets the minimum standard even if they are reading below the level of a typical Year 5 student.

Policymakers need to do three things: put learning gaps at the heart of school policy; give schools better support to target teaching at each child’s needs; and work harder to improve the progress of disadvantaged students so that every child in every Australian school can achieve their potential.

Read the report

For further enquiries: Pete Goss, Program Director, School Education
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Grattan Institute is delighted to announce the appointment of Dr Jim Minifie as the new director of Grattan Institute’s Productivity Growth Program.

CEO John Daley said that Dr Minifie, who has been Chief Economist of the Boston Consulting Group in Australia and New Zealand, would make an outstanding contribution to public debate on economics and productivity at a time when the Australian economic was undergoing seismic change.

“Jim is a highly gifted economist, thinker and writer, with a strong grasp of the Australian economic and policy landscape, and attuned to the challenges facing both public and private sectors,” Professor Daley said.

Dr Minifie, whose appointment follows Saul Eslake’s move to the Bank of America Merrill Lynch, will develop a program on policy settings for the evolving Australian economy. His initial focus will include responding to structural change.

Dr Minifie completed a PhD in applied economics at Stanford University before joining BCG in 1999. He has worked closely with Australian corporate leaders, helping them to understand the domestic and international environments in which their businesses operate.

“Grattan Institute has engaged Australia’s best strategic and public policy thinkers to conduct independent and rigorous analysis and propose practical solutions to the issues that will make a difference to Australian society” Professor Daley said.

State and territory governments can do more to improve the lives of Australians. A new Grattan Institute State Scorecard shows that outcomes vary between states across a broad range of areas. In many cases, states are different because their governments adopted better policies.

The scorecard is in a new publication from Grattan, the State Orange Book 2018, which draws on 10 years of Grattan reports to outline the policy priorities for state and territory governments to improve the lives of their residents.

The State Orange Book 2018 is designed to inform voters and influence policymakers across Australia, particularly in the lead-up to the Victorian state election in November 2018, and the NSW state election in March 2019.

The State Orange Book 2018 covers a wide variety of policy areas, including:

• Economic and regional development
• Cities, housing, and transport
• School education
• Health
• Energy
• Budgets, taxes, and institutional reform

For example, the Health Scorecard shows Victoria has relatively good outcomes – and has improved more – on a range of measures such as mortality, cost and waiting times, whereas South Australia and the Northern Territory lag well behind. Other states and territories could learn from how Victoria has managed its hospitals.

Other policy areas require more difficult trade-offs. The Energy Scorecard shows that South Australia has more expensive electricity and more outages. But it has lower carbon emissions.

Launching the State Orange Book 2018, Grattan Institute CEO John Daley said: “The State Scorecard shows how state and territory governments are doing on the issues that matter to Australians.

“Unfortunately, the problems aren’t hard to find.

“Per capita income has been flat for five years as the mining boom subsided. State and territory governments continue to announce large infrastructure projects without doing enough homework beforehand. Home ownership is falling fast among the young and the poor, and homelessness is rising. Our schools are not keeping up with the best in the world. In most states, people are waiting longer for medical treatments. Wholesale electricity prices have increased significantly over the past few years.”

The book is by no means all bad news.

“Many worthwhile reforms have been implemented over the past decade,” Mr Daley said.

“Victoria’s hospitals cost less per patient and contribute to better health outcomes than elsewhere. Queensland’s school students learn more in Years 3-5, and this has improved significantly in the past few years. The ACT has started to replace inefficient stamp duties with a much more efficient broad-based property tax. NSW has used the good times to improve its budget position. Victoria, South Australia and the ACT have all increased the transparency of political decision-making and tightened controls over money in politics.”

But every state and territory could learn from the others and do better.

State governments – particularly NSW and Victoria – face population pressures. They should resist political pressure to wind back planning reforms that have helped to increase housing supply, and instead should go further to ensure enough housing is built, particularly in established suburbs, to accommodate rapidly growing populations. NSW and Victoria should commission work to enable the introduction of time-of-day road and public transport pricing to manage congestion in Melbourne and Sydney. All states should stop announcing transport projects before they have been analysed rigorously, and they should evaluate completed projects properly.

There are other important priorities for economic reform. All states should follow the lead of the ACT and replace stamp duties with broad-based property taxes. States should reform electricity markets to encourage reliability and reduce emissions – whether or not the Commonwealth Government cooperates.

States could deliver services better. Other states should follow Victoria’s lead and reduce the overall cost and the variation in cost between public hospitals. And they should develop more prevention programs to reduce the disparity between regional and urban health outcomes. States should lift progress for all students by identifying and spreading good teaching practices at the same time as strengthening the evidence base. They should also invest more in early learning for the most disadvantaged students.

Institutional reforms are needed as well. States need more visibility of their long-term budget positions. While institutional accountability is improving in many states, Western Australia, Tasmania and the Northern Territory need to limit election spending, and make political donations and lobbying more transparent.

Read the report

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Australia is getting hotter, and that is harming Australians’ health, according to a new Grattan Institute report.

Climate change and health: preparing for the next disaster warns that last summer’s devastating bushfires are a portent of things to come as global warming increases the severity and frequency of natural disasters in Australia.

Thirty-three people were killed directly by the 2019-20 bushfires. Thousands lost their homes or their livelihoods. Those who fought the fires, or who live in hard-hit areas, will suffer the mental health consequences for decades to come.

Millions of Australians, including in Sydney, Melbourne, and Canberra, were affected by bushfire smoke. The smoke alone caused more than 400 additional deaths and sent thousands of people to hospital emergency departments with respiratory and heart problems.

Australia is already about 1.5 degrees warmer than it was a hundred years ago. We’ve just recorded our hottest November. And there is worse to come.

Climate change will cause harsher heatwaves and more severe storms. In the far north of Australia, cyclones will be more intense, causing floods that will destroy homes, businesses, and public buildings. Further south, droughts will be longer, creating still more hardship for farmers and regional towns and cities.

The health sector must adapt to the reality of a warming Australia.

It must develop plans and protocols to minimise the harm caused by climate disasters. It must ensure people can continue to get healthcare services and medications when disaster strikes. And it must provide mental health support, not just during a crisis but for decades after.

Although we are too late to prevent climate change from harming our health, we can act now to prevent greater damage. The health sector should set an example by cutting its greenhouse gas emissions to help minimise further damage. State and territory public health sectors should have net-zero emissions plans in place by the end of 2023.

‘For our health departments, hospitals, and local healthcare networks, responding to climate change is not an optional extra, it is core business,’ says lead author and Grattan Institute Health Program Director Stephen Duckett.

‘Climate change is damaging Australians’ health and wellbeing right now, and things are only going to get worse. Unfortunately, the black summer of 2019-20 won’t be a one-off,’ Dr Duckett says.

‘In 2020, Australia listened to the science and acted on the health advice to prevent some of the catastrophic health consequences of COVID-19. Now we must do it again.’

For media enquiries contact Stephen Duckett:
0447 837 741, stephen.duckett@grattaninstitute.edu.au

Grattan Institute is delighted to announce the appointment of Mr Andrew Norton as director of its Higher Education Program. This newly established Program, funded by The Myer Foundation, will analyse higher education policy issues, publish proposals for reform, and engage both the public and decision-makers in discussion.

“Andrew’s appointment signals Grattan Institute’s emphasis on improving Australia’s higher education. Higher education is a substantial driver of Australia’s human capital, innovation, and understanding of ourselves and the world,’’ said Grattan CEO, Professor John Daley.

Mr Norton joins Grattan Institute after eleven years as the Higher Education Advisor in The Office of the Vice-Chancellor at The University of Melbourne. Concurrent with this work, he was a Research Fellow at The Centre for Independent Studies and Editor of the Centre’s Policy magazine.

“Andrew is well-known within the higher education sector and is a thoughtful and original thinker about higher education reform,” Professor Daley said.

Mr Norton said he was pleased to be able to join Grattan Institute and to participate in Australian higher education policy reform. “Grattan Institute’s higher education program will offer ideas for the big questions of higher education funding and market design. I am looking forward to working on these issues with Grattan Institute’s team,” said Mr Norton.

“Grattan Institute has engaged Australia’s best strategic and public policy thinkers to conduct independent and rigorous analysis and propose practical solutions to the issues that will make a difference to Australian society,” Professor Daley said.

Andrew Norton, the Director of Grattan’s Higher Education Program since it started eight years ago, has decided to move on.

Andrew has been the driving force behind the Program’s overall direction, and its detailed analysis of everything from completion rates to funding trends.

For several years, the Higher Education Program’s advocacy helped persuade the Commonwealth Government to keep demand-driven funding of bachelor-degree student places. Although funding caps were eventually imposed, a record proportion of young Australians now attend university.

The Higher Education Program also drew attention to the escalating expense of the HELP loan scheme. Three reports proposed policies for bringing HELP’s costs down while keeping higher education accessible and debt repayments affordable. Some of these policies are now in place.

The Program devised and published five editions of Mapping Australian higher education, Grattan’s overview of Australian higher education. Public servants, university executives, university councils, and journalists all regard it as the essential introduction and reference guide to the sector.

Grattan CEO John Daley said: ‘Andrew has made an enormous contribution to the Grattan team. His wise counsel and wry observations about the realities of politics, ministers, and all sides of politics have often helped Grattan to steer a better course.

‘Andrew is truly irreplaceable, and in view of his departure Grattan has made the difficult decision not to extend the Higher Education Program further.’

Grattan will continue to host the substantial body of work produced by the Higher Education Program, and to respond to media inquiries to the extent that Andrew does not do so in his next role.

The Myer Foundation supported the Program for its first four years. John Daley said the work of the Program will resonate with higher education policy makers for years to come, and is an enduring monument to the Foundation’s support.

Andrew Norton is exploring a number of opportunities beyond Grattan, and his last day at Grattan will be 26 September.

Reform of electricity tariffs is urgently needed to prevent all Australians paying too much for power and some people paying more than their fair share, according to a new Grattan Institute report.

Fair pricing for power finds that a different way of charging customers could have saved network businesses nearly $8 billion in reduced investment over five years, with the savings passed onto consumers as lower bills.

Grattan Institute Energy Program Director Tony Wood says that over the five years to 2013 the average Australian power bill increased by 70 per cent.

“Some of that burden is unfair, and it’s falling especially heavily on some consumers, whose bills are subsidising others. We have to find a better way,” Mr Wood says.

The report recommends a change to the way consumers pay for the network that carries electricity from generators to homes, so that it better reflects the cost of running the network.

Instead of charging a household based on its total energy use, the 43 per cent of the consumer bill that goes to fund the network should be based on the load the household puts on the network when it is drawing down most power.

“Calculating bills based on a household’s maximum load far better reflects the real cost of running the network,” says Mr Wood. “If we can get this cost down, we can get consumer prices down.”

The report proposes a second tariff for households in geographic areas where the network is under greatest strain and where expensive new infrastructure will have to be built unless the strain is relieved.

Both tariffs seek to change consumer behaviour so that less power is used in periods of peak demand and less infrastructure has to be built as a result.

The reforms would raise prices for consumers who use more power in periods of peak demand, and reduce them for consumers who use less power in these times.

“In the short term the total consumer bill would stay the same, but in the long run, as unnecessary infrastructure is no longer built, prices across the board will fall,” Mr Wood says.

“Australians are tired of paying too much for power. If politicians decide this reform is too hard, they will miss an opportunity to make prices fairer and cheaper for everyone.”

Read the report

For further enquiries: Tony Wood, Energy Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

“A sustained focus on year 12 retention rates and school performance is needed to lift Tasmanian living standards, ” The Program Director of Productivity Growth at Grattan Institute, Saul Eslake, said today at a presentation to the Tasmanian Leaders Program held at “Technopark”, Dowsings Point.

“Although Tasmanian’s outcomes have improved over the last 10 years, Tasmania has significantly lagged the mainland for decades on living standards, life expectancy, long-term unemployment, and disadvantaged children,” he said.

“A fundamental cause is that Tasmanian productivity is significantly behind the mainland in most industries.”

“Productivity could be substantially higher if Tasmania lifted year twelve retention rates and school performance to mainland levels, along with curriculum reform. Tasmanian living standards will not be improved by propping up old industries or the ‘cargo cult’ of major industrial projects.”

“Recent studies point to the need to produce and market highly differentiated goods and services that embody high intellectual content for which a premium is willingly paid. Higher skills and education levels for the Tasmanian workforce are pivotal to this. They need improvement.”

“The attitude that the State’s economy is best served by protecting low skill, old industries that do not require year twelve standard education must change.”

The first priority for Tasmanian Governments should be bringing Tasmanian schooling completion and achievement up to mainland standards. And then, Tasmanian Governments should be investing in the State’s infrastructure, with particular focus on transport, communications, water and clean energy.

Eighty per cent of the dollar value of all goods and services in Australia is produced on just 0.2 per cent of the nation’s land mass, nearly all of it in cities, according to a new Grattan Institute report.

Mapping Australia’s economy: cities as engines of prosperity finds that the combined central business districts of Sydney and Melbourne alone – 7.1 square kilometres – generate nearly 10 per cent of the value of goods and services produced in all of Australia, three times that produced by the agricultural sector.

“The report reveals a great reshaping of Australia’s economic geography,” says Grattan Institute Cities researcher Paul Donegan.

“We have moved from prosperity coming from regional jobs in primary industry a century ago, to suburban jobs in manufacturing after World War Two, to city centre jobs in knowledge-intensive businesses today.”

But while city centres are vital to Australia’s prosperity, the concentration of highly productive activity in them presents big challenges for policymakers, because too many workers live too far from these centres to fulfil our cities’ economic potential.

The report finds that CBDs contribute so strongly to economic activity both because jobs are concentrated there and because CBD businesses are more productive on average than are businesses in other areas.

In 2011-12 the Sydney CBD produced $100 in value for every hour worked there, for example. Parramatta, by contrast, produced only $68 for every hour worked there.

Areas close to CBDs that produce high levels of economic value include North Sydney ($10.2 billion), Richmond in Melbourne ($4.4 billion), Perth’s Subiaco ($4.2 billion) and Paddington in Brisbane ($3.4 billion).

Mr Donegan says intense economic activity is concentrating in CBDs and inner suburbs because knowledge-intensive firms need highly skilled workers, and locating in the city gives firms access to more of them.

“But these small areas that generate most value are often a long commute from the fast-growing outer suburbs where many Australians live.”

“For the sake of the economy and the fair go, we have to find ways to enable more workers to either live closer to these centres, or to reach them more quickly by road and public transport,” says Mr Donegan.

Read the report

For further enquiries: Paul Donegan, Senior Associate, Cities
M. 0403 305 422 T. 03 9035 6405 E. paul.donegan@grattan.edu.au

The Federal Government’s plan to make most patients pay $5 more for each drug prescription will hurt the poor and sick while saving far less money than could be saved if the Government simply paid fair prices for pharmaceuticals, according to the Grattan Institute.

In evidence to a Senate inquiry today, Health Program Director Stephen Duckett said the new pharmaceuticals co-payment would only raise $450 million in 2017-18.

Yet the Government could save $580 million a year immediately if it matched the prices that the British Government pays pharmaceutical companies for just 20 drugs.

This change would also save Australian patients an average of $13 for each box of pills.

“A proper drug pricing policy would save money for both government and consumers. Joe Hockey can have his health cake and eat it too,” says Dr Duckett.

These figures update Grattan Institute’s 2013 report, Australia’s bad drug deal, which shows that the Pharmaceutical Benefits Scheme pays drug companies more than $1 billion a year too much for prescription drugs, compared to the sums paid by the most efficient schemes overseas.

Grattan research also shows that out-of-pocket health costs are straining the budgets of low-income Australians even before the Government introduces co-payments for GP visits and prescriptions.

In one in 10 of the poorest households that pay out-of-pocket costs, these costs eat up more than 20 cents in every dollar of the household budget.

“The result is that poor people who are sick are likely to avoid doctors and get sicker,” says Dr Duckett.

Many people already miss out on health care because of cost: 5 per cent skip GP visits, 8 per cent don’t go to a specialist, 8 per cent don’t fill their prescription and 18 per cent don’t go to the dentist.

“These proposed changes will put people’s health at risk yet do little to balance the budget. There are much fairer and safer ways to cut health spending,” Dr Duckett says.

For further enquiries: Stephen Duckett, Health Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

“Grattan Institute has appointed Dr Bruce Cohen as its fourth Program Director,” Professor John Daley announced today. “Dr Cohen will take responsibility for the Water program, as well as looking at broader competition and regulatory design issues.”

“Prior to commencing with the Grattan Institute, Dr Cohen has practised as a barrister, as economic adviser to the Premier and Treasurer of Victoria, and as an analyst with the Tasman Institute and the Australian Bankers’ Association. He is currently a director of VicTrack and has previously served as a Commissioner to the Victorian Competition and Efficiency Commission and on the boards of Melbourne Water, Snowy Hydro Limited and VENCorp.”

“This high level public policy, institutional and regulatory experience fits well with Grattan Institute’s declared priority to address the significant water issues that Australia faces, and also reflects the importance of regulatory design to improve productivity growth,” he added.

Specific water issues that Dr Cohen will examine will include the ongoing structural and regulatory reform of the rural water sector and the development of urban water markets. He will also examine ways to facilitate the efficient use of water from multiple sources such as stormwater and recycled water.

“The ongoing challenges in the water sector across Australia are considerable, and I welcome the opportunity to work with Grattan Institute in the development of public policy in this and other key areas,” Dr Cohen said.

“Grattan Institute intends to seek the best strategic thinkers and public policy leaders in order to fulfil its commitment to independent, rigorous fact based analysis. It will consider those key ‘swing factors’ that will make a difference to Australian society in the long term,” Professor Daley said.

“We are engaging the best minds to ensure Grattan Institute makes a substantial contribution in the areas of Productivity, Cities, Energy, Water and Education,” he concluded.

Reducing the thresholds at which former students repay their debt to the Higher Education Loan Program would increase repayments by an initial $500 million a year and more over time, according to a new Grattan Institute report.

Without change, HELP costs will escalate, putting other education programs at risk of cuts.

HELP for the future: fairer repayment of student debt finds that an estimated $1.6 billion lent to students in 2014-15 – a fifth of all lending under the program that year – will not be repaid.

Interest subsidies on outstanding debt added $200 million a year to HELP’s costs, but would be five times higher if interest rates return to previous levels.

The report argues that reducing the initial repayment threshold to $42,000 next year from its current level of $54,126 would cut interest costs and HELP’s rapidly expanding doubtful debt bill while maintaining the fairness and effectiveness of the program.

Grattan Higher Education Program Director Andrew Norton says that since 1989 nearly four million Australians have taken out HELP loans, greatly expanding access to tertiary education.

‘It’s a vital program, but today too many borrowers either do not repay what they owe, or take too long to clear their debts,’ Mr Norton says.

A major cause of HELP’s problems is that a growing proportion of all graduates work part-time, but most part-time jobs earn less than the current threshold.

In addition, vocational education diploma students now get HELP, and are less likely than higher education graduates to earn the repayment threshold of $54,126 or more.

International experience suggests that even with a lower threshold, students are still attracted to tertiary education. The English student loan repayment threshold is set at a level similar to $42,000, while in New Zealand the threshold is much lower.

The reform would affect more women than men, due to high rates of part-time work. Yet half of the debtors who would be affected live with a partner, and the combined disposable income of 70 per cent of these couples exceeds $80,000 a year.

‘With this reform, subsidies built into HELP loans would be more targeted toward people in real financial hardship,’ says Mr Norton. ‘In tough times, it’s a reform we can’t ignore.’

Read the report

For further enquiries:
Andrew Norton, Higher Education Program Director
T. 03 8344 3637 E. andrew.norton@grattan.edu.au

“Grattan Institute has appointed Dr Ben Jensen as Program Director: Schools Education,” Professor John Daley announced today. “Dr Jensen joins Grattan Institute after working for five years at the OECD’s Directorate for Education.”

“Dr Jensen’s appointment signals Grattan Institute’s emphasis on the importance of school education, and indicates that its initial focus will be on how improved management of teachers and schools could make a difference.”

“Whilst at OECD, Dr Jensen was responsible for work that has been influential around the globe on the best ways to measure educational outcomes in schools. He was lead analyst on the OECD’s project “Development of school–level Value Added Modelling in Education systems”, as well as lead author of the OECD’s publication, “Measuring improvements in learning outcomes – best practices to assess the value added of schools”.

Dr Jensen was also responsible at the OECD for an international survey of teachers and documentation of teaching practices to understand how teachers and students are affected by issues such as teacher management, teacher salaries, working hours and conditions, instruction hours within schools, and class sizes.

Dr Jensen commented that, “Australia’s own National Reform Agenda has argued that improved education and training has the biggest impact on economic growth of any policy option.

However we would benefit from more evidence and analysis on what reforms will make the most difference to improving school education.”

“Grattan Institute is engaging Australia’s best strategic and public policy thinkers to conduct independent, rigorous fact-based analysis on the issues that will make a difference to Australian society in the areas of Productivity, Cities, Energy, Water and Education,” Prof Daley concluded.

Bachelor-degree graduates of Australia’s sandstone and technology universities earn about 6 per cent more over a 40-year career than do graduates of Australia’s other universities, a new Grattan Institute report reveals.

This is equivalent to graduates with degrees like commerce or science earning about $200,000 more over their working lives.

Technology universities – including RMIT, Curtin University and Queensland University of Technology – are much lower in international university rankings than sandstone universities such as Sydney, Melbourne and Adelaide. But this does not seem to matter in the Australian labour market.

“Graduates of the technology universities do just as well as those from the more prestigious sandstone universities,” says Grattan Higher Education Director Andrew Norton.

Yet Mapping Australian higher education, 2014-15 also shows that there are larger income gaps between courses than between universities.

“The report shows that when it comes to earnings, what you study matters more than where you study,” says Mr Norton say.

For example, a law graduate is likely to $400,000 more over a career than a science graduate.

“Studying engineering at any university is likely to lead to a higher salary than studying arts at a sandstone university,” Mr Norton says.

Mapping Australian higher education, 2014-15 is the third in an annual Grattan series that puts key facts and analysis about the higher education sector in one report.

It shows that domestic enrolments are growing strongly and in 2014 are likely to exceed a million for the first time.

International enrolments are recovering from a downturn and numbered nearly 330,000 in 2013, with China the single largest source of students.

In 2012 the revenues of Australia’s 40 full universities, and about 130 other higher education providers exceeded $26 billion, making higher education a significant industry.

Mr Norton says the report shows that overall the higher education sector is in good shape.

Read the report

For further enquiries:
Andrew Norton, Higher Education Program Director
T. 03 8344 3667 E. andrew.norton@grattan.edu.au

The Chair of Grattan Institute, The Hon Alex Chernov AC QC, announced today that after an extensive search Grattan Institute’s Board had appointed Ms Danielle Wood as Grattan’s new Chief Executive Officer, to take up the role in July 2020 upon the retirement of Prof John Daley.

Danielle is currently the Budget Policy and Institutional Reform Program Director at the Grattan Institute, where her research focuses on economic policy, including tax and budgets, and government integrity.

Danielle is also the President of the Economic Society of Australia and has been the Chair of the Society’s Women in Economics Network.

Earlier, Danielle worked as Principal Economist and Mergers Director at the ACCC, a Senior Consultant at NERA Economic Consulting, and a Senior Research Economist at the Productivity Commission.

‘I am very pleased that Danielle has agreed to step into the CEO role at Grattan and continue the vital work that we have been doing over the last eleven years’ said Mr Chernov.

Grattan Institute’s inaugural CEO, Prof John Daley, will be stepping down in July 2020.

Mr Chernov said that ‘since John opened the doors in 2009, he has steered Grattan to become Australia’s leading domestic policy think tank, and a household name. Grattan’s Board had enjoyed working with John and, on his departure, will miss his rigorous and practical contributions to Board discussion and Grattan’s work. John will leave Grattan with the thanks and best wishes of the Board and all at the Institute.’

For further enquiries: The Hon. Alex Chernov AC QC, Chairman
T. 03 8344 3637 E. alex.chernov@grattan.edu.au

“Professor David Penington has been appointed as the first Senior Fellow of the Grattan Institute,” the CEO, John Daley, announced today.

“Professor Penington is an outstanding administrator, scholar, and policy thinker, with many years experience in health, education and research policy.

His remarkable University career included positions as Professor of Medicine at the University of Melbourne (St Vincent’s Hospital) (1970-87), Dean of the Faculty of Medicine (1978-85) and Vice-Chancellor of the University of Melbourne (1988-96).

His contributions to debates on Medicare, AIDS, and drug use lie behind his reputation as a fearless and thoughtful commentator on some of society’s most difficult issues. He chaired the ‘National AIDS Task Force’ (1983-87), and the 1984 Inquiry into the Medicare dispute. He also chaired the Victorian Premier’s Drug Advisory Council (1995-96) and the Drug Policy Expert Committee of the Bracks Government (1999-2000).

“Grattan Institute is engaging some of Australia’s best strategic thinkers and public policy leaders to provide independent, fact-based analysis that assists public policy discussions and decisions. Senior Fellows will bring their experience and advice to Grattan Institute and continue to contribute to public debate.” John Daley added.

“As a Grattan Institute Senior Fellow, Professor Penington will add to public thinking on health and education policy as a recognised leader in these areas.”

“Personal fulfilment, social interaction and sustainability are the fundamental values underlying Grattan Institute’s research; hence our Programs on Cities, Productivity, School Education, Energy, and Water. Professor Penington’s extensive experience in health and education policy will add an important dimension to our thinking about human well-being that underpins these research areas,” he said.

Australia has an historic opportunity to create a multi-billion-dollar, export-focused manufacturing sector based on globally competitive renewable energy, according to a new Grattan Institute report.

Start with steel: A practical plan to support carbon workers and cut emissions shows that using Australia’s plentiful wind and solar resources to make energy-intensive ‘green’ commodities could create tens of thousands of jobs.

And these jobs could be concentrated in regions that currently employ tens of thousands of coal miners and other ‘carbon workers’ whose jobs are threatened by global efforts to tackle climate change by cutting greenhouse gas emissions.

Capturing about 6.5 per cent of the global steel market would generate about $65 billion in annual export revenue and could create 25,000 manufacturing jobs in Queensland and NSW.

‘Climate change is a wicked conundrum for Australia,’ says Grattan Institute’s Energy Program director and report lead author Tony Wood. ‘It’s a threat to our health and to our agriculture and tourism industries – but tens of thousands of Australians work in industries that rely on fossil fuels.

‘Our practical plan could be a win-win-win: it would create a new export industry, support carbon workers, and cut emissions.’

The report assesses the potential of three sectors to help make Australia a green energy superpower: aviation fuel, ammonia, and steel. It concludes that green steel represents the best opportunity for exports and job creation in key regions.

Green steel uses hydrogen, produced from renewable energy, to replace metallurgical coal to reduce iron ore to iron metal. Australia’s extensive wind and solar energy resources mean we can make hydrogen, and therefore green steel, more cheaply than countries such as Japan, Korea, and Indonesia.

To do this at a global scale will require big industrial workforces – such as those found in the coal-mining regions of central Queensland and the Hunter Valley in NSW.

It is cheaper to make green steel in those places, where labour is available and affordable, than in the Pilbara in Western Australia – despite the cost of shipping iron ore to the east coast.

Smaller but still valuable opportunities in green steel and aviation biofuel exist in other locations, including Port Kembla in NSW, Portland in Victoria, Whyalla in South Australia, and Collie in WA.

Investment to create a global-scale export industry would have to come from the private sector, but Australian governments should act now to ensure we can capture this opportunity.

To build local skills and capability in low-emissions steel-making in the next decade, the federal government should help fund a low-emissions steel ‘flagship’ project. This could use WA’s low-cost gas to make steel with lower emissions than coal. Or it could help modernise the steel plants at Port Kembla or Whyalla, and sustain existing jobs.

Governments should fund and publish pre-commercial studies of geological potential in Australia for hydrogen storage. And federal, state, and local governments should all play a role in coordinating land-use planning and regional development, and helping workers to retrain.

Australia could also support a new, sustainable biofuels industry that uses non-food biomass sources. The federal government should consider mandating that a set share of domestic aviation fuel comes from such biofuels. This could create hundreds of jobs in centres such as Collie, Portland, and Victoria’s Latrobe Valley.

‘For too long, adding value to Australia’s energy and minerals resources and creating sustainable jobs through manufacturing and exporting have been the stuff of dreams,’ Mr Wood says.

‘Not anymore. If we get this right, we will resolve the great climate conundrum that has stretched our political fabric for more than a decade.’

For further enquiries: Tony Wood, Energy Program Director
T. 03 9035 9881‬ E. tony.wood@unimelb.edu.au

Grattan Institute announced its second major Program appointment today. Jane-Frances Kelly will take up the position of Program Director for Cities.

Grattan Institute is a new think tank aiming to shape the direction of debate on many of the important challenges facing Australia. It was set up with substantial support from the Commonwealth and Victorian Governments, The University of Melbourne and BHP Billiton.

John Daley, CEO of Grattan Institute, commented that, “Over two thirds of Australians live in major cities. Growing city populations are straining the capacity of our transport, utility, and social infrastructure. There is also increasing understanding that urban design makes a difference to the quality of social interactions, economic productivity and sustainable energy choices. We hope that work on these areas, as well as on metropolitan governance arrangements, will contribute to cities that work better for the people who live in them.”

Jane-Frances Kelly has an outstanding reputation as one of Australia’s leading policy thinkers. She has led work on strategy and prioritisation for the Commonwealth Department of Prime Minister and Cabinet, the Departments of Premier and Cabinet in Queensland, Victoria and NSW, the UK Cabinet Office, and the Boston Consulting Group. She has been a senior strategic adviser for Noel Pearson at the Cape York Institute, and Christine Nixon at Victoria Police.

“This experience fits Jane-Frances well for the complex task of bringing together a team across a number of disciplines required for public policy recommendations about the future of our cities,” John Daley added.

“Jane-Frances’ appointment is one of a suite of similar announcements being made over the next couple of months. “Grattan Institute is engaging Australia’s best strategic and public policy thinkers to conduct independent, rigorous fact-based analysis on the issues that will make a difference to Australian society in the areas of Productivity, Cities, Energy, Water and Education,” he concluded.

Saul Eslake will join Grattan Institute as the Program Director for its Productivity Growth Program, Professor John Daley, Grattan Institute’s CEO, announced today. Saul joins Grattan Institute after 14 years as the Chief Economist at ANZ.

“We are delighted to have one of Australia’s most respected and forthright commentators on public policy and economics issues in Australia. He is a perfect fit with Grattan Institute’s mission to make a significant contribution to the national public policy debate,” Professor Daley added.

Grattan Institute is a new think tank aiming to shape the direction of debate on many of the important challenges facing Australia. It was set up with substantial support from the Commonwealth and Victorian Governments, University of Melbourne and BHP Billiton.

“Saul will lead Grattan Institute’s investigation of the key drivers of national productivity growth, most recently highlighted on Tuesday by the Governor of the RBA, Glenn Stevens. He described productivity as the key to meeting expectations for future income and wealth”.

“I am excited to be joining Grattan Institute,” Saul Eslake said, “and look forward to contributing to its research program and engaging in the public debate that the work of the Institute will generate.”

“The opportunity to tackle the long term issues behind national productivity performance and the implications for government policy is much needed. Government policy on education, health, greenhouse emissions and demography all affect productivity growth: all require serious investigation and response,” he added.

Professor Daley also commented that Saul’s appointment would be the first in a number to be announced over coming months. “We are engaging the best minds as part of Grattan Institute to make substantial contributions in the areas of Cities, Energy, Water and School Education.”

Saul will take up his appointment on Tuesday 11 August.

Australia should introduce a Medicare-style universal insurance scheme for primary dental care, to ensure all Australians can go to the dentist when they need to, according to a new Grattan Institute report.

Filling the gap: A universal dental care scheme for Australia calculates the scheme would cost an extra $5.6 billion a year, suggests it could be paid for in part by a rise in the Medicare levy, and recommends it be phased in over 10 years.

It’s needed because about 2 million Australians who required dental care in the past year either didn’t get it or delayed getting it because of the cost – and the poor and disadvantaged are most likely to miss out on care.

This is because most spending on dental care comes straight out of patients’ pockets.

“When Australians need to see a GP, Medicare picks up all or most of the bill. But when they need to see a dentist, Australians are on their own,” says the Grattan Institute’s Health Program Director, Stephen Duckett.

The consequence is widespread poor oral health. About a quarter of Australian adults say they avoid some foods because of the condition of their teeth; for low-income people, it’s about a third. Low-income people are more likely to have periodontal disease, untreated tooth decay, or missing teeth.

Bad oral health has painful and costly consequences. Oral health conditions can contribute to other health problems, including diabetes and heart disease. Most oral health conditions are preventable, yet people often end up going to a GP or hospital emergency department to be treated for conditions that could have been arrested with earlier care.

Existing public dental schemes are inadequate, uncoordinated, and inequitable across states and territories. Most states have waiting lists of well over a year for public dental care – and if people need to wait a year for care, their conditions are only going to get worse.

The Commonwealth Government should announce that it will take responsibility for funding primary dental care – just as it takes responsibility for primary medical care.

“There’s no compelling medical, economic, legal or logical reason to treat the mouth so differently from the rest of the body,” Dr Duckett says.

But it would be impractical to move to a universal scheme overnight. It would cost a lot of money – about $5.6 billion in extra spending each year – and more dentists and oral health professionals would need to be trained locally or recruited from overseas.

So, the Commonwealth should announce a roadmap to a universal scheme, including plans to expand the dental health workforce, followed by incremental steps towards a universal scheme.

First, the Commonwealth should take over funding of services for people eligible for existing public dental schemes, fund them properly, and enable private-sector providers to deliver publicly-funded care. Then the scheme should be expanded – first to people on Centrelink payments, then all children. Within a decade, the Commonwealth should take the final step to a universal scheme.

“Universal dental care is a big idea whose time has come,” Dr Duckett says. “All Australians should be able to get the care they need, when they need it, without financial barriers.”

Read the report

Further enquiries: Stephen Duckett, Health Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Marius Kloppers, Chief Executive Officer of BHP Billiton, has joined Grattan Institute’s Board of Directors from 24 February 2009.

Marius brings with him an extensive knowledge of the mining industry and BHP Billiton’s operations, having been internationally active in the mining and resources industry since 1993. He played a key role in the merger of BHP and Billiton and was appointed CEO on 1 October, 2007. Born in Cape Town, South Africa, he has a Bachelor of Engineering (Chemical) from the University of Pretoria, a PhD from Massachusetts Institute of Technology (MIT) and a MBA from Insead, France. In his professional career he has previously worked for Gencor in South Africa, and with management consultants McKinsey & Co. in the Netherlands.

Marius’ appointment follows the commitment of BHP Billiton, the world’s largest diversified resources company, as a Founding Member of Grattan Institute, making a substantial contribution to its initial endowment.

Grattan Institute is a new national public policy institute being established in Melbourne. Its initial endowment by the Commonwealth and Victorian governments, the University of Melbourne, BHP Billiton and nab, and a strong board from diverse background ensure its independence. Its aims are to undertake research and analysis, and lead public debate, on key public issues for Australia as a liberal democracy in a globalised economy.

The Government must act to prevent excessive fees taking at least $40,000 from the superannuation accounts of millions of Australians at retirement, according to a new Grattan Institute report.

Super savings, a companion to Grattan’s 2014 report, Super sting,finds that too many superannuation account holders pay too much in both administration and investment management fees, and that the system could be run for significantly less than the $21 billion Australians pay each year in fees and expenses.

The report recommends that government reduce fees by running a tender to select superannuation funds to manage the accounts of more than nine million Australians who choose a default fund through their employer.

Running a tender to select these funds would save $1 billion a year in fees, or $40,000 for each account holder.

The Murray Financial System Inquiry came to a similar view in its 2014 report, recommending a “competitive mechanism”, or tender, to select default funds, unless a review shows that the sector has become much more efficient by 2020. Grattan’s report, Super Savings, shows that government should accelerate this timetable: Australians have already waited too long for cheaper super.

Government also needs to follow through on recent moves to reduce administration costs and make default accounts more transparent. But as Grattan’s report Super savings shows, government needs to go further to close excess accounts, merge funds and encourage people to move out of overpriced superannuation products. There are too many accounts, too many funds, and too many of them incur high costs.

But it also urges the government to go further and close excess accounts, merge funds and encourage people to move out of overpriced superannuation products.

“There are too many accounts, too many funds, and too many of them incur high costs,” says Grattan’s Productivity Growth Program Director, Jim Minifie.

“Australia has many high-performing but lean funds. If other funds charged what they charge, account holders could get the same performance, but pay $4 billion a year less in administration and $2 billion less in investment management,” he says.

“These are numbers big enough to make the difference between sausages and steak in retirement.”

“A stronger and fairer superannuation system will take the pressure off government pension payments and give older Australians confidence in the future.”

Read the report

For further enquiries: Jim Minifie, Productivity Growth Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

A reform package could add about $37 billion a year to Australian government budgets and help to tackle Australia’s growing budget crisis, a new Grattan Institute report finds.

The package would broaden the GST, raise the age of access to superannuation and the Age Pension and require wealthy retirees to draw down some of the value of their owner- occupied dwellings before accessing the Age Pension.

It would also limit tax concessions on superannuation that allow people over 60 to pay substantially less income tax than younger people with similar incomes.

The package is one option for budget repair presented in Balancing budgets: tough choices we need, a report that assesses options Australian governments have to address potential deficits of $60 billion a year – or 4 per cent of GDP – by 2023.

The budget squeeze comes from rising health costs, likely pressure on welfare spending, an inevitable fall in the terms of trade, and the propensity of governments to introduce big- ticket initiatives such as paid parental leave, new school funding and the National Disability Insurance Scheme.

“Governments cannot put off tough choices indefinitely without imposing heavy costs on the next generation,” says Grattan CEO John Daley.

“We need leaders who make the case publicly, design a package of measures that share the burden of reform fairly across the community, and then make the tough choices to raise taxes and cut expenditure early in their term of government.”

The report examines 20 reforms that would contribute $2 billion a year or more to government budgets.

It favours reforms that are big enough to make a difference, do not produce unacceptable economic and social side-effects, and do not make life harder for those who are worst off.

The report also finds that some areas of potential reform – including cuts to the public service and so-called middle-class welfare – would make far less difference to government budgets than is commonly believed.

“None of these budget choices will be easy for politicians, but making them is vital to

Australia’s long-term prosperity,” Mr Daley says.

The Chair of Grattan Institute, The Hon Alex Chernov, announced today that its inaugural CEO, Prof John Daley, would be stepping down when his contract finishes in July 2020. He said that ‘since John opened the doors in 2009, he has steered Grattan to become Australia’s leading domestic policy think tank, and a household name’. Its seven programs now cover a wide range of policy issues, from energy to health, education, budgets, tax, transport, and housing.

Under John’s leadership, Grattan has shaped debates and subsequent policy reforms on a broad range of public policy issues such as school funding, the costs of superannuation, and electricity pricing, and its ideas have been picked up by all sides of politics. A review published this year traced the enormous impact of more than 115 reports published so far.

Grattan’s work has a reputation for independent, rigorous, and practical analysis of public policy issues that facilitates better-informed discussions among decision makers and the public. Its ‘Orange books’, for example, have become much used by public servants and journalists in preparing and assessing State and Federal election policy agendas.

The Chair emphasised that, ‘John has nurtured Grattan’s distinctive culture, which promotes both vigorous internal debate and passionate cooperation towards achieving Grattan’s outstanding results’. As a result, Grattan has become a magnet for talented policy analysts, and its alumni now hold a series of important roles in government and other bodies involved in public policy.

The Chair of Grattan Institute’s Public Policy Committee and Board Member, Dr Ian Watt AC, former Secretary of the Department of Prime Minister and Cabinet, reflected that ‘John has moulded Grattan’s unique brand in Australia for penetrating original analysis that is clearly communicated and sharply outlines the policies that government should adopt. Many hold up its work as an exemplar of high-quality policy analysis on complex issues.’

As well as leading Grattan’s overall program, John has personally authored a number of significant reports. Game Changers (2012), for example, identified the key priorities for economic reform, and has influenced governments for several years. John has also written leading reports on budget reform, intergenerational inequality, tax reform, housing affordability, and retirement incomes.

John said that  ‘after 11 years, the long-term growth of Grattan Institute as an institution requires new leadership and it is time for the Board to identify and put in place a new CEO who can take Grattan onto the next stage. The greatest legacy of a CEO is not what is achieved while you are there, but how you set up the organisation to develop afterwards. So far I have been a lawyer, a policy adviser, an academic, a management consultant, a banker, a stockbroker, and the founding CEO of Australia’s leading domestic policy think tank, and I am looking forward to what comes next.’

Alex Chernov said that the Grattan Board had enjoyed working with John and, on his departure, will miss his rigorous and practical contributions to Board discussion. John will leave Grattan with the thanks and best wishes of the Board and all at the Institute. The Board has begun the search for a new CEO with assistance from Egon Zehnder.

The Hon Alex Chernov AC QC

For further enquiries:

media@grattan.edu.au

Australia’s private health insurance industry fears it is in a death spiral, and politicians need to rethink whether or to what extent taxpayers should continue to subsidise the industry, according to a new Grattan Institute working paper.

The history and purposes of private health insurance finds that Australians are increasingly dissatisfied with private health insurance, and policy reform is urgent.

Premiums are rising much faster than wages or inflation. People are dropping their cover, especially the young and the healthy. Those who are left are more likely to get sick and go to hospital, driving insurance costs up further.

Meanwhile, taxpayers subside the industry to the tune of about $9 billion every year: $6 billion for the private health insurance rebate, and $3 billion on private medical services for inpatients.

“It’s inevitable that government will have to make tough decisions about whether more subsidies are the answer to the impending crisis,” says lead author and Grattan Institute Health Program Director Stephen Duckett.

“Governments have failed to clearly define the role of private health insurance since Medicare was introduced in the 1980s. The upshot is we have a muddled health care system that is riddled with inconsistencies and perverse incentives.”

Australia needs to confront a fundamental question: what is the purpose of private hospital care?

If its purpose is to complement Medicare, offering people choice of specialists and a wider range of services, then the argument for taxpayer subsidies is weak.

But if its purpose is to substitute for public hospital care, then the argument for subsidies is stronger.

The paper urges policy makers to grapple with two further questions:

• Do the current design features of the private health insurance system, including incentives, penalties and regulation, support its desired role (as a complement or substitute or both) in the overall health system? And if not, what other mechanisms or combination of arrangements are needed?
• Does government support for private health insurance and private hospital care promote overall economic efficiency and the most effective and equitable use of government and community resources? And in the long run, are there better ways of providing support to the sector?

“The question then becomes whether government should support private health care directly, or via public health insurance – or not at all,” Professor Duckett says.

Future Grattan Institute work will tackle these questions and propose solutions to Australia’s private health insurance woes.

Read the working paper

Further enquiries: Stephen Duckett, Health Program Director
T. 03 8344 3637 E. media@grattan.edu.au

The wholesale price of seven medicines fell by about a third today, but Australia has a long way to go before consumers pay fair prices for pharmaceuticals, according to a new Grattan Institute report.

Poor pricing progress: price disclosure isn’t the answer to high drug prices shows that even after today’s reductions, Australian prices for these seven drugs are on average 14 times higher than prices for the same drugs in the United Kingdom.

Australia’s “price disclosure” policy was introduced in 2007 in a bid to cut costs. But drugs that have just been through this process have wholesale prices that are on average over 16 times the lowest price in New Zealand, the UK and the Canadian province of Ontario.

“Price disclosure has not gone far enough or fast enough, and it’s time for a new approach,” says Grattan Institute Health Director Stephen Duckett.

Under price disclosure, pharmacies are forced to reveal discounts on drug prices that manufacturers provide them, and the Government reduces the amount paid to pharmacies for each drug accordingly.

But another 2013 Grattan report, Australia’s bad drug deal, shows that if the Government benchmarked the prices of generic drugs against prices paid overseas it could save more than $1 billion a year in payments to manufacturers.

“We’re simply buying drugs the wrong way: we need to be much tougher on prices and much fairer for consumers,” Dr Duckett says.

High costs also hit patient health: nearly one in 10 Australians doesn’t take medicines a doctor prescribes because of cost.

For six of the seven drugs with price cuts today, benchmarking would save patients almost $20 more for each box of pills, on average.

“Take Atorvastatin, a high cholesterol drug that is sold as ‘Lipitor’. For someone without a concession, the price of a box of 40mg pills just fell by around seven dollars,” Dr Duckett said.

“But if we had the UK’s wholesale prices, patients would save much more, up to $19 extra.”

“Any business would look around to check the market price, and the Government should do the same. There is simply no reason why Australians shouldn’t get a better deal on medicines.”

For further enquiries: Dr Stephen Duckett
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

State governments have spent up to $20 billion more than was needed on the electricity grid, and households and businesses are paying for it through their power bills, according to a new Grattan Institute report.

Down to the wire: A sustainable electricity network for Australia shows that customers in NSW, Queensland and Tasmania are paying $100-to-$400 more each year than they should.

The report calls on those state governments to write down the value of the assets to reduce electricity bills, or give direct rebates to customers.

The cost of the National Electricity Market’s power grid rose from $50 billion in 2005 to $90 billion today. But up to $20 billion of that was not needed to cover growth in population, consumption, or even demand at peak times.

There have been some improvements in reliability of supply, but not enough to justify the spending.

The over-investment was overwhelmingly in NSW and Queensland. In 2005, the NSW and Queensland governments required their network businesses to build excessive back-up infrastructure to protect against even the most unlikely events. At the same time, growth in demand for electricity slowed, as appliances became more energy efficient and more households installed solar panels.

Unless state governments fix the mistakes of the past, consumers will continue to pay for assets that are neither used nor useful. And prices that are higher than they should be will lead to poor investment decisions in future.

In Queensland and Tasmania, where the businesses are still state-owned, the Government should write down the value of the assets. This would mean governments foregoing future revenue in favour of lower electricity bills.

In NSW, intervening to revalue the privatised businesses would create too many problems, so the Government should instead use the proceeds of the privatisations to fund a rebate to consumers.

To prevent the mistakes happening again, state governments should move to full privatisation, because the evidence shows that privatised electricity businesses deliver lower prices for consumers, without compromising reliability or safety.

And governments should change the way electricity is priced, so all consumers can see when demand is high. Network costs would fall if customers reduced their consumption at critical peak periods.

“Consumers are copping the bill for the past excessive spending on the electricity grid,” says Grattan Institute Energy Program Director Tony Wood.

“Governments should act now to give some of that money back to consumers, and to ensure we have a more sustainable and affordable electricity network.”

Read the report

For further enquiries: Tony Wood, Energy Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

The State Library of Victoria last night announced a new collaboration with Grattan Institute to create The Policy Pitch, a series of free public seminars that examine key policy issues facing Australia today.

The Policy Pitch series begins in February next year with the inaugural session Shock to the system: why power use is falling but bills keep going up that will highlight some of the most pressing problems facing the Australian electricity sector.

Australian governments have spent unprecedented sums on transport infrastructure in the past decade, and while important projects have been built the overall investment has been poorly directed, according to a new Grattan Institute report.

Roads to riches: better transport spending finds that although our large cities are the engines of Australia’s economic growth, governments have not prioritised vital urban freight and passenger routes.

Grattan’s analysis of government budget papers shows that too much money has been spent on the wrong projects in the wrong places. In particular, governments have spent up big in electorates where federal elections are won and lost, funding roads that are not very important to the economy, but are popular with local voters.

In some cases return on investment has been staggeringly low: project evaluation showed one highway upgrade yielded a return of eight cents for each dollar spent.

“One difficulty is that there is little to prevent politicians committing to projects on the basis of weak or undisclosed business cases – and particularly during election campaigns,” says Grattan Transport Program Director Marion Terrill.

“There isn’t enough publicly available information on potential projects, so the public can’t hold politicians to account or be confident that funds are spent wisely.”

Oversight mechanisms aren’t working. Since 2012 over half of Commonwealth infrastructure spending has gone to projects where Infrastructure Australia has not published an evaluation. States have spent billions more with little transparency.

A better approach would be for an independent body to assess all infrastructure proposals rigorously on a like-for-like basis. The assessment of the net benefits should then be tabled in the parliament, and only then should governments be able to go ahead and commit public money.

Once governments are only building projects where the community benefit clearly outweighs the cost, their second step should be aim to build all such projects.

Read the report

For further enquiries:
Marion Terrill, Transport Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Chaotic approaches to energy policy have pushed up electricity prices and scared off investors, according to a new Grattan Institute report.

Power play: how governments can better direct Australia’s electricity market says governments feel compelled to respond when electricity supply is lost and when prices are too high, but ad hoc and uncoordinated actions by federal and state governments have made things worse.

The report finds that the energy sector is likely to need in the order of $150 billion in new utility-scale generation assets over the next 30 years.

The Federal Government is making this investment harder by bashing big companies and intervening in the market with knee-jerk policies such as the taxpayer-funded $5 billion Snowy 2.0 pumped hydro project and the ‘Underwriting New Generation Investments’ program. After the 2016 statewide blackout, the South Australian government deployed expensive diesel generators at short notice, which ultimately were used for only four hours – at a cost of $111 million.

‘Significant investment is needed to transition from old and dirty to new and clean energy, while keeping the lights on. But we are currently doing this the hard way – and Australia’s governments, state and federal, are not helping,’ says the report’s lead author, Grattan Energy Program Director Tony Wood.

‘Governments have a bad track record at “picking winners”, and their interventions crowd out alternative, generally better, investments.’

The Federal Government’s fight to avoid the impending closure of the Liddell coal power station in NSW makes it harder for Australia to achieve its emissions reduction targets, and is likely to increase electricity prices and reduce the reliability of supplies.

The states should work together to fill the climate-change policy vacuum. Over the past decade or so, successive federal governments have proposed and rejected five emissions policies. The states’ responses have added to the mess, using different mechanisms to try to meet different emissions reduction targets. The upshot has been growing frustration for investors and higher prices for consumers.

‘The states should abandon their uncoordinated policies and instead implement a nationwide emissions reduction policy through state-based legislation,’ Mr Wood says.

‘While a national policy led by the federal government would be ideal, a state-based policy would be far superior to no policy at all. It would resolve a key element of uncertainty that has held back investment in both renewable and dispatchable generation – and so it would ultimately led to lower bills and increased reliability.’

In the meantime, the Federal Government should abandon its current approach of ‘big stick’ threats to the major energy companies, ad hoc market interventions, and taxpayer-funded support for electricity generation. Instead it should help get the electricity market back on the right track by providing clear, rules-based policies to better manage investments in transmission and closures of coal plants.

Australia’s coal fleet is ageing and will progressively retire over coming decades. The abrupt closures of the Northern power station in South Australia in 2016 and the Hazelwood power station in Victoria in 2017 have heightened political concerns that future closures will push up electricity prices and reduce reliability.

To improve clarity on coal closures, the report proposes that generators be required to place hundreds of millions of dollars into escrow to ensure orderly retirement.

Under the Grattan coal closure model, coal plants would need to nominate closure dates. If they then closed earlier than promised, they would forfeit the money and it could be used to try to cover any reliability problems caused.‘Recent and current government actions imperil Australia’s great energy transition,’ Mr Wood says. ‘Yet the transition to a low-emissions future is inevitable and desirable. This report charts the path to success.’ 

Read the report

For further enquiries: Tony Wood, Energy Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

The graduate gender pay gap in Australia is narrowing, with more women in paid work than ever before, a new Grattan Institute report has found.

Mapping Australian higher education 2018 shows women’s earnings generally outpaced men’s over the past decade – but the pay gap remains large.

Female university graduates are now expected to earn 27 per cent less than men – or $750,000 less – over their career.

Ten years earlier, the gap was 30 per cent.

The median-income female graduate from 2016 can expect to earn about $2 million over her career. Early-career female graduates from 2016 are earning about 4 per cent more (after allowing for inflation) than their counterparts from 2006. Early-career male graduates from 2016, by contrast, are earning about 3 per cent less than their counterparts from a decade earlier.

The driving force behind women’s earnings growth over the past decade is a big increase in the number of women with children staying in the workforce – up by nearly 10 percentage points among graduates aged 25-34, and 5 percentage points among graduates aged 35-44.

“This is a policy success story,” says Grattan Institute’s Higher Education Program Director Andrew Norton.

“As paid maternity leave has become more widely available, more women are choosing to stay employed when they become mothers, rather than quitting the workforce.

“And this trend is expected to continue.

“As subsidies make childcare more affordable for women returning to work, more are doing so full-time.

“Gender equality in the workforce is not yet a reality in Australia, but it’s slowly getting closer.”

More broadly, growth in professional jobs in Australia did not keep up with the growing number of graduates over the decade, and recent graduates are getting less financial benefit from their degrees than earlier graduates at the same point in their careers.

In early 2017, 28 per cent of recent graduates who were looking for full-time work were yet to find it four months from completion, up from 15 per cent in early 2008, before the global financial crisis.

Earnings either grew weakly or declined over the past decade for early-career graduates from all disciplines except education, nursing and medicine. A median-income male graduate in science, commerce or law earned less in 2016 than in 2006, although law graduates still have above-average incomes.

Although the labour market remains tough for young graduates, it has improved since its lowest point in 2014, reflecting recent growth in professional jobs.

The report, the fifth in a series going back to 2012, shows that in 2016 a record 41 per cent of Australian 19-year-olds were enrolled in higher education institutions.

Health-related courses have experienced the strongest growth over the last decade.

After a decade of rapid growth, domestic commencing bachelor-degree enrolments are now growing slowly and so higher education participation will plateau over the next few years.

International student enrolments are still booming, bringing in more than $9 billion in fee revenue in 2017. China and India are the largest source countries.

Australian public universities still receive more than half their cash flow from government grants or loans, but are becoming less reliant on government.

In 2018, the Commonwealth Government will spend less in real terms on tuition subsidies than it did in 2017, the first annual drop since 2003.

Public spending on research has fallen in recent years, although total research spending by universities is up slightly, to $11 billion in 2016.

Apart from international students, most higher education indicators are stable. After a decade of rapid change, Australian higher education is in a consolidation phase.

Read the report

For further enquiries:
Andrew Norton, Higher Education Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Australians are using less power but paying more for it, with potentially highly damaging consequences for the electricity system, a new Grattan Institute report finds.

Shock to the system: dealing with falling electricity demand shows that while the average household has consumed 7 per cent less power since 2006, its average power bill has gone up over the same period by more than 85 per cent: from $890 to $1660 a year.

Prices have stayed high in part because network businesses – which carry power through poles and wires from the generator to the home – have spent billions of dollars on infrastructure that falling consumption has made redundant.

“A nasty correction is coming and the question is who will pay for it – power companies, governments or consumers again?” says Grattan Institute Energy Program Director Tony Wood.

Network businesses, unlike electricity generators, are regulated monopolies not subject to market forces.

For years regulators have allowed these companies to earn excessive profits by setting tariffs that are too high, given the low risk they face as monopolies.

This was less of a problem when consumption was rising but when it falls, the high cost of the network is spread over a smaller volume of power use, and everyone pays more.

In response, governments must ensure that network companies make future investments that better match future power needs, and begin the hard task of reforming electricity tariffs so that they better reflect the cost companies incur.

“Even with these changes, redundant assets may have to be written down, and it’s a hard job deciding who will pay for that,” says Tony Wood.

“Reforms in this area will be neither simple nor painless, but governments must act now to prevent even higher prices and more pain down the track.”

For further enquiries: Tony Wood, Energy Program Director, or Lucy Carter, Energy Fellow
T. +61 3 8344 3637
E. media@grattan.edu.au

Many recent science and information technology graduates are failing to find full-time work at a time when science, technology, engineering and mathematics (STEM) education is a priority for government and industry, according to a new Grattan Institute report.

Mapping Australian higher education 2016 shows that in 2015, only half of bachelor degree science graduates seeking full-time work had found it four months after completing their degrees, 17 percentage points below the average for all graduates.

Among recent science graduates who found full-time jobs, only half say their qualification is required or important for their job – about 20 percentage points below the average.

Although job outcomes improve over time, science bachelor degree graduates are less likely than other STEM graduates to work in high-skill managerial or professional jobs.

Mapping Australian higher education 2016, Grattan Institute’s regular overview of key trends in higher education, focuses on STEM graduate employment.

Grattan Institute Higher Education Program Director Andrew Norton says that despite poor employment outcomes, demand for science courses continues to grow.

‘Prospective students thinking about studying science need to know that a bachelor science degree is high risk for finding a job. Often students need to do another degree to improve their employment prospects,’ Mr Norton says.

While there are many more potential jobs in IT than science, a third of recent IT graduates cannot find full-time work.

IT students are less satisfied with their skills development, and are more likely to leave their courses without finishing, than are other students. IT industry and professional bodies suggest that university IT courses need improving.

Engineering graduates have better employment prospects than science or IT graduates.  Three-quarters of new engineering graduates have full-time work, and have the highest rate of professional or managerial employment of all STEM graduates.

In other trends examined in Mapping Australian higher education 2016, domestic enrolments exceeded one million for the first time in 2014, with the fastest growth in health.

International student numbers are growing again, after a fall between 2010 and 2012. Student satisfaction with teaching is also increasing.

Australia performs well in global research rankings, but in recent years levels of university research expenditure and outputs have stopped growing.

Read the report

For further enquiries:
Andrew Norton, Higher Education Program Director
T. 03 8344 3637 E. media@grattan.edu.au

The conventional wisdom that Australians don’t save enough for retirement is wrong. A new Grattan Institute report reveals that the vast majority of retirees today and in future are likely to be financially comfortable.

Money in retirement: more than enough shows that retirees are less likely than working-age Australians to suffer financial stress such as not being able to pay a bill on time, and more likely to be able to afford optional extras such as annual holidays.

Grattan Institute modelling shows that, even after allowing for inflation, most workers today can expect a retirement income of at least 91 per cent of their pre-retirement income – well above the 70 per cent benchmark endorsed by the OECD, and more than enough to maintain pre-retirement living standards.

And many low-income Australians will get a pay rise when they retire, through a combination of the Age Pension and their compulsory superannuation savings.

Australians tend to spend less after they retire, and even less into old age. Their medical costs increase, but are largely covered by the taxpayer. Many retirees are net savers, and current retirees often leave a legacy almost as large as their nest egg on the day they retired.

“The financial services industry ‘fear factory’ encourages Australians to worry unnecessarily about whether they’ll have enough money in retirement,” Grattan Institute CEO John Daley said.

But the retirement incomes system is not working for some low-income Australians who rent, particularly in Sydney and Melbourne. And this problem will get worse because on current trends home ownership for over-65s will decline from 76 per today to 57 per cent by 2056.

To boost retirement incomes for the poorest Australians, the report calls for a 40 per cent increase in the maximum rate of Commonwealth Rent Assistance – worth more than $1,400 a year for a single retiree.

Loosening the Age Pension assets test could boost retirement incomes for around 20 per cent of retirees today, rising to more than 70 per cent of retirees in future. It would also deal with anomalies in the system: some people who save $100 while working increase their total retirement income by less than $100 in real terms.

But because most Australians will be comfortable in retirement, there is no need to boost retirement incomes across the board. The legislated plan to increase compulsory superannuation contributions from 9.5 per cent to 12 per cent should be scrapped, saving the Budget about $2 billion a year.

And superannuation tax breaks and age-based tax breaks should be reduced, to ensure the retirement incomes system does not become an excessive burden on future budgets, and endanger funding for aged care and health.

Read the report

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Australia’s aged care system is failing older Australians and their families and needs to be overhauled, according to a new Grattan Institute report.

Rethinking aged care: emphasising the rights of older Australians says the care and support of older Australians must trump the profits of private providers.

The report identifies ageism as part of the problem, and emphasising the rights of older Australians in need of care and support as the start of the solution.

‘The horror stories from the Royal Commission into aged care and from the COVID-19 aged care crisis have to stop,’ says lead author and Grattan Institute Health Program Director Stephen Duckett.

‘More money and different regulation are both necessary, but won’t be enough. Australia needs to fundamentally change the culture of its aged care system.’

Over the past few decades the sector has become a ‘market’. As for-profit providers moved in, residential facilities got bigger. Regulation has not kept pace with the increasingly privatised market. Government focus has been on constraining costs rather than ensuring quality.

The government’s poor commitment to the care and support of older Australians reflects society’s disdainful attitude to the aged.

‘Older Australians are often seen as a burden and no longer valuable or contributing members of society,’ Dr Duckett says.

‘They are pushed out of sight and out of mind.

‘The result is the shameful mess we have today: a top-down, provider-centric aged care system that is under-funded, poorly regulated, and failing older Australians.

‘Merely adding further Band-Aids to a broken system is not enough. We need to start again with a new Act that puts the rights of older Australians at the heart.’

Five key rights-based principles should shape the system:

• Independence, self-fulfilment, and participation in community
• Informed and supported choice and control
• Universal access to reasonable and necessary supports
• Equity and non-discrimination
• Dignity, including dignity in death

This first Grattan report on aged care sets the overarching framework for reform. A second Grattan report to follow will detail how Australia can build a rights-based aged care system so that older Australians can live dignified and meaningful lives.

Read the report

Contact

Stephen Duckett, Health Program Director
‬ T. ‭03 9035 9881 M. ‭0447 837 741 E. stephen.duckett@grattan.edu.au

An energy revolution is at hand in Australia, as the arrival of home batteries combines with the falling cost of solar panels to transform the centralised grid, according to a new Grattan Institute report.

But Sundown, sunrise: how Australia can finally get solar power right urges governments to avoid the mistakes of the past by rejecting expensive and unfair subsidies and by setting charges that reflect the true cost of providing electricity.

The report shows how lavish feed-in tariff schemes have induced 1.4 million households to put solar panels on their roofs – the highest proportion of households of any country.

State governments began winding back the schemes in 2012, but by the time the last runs out in 2028 they will have cost the economy $9 billion, the report finds.

Worse, people who chose not to install solar, or could not afford it, have paid for the schemes through a subsidy to solar PV owners worth $14 billion.

“It’s true the schemes have reduced emissions but at a very high price – we could have found much cheaper ways to tackle climate change,” says Grattan Energy Program Director Tony Wood.

The report calls on state governments to introduce new electricity tariffs that encourage consumers to use less power in periods of peak demand.

The tariffs would remove a subsidy to solar PV owners, making their panels less profitable in the short term, but they would also open the door to radically new uses of power that will transform the grid and cut both costs and emissions.

Tony Wood says that as home batteries come on the market from as early as next year, people will be able to store power from their solar panels during the day then use it in the evening when demand on the network is greatest.

“This will reduce the load on the network, cutting power prices not just for solar panel owners but for everyone,” Mr Wood says.

“But network businesses have some difficult decisions ahead to ensure they remain profitable.”

“The journey to a new electricity system has begun. If we manage the transformation poorly, consumers will pay again. If we do it well, everyone can benefit from a more efficient, sustainable and affordable system.”

Read the report

For further enquiries: Tony Wood, Energy Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Australia risks descent into economic stagnation as the mining investment boom fades, according to a new Grattan Institute report.

Stagnation Nation? Australian investment in a low-growth world urges governments and policymakers to do more to ensure Australia remains a dynamic, growing economy.

Australia is experiencing its biggest ever five-year fall in mining investment, as a proportion of GDP. And non-mining business investment has fallen from 12 per cent to 9 per cent of GDP, lower than at any point in the past 50 years.

What’s needed is perspective, not panic. The shift to a services economy, and a fall in the price of capital goods, mean businesses can thrive with lower levels of investment. And there are some green shoots in the non-mining states.

But this is no excuse for complacency. A third of the fall in non-mining investment is a result of slow economic growth, and that’s a problem requiring concerted action.

The report says the Federal Government’s key policy prescription – a cut in the company tax rate from 30 per cent to 25 per cent over ten years – would attract extra foreign investment, but at a cost: it would also reduce national income for years and hit the budget. Committing to the plan now, before the budget is on a clear path to recovery, risks reducing future living standards.

Any cut in the company tax rate should be part of a wider package of reforms that explicitly funds the cost to the budget.  The package could include an increase in the GST rate from 10 per cent to 15 per cent, which would bring in about $11 billion of extra revenue a year, even after compensation for lower-income households. The tax treatment of capital gains, borrowing and superannuation could also be adjusted.

Federal and state governments should also introduce broader reforms to promote growth. They could invest more in infrastructure – but only if they can build better infrastructure. They should improve workforce participation, by ensuring tax, transfer, and childcare support do not impose high effective marginal tax rates on the second earners in households. They should improve the efficiency of urban land use, by permitting more density in the middle and inner suburbs of Australia’s major cities.

“There are no silver bullets for Australia, only tough choices,” says Grattan Institute Productivity Growth Program Director Jim Minifie.

“Australians cannot take economic growth for granted, and the risk is real: we could join the global low-growth pack as our mining boom winds down.”

Read the report

Further enquiries: Jim Minifie, Productivity Growth Program Director, Grattan Institute
T. 03 8344 3637 E. media@grattan.edu.au

Some of Australia’s most troubled schools are turning around their performance to achieve remarkable results and serve as a model for low-performing schools across the country, a new Grattan Institute report has found.

Turning around schools: it can be done examines two secondary and two primary schools to show that all of them have succeeded by following the same five steps.

They are: strong leadership that raises expectations, effective teaching with teachers learning from each other, development and measurement of student learning, a positive school culture, and engagement of parents and the local community.

“People think turning around a school only happens with superhuman leaders and teachers – it doesn’t,” says Grattan Institute School Education Program Director Ben Jensen.

“Many of these schools have inspirational figures but the lesson of both Australia and overseas is that any school that rigorously follows these five steps can succeed.”

Dr Jensen stressed that governments had a key role in supporting schools to make behavioural and cultural change, but they had to do more than simply focus on the five steps.

“Governments need to find a way to commit all parties – government, the education sector and schools – to lasting change” Dr Jensen said.

Governments and schools must develop the skills for change in the five steps for school turnaround, and then reinforce them with comprehensive evaluation and accountability mechanisms.

But Dr Jensen said these mechanisms had to focus on achieving change in the five steps, not just on test scores.

“If school turnaround is done well, it will make huge dent in inequality and enrich the lives of the students who need it most,” he said.

The four schools examined in the report are Ellenbrook Primary School in Perth, Ravenswood Heights Primary School in Launceston, Holroyd High School in Sydney and Sunshine College in Melbourne.

For further enquiries: Dr Ben Jensen, School Education Program Director
T. +61 (0) 8344 3637 E. media@grattan.edu.au

View the submission

The Federal Government’s Direct Action Plan and Emissions Reduction Fund do not make up “a comprehensive climate change policy” consistent with holding global warming to two degrees, a Grattan Institute paper has warned.

A submission responding to the Emissions Reduction Fund Green Paper finds that the Green Paper lacks vital detail and “does not provide confidence” that key elements of the Government’s design principles for the Fund will be met.

The submission, published today, argues that the Fund “can achieve effective and cost-efficient reductions” towards meeting Australia’s unconditional emissions target of 5 per cent below 2000 levels by 2020.

But “it will require extension and/or enhancement” to go beyond that target or past 2020. Grattan’s submission also argues that the Government’s “firm and capped” commitment of $2.55 billion over four years may constrain the effectiveness of the Fund.

It warns that the Green Paper does not provide confidence that the three guiding design principles of the Fund – that reductions should be lowest cost, they should be genuine and administration should be streamlined – will be met.

The submissions sees strengths and weaknesses in the Government’s plan to use a competitive auction system to fund the lowest-cost emissions reduction activities.

While auction schemes generally reduce the cost of low-emission energy technology projects, they have a mixed record, and can induce developers to bid low in order to win the auction, then fail to deliver the project.

The government’s proposed Emissions Reduction Fund is intended to create a form of carbon price and work in parallel with the Renewable Energy Target to cut emissions effectively and efficiently.

Grattan Institute’s submission argues that “only an economy-wide carbon price can achieve the scale and speed of emissions reductions required for Australia to meet its 2020 commitments without excessive cost to the economy or taxpayer”. It remains unclear whether the Emissions Reduction Fund will achieve this goal.

The deadline for submissions to the Green Paper process closed on Friday and the Government will release a White Paper on the Emissions Reduction Fund in March.

View the submission

For further enquiries: Tony Wood, Energy Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Read the report

Schools must make time in their day to help teachers develop or Australia will continue to slide in international school education rankings, according to a new Grattan Institute report.

Making time for great teaching finds that Australian school systems and schools are struggling to allocate the time and resources needed to put teaching and learning first.

The world’s highest-performing school systems provide time for teachers to be mentored, research best practice, have their classes observed and receive constructive feedback on their performance, says Grattan School Education Program Director Ben Jensen.

“The world’s best systems are relentless about teacher development. We are committed to it in principle but struggle in practice. This report shows how schools can do it,” Dr Jensen says.

Making time for great teaching examines the timetables and budgets of six diverse schools across the country to identify ways they can change their practices in order to free up time for teacher development.

It recommends, among a range of options, that schools make this time by reducing teacher presence at meetings and assemblies, extra-curricular events and professional development days that do not improve teaching.

Yet Dr Jensen says that while schools can make substantial changes, governments and school systems must lead the way by changing regulations in order to give teachers time to improve their classroom practice.

“Right now we’re going the opposite way – schools are being asked to take on more subjects, more student welfare support, more extra-curricular activity and smaller classes,” Dr Jensen says.

“We cannot expect teachers to lift our students to the best in the world while also insisting they undertake child minding in the playground and on busses on the way home from school.”

“The best way to improve schools is to make the time to improve teaching. We know it. Now we have to do it.”

For further enquiries: Dr Ben Jensen, School Education Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

The popular idea that the economic divide between Australia’s cities and regions is getting bigger is a misconception, according to new Grattan Institute research.

The working paper Regional patterns of Australia’s economy and population, released today, shows that beneath the oft-told ‘tale of two Australias’ is a more nuanced story.

Income growth and employment rates are not obviously worse in regional areas.

Cities and regions both have pockets of disadvantage, as well as areas with healthy income growth and low unemployment.

And while cities have higher average incomes, the gap in incomes between the cities and the regions is not getting wider.

Grattan Institute CEO John Daley says the research casts doubt on the idea that regional Australians are increasingly voting for minor parties because the regions are getting a raw deal compared to the cities.

“Given that people in regions have generally fared as well as those in cities over the past decade, major parties may need to look beyond income and employment to discover why dissatisfaction among regional voters is increasing,” he says.

The paper shows that the highest taxable incomes in Australia are in Sydney’s eastern suburbs, followed by Cottesloe in Perth and Stonnington in eastern Melbourne. The lowest taxable incomes are in Tasmania and the regions of the east-coast states, especially the far north coast of NSW, central Victoria and southern Queensland.

But income growth in the regions has kept pace with income growth in the cities over the past decade. The lowest income growth was typically in suburban areas of major cities.

While unemployment varies between regions, it is not noticeably worse in the regions overall. Some of the biggest increases in unemployment over the past five years were along transport ‘spines’ in cities, such as the Ipswich to Carole Park corridor in Brisbane and the Dandenong to Pakenham corridor in Melbourne.

The biggest difference between regions and cities is that inland regional populations are generally growing slower – particularly in non-mining states. Cities are attracting many more migrants, particularly from Asia, the Middle East, and Africa. The east coast “sea change” towns are also getting larger, but unemployment is relatively high.

The research will contribute to a forthcoming Grattan Institute report examining why the vote for minor parties has risen rapidly over the past decade, particularly in regional electorates.

Read the report

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Grattan Institute is delighted to announce that ABC presenter, Geraldine Doogue, has joined the Grattan Board.

Ms Doogue, whose 40-year journalism career features numerous roles and awards, presents Saturday Extra on Radio National and Compass on ABC TV1.

Julianne Schultz and Terry Moran have retired from the board, after seeing Grattan Institute through its first five years of operation.

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

High electricity prices are here to stay, according to a new Grattan Institute report that calls on politicians to tell Australians the truth about the future of energy costs.

Mostly working: Australia’s wholesale electricity market finds that wholesale electricity prices rose across the National Electricity Market (NEM) by 130 per cent between 2015 and 2017.

The price paid for electricity traded in the NEM also more than doubled, from about $8 billion to $18 billion, and household bills increased by up to 20 per cent in 2017 alone.

But it is impossible for governments to fix the problem, because most of the price rises have been caused by issues beyond their control.

The report identifies three underlying causes. First, big, old, low-cost, coal-fired power stations closed (Northern in South Australia in 2016 and Hazelwood in Victoria in 2017). Although they were low-cost to operate, they faced big maintenance bills that weren’t worth paying given low market prices as a result of historic oversupply. Their closure reduced supply and so pushing prices up. This accounts for about 60 per cent, or $6 billion, of the increase in the value of electricity traded annually in the NEM between 2015 and 2017.

Second, the price of key inputs, especially gas and black coal, rose just when the plants they fuel were needed more often, pushing prices up still further. This accounts for nearly 40 per cent of the increase. In both cases, the market responded efficiently and appropriately to the changing circumstances.

The third cause is that major electricity generators ‘game’ the system: they use their power in concentrated markets to create artificial scarcity of supply and so force prices up. Gaming has mainly occurred in Queensland and South Australia, but there are signs of it in Victoria since the closure of Hazelwood, and it could emerge in NSW as supply tightens with the scheduled closure of the Liddell coal-fired power station in 2022.

Gaming has been part of the market for years and appears to be permitted by the current market rules. But it may add as much as $800 million to the price paid for electricity traded in the NEM in some years, and the report calls for changes to the rules to eliminate or at least limit gaming.

Grattan Institute Energy Program Director Tony Wood said the report was not good news for households or businesses banking on lower electricity prices.

“Wholesale prices are very unlikely to return to previous levels of around $50 per megawatt hour,” he said.

“Historic over-supply is disappearing, gas prices will stay higher than they were in the past, and new generators using any technology – including coal – cost more.

“Politicians should tell Australians the harsh truth: high wholesale electricity prices are the new normal.”

Read the report

For further enquiries: Tony Wood, Energy Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

The Commonwealth Government could save more than $800 million a year by 2017 if it recovered outstanding student loans from deceased estates and people living overseas, a Grattan Institute report has found.

Doubtful debt: the rising cost of student loans reveals that total doubtful debt – loans that are not expected to be repaid – is likely to be as high as $13 billion by 2017.

The Higher Education Loan Program (HELP) lends students more than $6 billion a year to finance their education, as much as the Government spends on funding higher education tuition.

Grattan Institute Higher Education Program Director Andrew Norton says that for 25 years student loan programs have been a great success, financing the education of millions of students.

“But as student numbers increase and new loan schemes are established, HELP is getting expensive,” Mr Norton says.

“A few targeted reforms could radically improve HELP’s finances and free up money for teaching and research, without creating hardship for students, graduates or their families.”

The report finds that while graduates of performing arts and visual arts and crafts are the least likely to repay their student loan in full, graduates of commerce, education, nursing, science and humanities contribute most to doubtful debt, once their larger numbers are taken into account.

The report calls on the Government to stop writing-off HELP debt in deceased estates – the biggest cause of doubtful debt – when estates are worth more than $100,000.

It also recommends that graduates living overseas repay a flat annual amount until their HELP debt is cleared.

“HELP’s repayment system was never designed for lending on the scale we see today,” Mr Norton says.

“With these modest reforms, we can achieve the goals of HELP at a much lower cost.”

After a decade of toxic political debates and a policy bonfire, there is an opportunity to forge a stable and compelling policy on climate change that could be supported by both sides of politics, according to a new Grattan Institute report.

Climate phoenix: a sustainable Australian climate policy shows that with both major parties committed to reducing emissions, a bipartisan approach is within reach. The report sets out a realistic policy roadmap that builds on the Coalition’s current climate policies while maintaining direction towards the long-term target. Its recommendations are designed to ensure both environmental credibility and the predictability essential to attract investment in clean technology.

‘An economy-wide carbon price remains the ideal climate policy. But pragmatism and urgency demand a practical, next-best approach,’ says Grattan Institute Energy Program Director Tony Wood.

‘Our assessment of Australia’s climate change options against a range of criteria indicates that none is perfect and that trade-offs are needed to ensure that both major parties are heading towards the commonly agreed objective.’

The roadmap allows a Coalition government to modify its Safeguard Mechanism so that it no longer merely prevents emissions from going up, but drives them down in line with agreed targets – and via steps that are consistent with its political constraints. Equally, it shows how a future Labor government could take the Coalition’s policy framework and move to its preferred emissions trading model.

Government should take three steps. First, it should tighten the emissions limits (‘baselines’) of the Safeguard Mechanism in line with Australia’s agreed targets. This forces our largest emitters to make significant reductions in their emissions.

Next, it should auction tradeable permits that allow businesses to emit above the baselines, but within the target trajectory to 2030. This step ensures that reductions are achieved at lowest possible cost.

The third step is to expand the Safeguard Mechanism to cover more emitters while reducing baselines to zero. Businesses covered by the scheme will then have to hold permits for all their emissions. This final step creates the structure to deliver tougher future targets at low cost.

‘With bipartisan agreement that Australia must move to a low-emissions economy, all we need now is a clear and workable plan for how to get there,’ Mr Wood says. ‘This report aims to provide it.’

Read the report

For further enquiries: Tony Wood, Energy Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Grattan Institute is delighted to announce the appointment of the Hon Alex Chernov AC, QC as chair of its board of directors.

Mr Allan Myers AC, QC, has retired after seven years as the foundation chair of Australia’s leading independent think tank.

Mr Chernov brings to Grattan a wealth of experience in public administration and governance.

During a distinguished legal career he served as Chairman of the Victorian Bar (1985-1986) and President of the Law Council of Australia (1990-91) before being appointed to the Court of Appeal of the Supreme Court of Victoria.

Since retiring from the Victorian Court of Appeal, Mr Chernov has devoted himself to public life, serving with distinction as Chancellor of the University of Melbourne (2009-2011) and then as Governor of Victoria (2011-2015).

Grattan Institute looks forward to continuing its work under Mr Chernov’s leadership.

Grattan Institute would like to acknowledge the enormous contribution of Mr Myers to its establishment, growth and success over the past decade. In addition to his term as chair, Mr Myers as chair of the committee formed to establish a Melbourne based public policy institute, over a period of three years, played a central role in setting up Grattan Institute, helping to devise its corporate structure, to secure its original funding, and to appoint its founding senior officers.

Grattan Institute would not have emerged as an important contributor to Australian public policy without the energy and commitment of Mr Myers. The board, CEO, and staff of Grattan Institute are deeply grateful for his contribution to the Institute, and to Australia.

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Enabling less highly-trained hospital workers to play a bigger role could improve jobs for doctors and nurses, save public hospitals nearly $430 million a year and fund treatment for more than 85,000 extra people, says a new Grattan Institute report.

Unlocking skills in hospitals: better jobs, more care finds that doctors, nurses and allied health professionals such as physiotherapists and occupational therapists are squandering their valuable skills on work that other people could do.

“It doesn’t take 15 years of training to provide light sedation for a stable patient having a simple procedure, or a three-year degree to help someone bathe or eat – but that’s where we are now,” says Grattan Health Program Director Stephen Duckett.

The mismatch of skills and jobs is putting heavy pressure on hospitals when there are already long waiting lists for many treatments and demand is growing fast.

The report suggests three ways – among many – that hospitals can get a better match between workers and their work.

Nursing assistants could free up nurses’ time by providing basic care to patients.

Specialist nurses could free up doctors’ time by doing common, low-risk procedures now done by doctors.

More assistants could be employed to support physiotherapists and occupational therapists.

The first two of these alone would save public hospitals $390 million a year and fund treatment for almost 80,000 more people.

Dr Duckett said that while these ideas were supported by successful trials and evidence, formidable barriers of culture, tradition, industrial relations and vested interest stood in the way of change.

However, “government budgets are under pressure. Hospitals have to get more efficient, or much tougher decisions about who should miss out on care will become inevitable.
”Current workforce roles were designed in the days of the horse and buggy. The choice to update them should be easy, because it means more and better care, more rewarding jobs for health professionals and a more sustainable system.”

Read the report

For further enquiries: Stephen Duckett, Health Program Director

T. +61 (0)3 8344 3637 E. media@grattan.edu.au

A huge spread of achievement levels in Australian classrooms is making it hard for teachers to implement best education practice and target their teaching to the needs of every individual student, according to a new Grattan Institute report.

Targeted teaching: how better use of data can improve student learning builds on a range of studies to show that at any given year level there is a five to six year difference between the most advanced and the least advanced ten per cent of students.

We have known this for a long time. A 2006 study of 3000 Victorian and Tasmanian students shows that in Year Eight mathematics there may be as much as eight year levels difference between the top and bottom students.

Yet the spread of achievement makes it essential that schools and education systems target teaching to the individual needs of every child, says Grattan School Education Director Pete Goss.

“Despite heroic efforts by many teachers, our most advanced students are not adequately stretched while our least advanced are not properly supported,” says Dr Goss.

 “These gaps are showing up in PISA tests – Australia lags behind the best international performers in teaching the most advanced and least advanced students.”

The report argues that the best teachers and schools focus single-mindedly on what each student knows now, target their teaching to what each student is ready to learn next, and track every student’s progress over time.

“The best schools in Australia are not necessarily those with the best ATAR or NAPLAN scores but those that enable every student to make the greatest progress in learning, regardless of where they start from,” says Dr Goss.

“Every teacher, principal and education expert knows this to be the case – the challenge is to implement targeted teaching properly.”

Streaming students or holding back low performers is not the answer, says Dr Goss.

Instead, “school systems must give teachers the time, tools and training to collect the best evidence about what students need to learn next and use it as the basis of their teaching.”

The report recommends greater use of proven programs that help schools better target their teaching. One highly-regarded NSW program could be rolled out to the bottom 20 per cent of primary schools nationally at a cost of about $300 million a year. This would improve both literacy and numeracy in the vital early years. “The educational and social rewards will more than repay the cost,” says Dr Goss.

Read the report

For further enquiries: Pete Goss, Program Director, School Education
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Australians are paying up to three times more than they should for superannuation, according to a new Grattan Institute report.

Excessively high fees are seriously damaging individual retirement balances and hurting taxpayers, who pay more for pensions when superannuation runs short,

Super sting: how to stop Australians paying too much for superannuation finds that reducing fees by at least half could save account holders $10 billion a year.

“It’s the largest single opportunity for micro-economic reform in the Australian economy and it is long overdue,” said Grattan Institute Productivity Growth Program Director Jim Minifie.

The report finds that Australians on average pay fees of 1.2 per cent on their superannuation account balances, more than three times the median OECD rate.

On conservative assumptions that means a 50-year old Australian today will have his or her super balance reduced by almost $80,000 in fees (in today’s dollars) at retirement.

A 30-year old will lose more than $250,000, or about a quarter of his or her total balance. Under a fairer and more transparent fee structure, at least half that money could be saved.

These high fees are not justified by high returns – Australian funds that charge the highest fees consistently deliver lower returns than other funds once their fees are taken out.

Dr Minifie says costs are too high because the system wrongly assumes that choice in the market will drive enough account holders to choose low-price funds, thereby forcing others to lower their fees.

“But this approach has not worked in Australia or anywhere in the world,” he says.

“Superannuation is inherently opaque and most people do not make an informed choice, instead paying into a default fund chosen by their employer.”

The report recommends two reforms to reduce the cost of superannuation: creating a new low-price default fund for new job starters, and using the tax return process to allow taxpayers to match their fund against the new fund — and to be able to switch on the spot.

“These reforms might reduce the revenues of super funds, but more importantly, they will take the nasty sting out of super for most Australians,” Dr Minifie says.

Read the report

For further enquiries: Jim Minifie, Productivity Growth Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Huge changes in Australia’s gas market will push up the average household bill in Melbourne by more than $300 a year, and in Sydney and Adelaide by more than $100 a year, according to a new Grattan Institute report.

Electricity and gas prices for Australian households have already increased in real terms by 61 and 36 per cent respectively over the past five years.

However, the report finds that most households are unlikely to switch from gas to electricity appliances because they still prefer gas, or they aren’t able to justify the immediate cost of switching or they are just confused by the competing choices.

Gas at the crossroads: Australia’s hard choice shows that gas price increases will put severe pressure on some manufacturing industries, including food processing, paper and packaging, explosives and fertilisers.

Gas price increases are also likely to price gas-fired power out of the electricity market, except to meet short-term peaks in demand.

This will lead to more coal being used for electricity generation, with a damaging effect on the climate and Australia’s hopes of meeting its 2020 emissions reduction target.

The emergence of an Australian gas export industry projected to be worth $60 billion a year by 2018 is driving the latest price increases, since domestic consumers will have to pay gas suppliers the same high price that suppliers can fetch on the global market.

But Grattan Energy Program Director Tony Wood says that despite the increases, the emerging export industry will deliver overwhelmingly positive economic benefits for Australia.

“Governments are already coming under pressure to protect Australian industry and consumers from the price rises. They should resist it,” Mr Wood says.

“Reserving or subsidising gas for domestic use will add more costs than benefits and do nothing to increase supply. And in the long run, protection harms everyone.”

It urges government to remove the remaining barriers to a well-functioning market to ensure the nation gets proper value from its gas exports.

“A massive export industry is rising on our northern shores. All Australians have the right to share in its bounty,” Mr Wood says.

Read the report

For further enquiries:
Tony Wood, Energy Program Director
T. 03 8344 3637 E. tony.wood@grattan.edu.au

The Commonwealth Government could save about $1 billion a year by winding back three tax breaks for older Australians that have no sensible policy rationale, according to a new Grattan Institute report.

Seniors pay less tax and get a higher rebate on private health insurance than do younger workers on the same income as a result of the Seniors and Pensioners Tax Offset (SAPTO), a higher Medicare levy income threshold, and higher Private Health Insurance rebates that are available only to older Australians.

Age of entitlement: age-based tax breaks shows that fewer people paying income tax – the rise of the “taxed-nots” – is in part due to age-based tax breaks. Despite their rising incomes and workforce participation rates, the proportion of over 65s paying tax has halved in the past 20 years.

At the same time, the Commonwealth is running annual budget deficits of about $40 billion and must make tough saving and spending decisions if it is not to hand an unsustainable bill to future generations.

The report recommends winding back SAPTO and the Medicare levy to save about $700 million a year. Reducing the private health insurance rebate so that seniors get the same rebate as younger Australians would save about $250 million.

Only pensioners should qualify for SAPTO, and those with enough private income that they do not qualify for a full Age Pension should pay some income tax.

The proposed changes would have little effect on the 40 per cent of seniors who receive a full Age Pension. They would most affect seniors who are wealthy enough to receive no pension or just a part pension.

Grattan CEO John Daley said that, “Some people think that the tax breaks are a fair reward for paying tax while under 65.”

“But in fact, large tax breaks for seniors are a relatively new invention not provided to previous generations. And the current generation of seniors receive much more than their predecessors from government spending, particularly on their health.”

“Age-based tax breaks are badly designed to achieve valid policy purposes, such as increasing workforce participation or preserving adequate retirement incomes for poorer Australians,” says Grattan CEO John Daley.

“These tax breaks might have been affordable when they were introduced over the past 20 years, but the country can no longer afford the bill.”

Read the report

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Australians pay more than $500 million a year too much for their prescription drugs, a new Grattan Institute report has found.

Cutting a better drug deal shows taxpayers and patients would pay less if the Federal Government made some simple changes to the way prices are set under the Pharmaceutical Benefits Scheme.

The report finds drug prices in Australia are more than twice as high as in the UK and more than three times higher than in New Zealand.

Australians on average pay five times the best international price for a group of seven commonly prescribed drugs. The price of the cholesterol medicine atorvastatin (Lipitor), the most prescribed drug in Australia, is about 1.5 times the best international price. In Australia, a box of 30 1mg tables of the breast cancer drug anastrozole (Arimidex) costs $19.20. In the UK it is just $2.45.

The high price doesn’t just hit Australians in the hip pocket, it harms their health: in the past 12 months about 8 per cent of Australians didn’t get, or deferred getting, prescribed drugs because they couldn’t afford them.

The Commonwealth Government is overpaying for generic medicines that are no longer covered by patents. Drug companies are already forced to reveal how much pharmacies actually pay for generic medicines, and the government reduces the amount it pays to pharmacies for each drug accordingly. But this policy is working too slowly. The report calls on the government to benchmark the prices of generic drugs in Australia against prices paid overseas. This would save $93 million a year and cut the price of 16 commonly prescribed drugs in Australia by an average of $6.43 per pack.

In addition, the government needs to overhaul the rules for interchangeable drugs that are equally effective and safe for most people. Such drugs are supposed to be put into “therapeutic groups”, and within each group the government only pays the price of the cheapest drug.

But Australia’s “therapeutic group premium policy” is riddled with loopholes. The report finds that taxpayers and patients could save a further $445 million a year if the policy were strengthened and broadened to cover 18 therapeutic groups, which are all included in a similar policy in Germany.

“Australia is buying and pricing its drugs the wrong way,” says Grattan Institute Health Program Director Stephen Duckett.

“Fixing this policy mess would give patients a better deal and improve the budget bottom line.

“The reforms we propose are easy to implement. The Government should get on with it.”

Read the report

Further enquiries: Stephen Duckett, Health Program Director, Grattan Institute
T. 03 8344 3637 E. media@grattan.edu.au

Australia should dump the decades-old dream of building a bullet train from Brisbane to Melbourne via Sydney and Canberra, and we should be wary of expensive promises to upgrade regional rail to ease population pressures on our major capitals and boost struggling regional cities and towns, according to a new Grattan Institute report.

Fast train fever: Why renovated rail might work but bullet trains won’t shows that the east-coast bullet train advocated by the federal ALP would be an expensive folly: Australia’s small population and vast distances make it unviable; it would add to greenhouse gas emissions for decades; and governments could help many more commuters by improving public transport in the booming outer suburbs of the capital cites.

East-coast business travellers would be the biggest winners from a multi-billion-dollar bullet train, but taxpayers from Broome to Perth, Darwin to Adelaide, and Launceston to Hobart would have to stump up an average of $10,000 each to make the dream a reality.

‘The global story is stark: good bullet trains are expensive, and bad bullet trains are very expensive,’ says Grattan’s Transport and Cities Program Director Marion Terrill. ‘It’s time we Australians put this idea to bed.’

The report shows that the alternative of renovating rail lines to boost train speeds from capital cities to surrounding regions is less expensive and might be worth doing – but these renovations are unlikely to fulfil all the wishful thinking of their proponents.

The federal and state governments are funding or considering renovations to numerous rail lines, including from Sydney to Newcastle, Sydney to Wollongong, Melbourne to Geelong, Melbourne to Albury/Wodonga, Melbourne to Traralgon, Brisbane to the Sunshine Coast, and Brisbane to the Gold Coast.

But even if such projects stand up to scrutiny, that doesn’t mean they would solve all the problems people imagine they would: very few city residents would move to the regions; regional cities may actually lose out if their residents can get to the capital more quickly; and many regions have more pressing infrastructure needs than faster trains, including better schools, hospitals, and internet and mobile connections.

More commuters would benefit if governments improved public transport in heavily populated outer suburbs of the capital cities, including Fairfield, Penrith, and Richmond in Sydney, Frankston, Pakenham, and Berwick in Melbourne, and Burpengary, Redcliffe, and Beenleigh in Brisbane.

Often there are better ways to achieve the desired community benefits of faster trains. Introducing congestion charges would be the most effective way to ease pressure on the capital cities’ busiest roads; relaxing restrictive zoning regulation is the most direct way governments can make housing cheaper; and fixing road bottle-necks and putting on extra bus services would make it easier for people to move around their city.

‘Australians have always had a romantic attachment to the idea of faster trains,’ Ms Terrill says. ‘But in light of the COVID crisis, it’s never been more important for our politicians to spend our money wisely, rather than pander to unrealistic dreams.’

For further enquiries: Marion Terrill, Transport and Cities Program Director T. 03 9035 9881‬ E. marion.terrill@grattaninstitute.edu.au

Australia needs to reform the way we collect and use information about patient safety, to reduce the risk of more scandals and tragedies in our hospitals, according to a new Grattan Institute report.

Strengthening safety statistics: How to make hospital safety data more useful shows that the health system is awash with data, but the information is poorly collated, not shared with patients, and often not given to the doctors and hospital managers responsible for keeping patients safe.

Hospitals boards are often blissfully ignorant of the level of safe care being provided in their own hospitals.

Co-author Stephen Duckett, who led an investigation for the Victorian Government after seven babies died potentially avoidable deaths at Bacchus Marsh Hospital in 2013 and 2014, says safety scandals in Australian hospitals are “depressingly frequent”.

“They stimulate special reports and an immediate flurry of action. But the tragedy is that these safety incidents occur despite reporting, governance and oversight measures that – if they were working properly – might have detected the aberrant clinical care.”

Strengthening safety statistics shows there is no public reporting of safety data about private hospitals in Australia, and that private hospitals are left outside state government monitoring of hospital safety.

Australia has dozens of collections of detailed data about particular diseases or treatments – for example the Australian Genetic Heart Disease Registry, the Australian Bleeding Disorders Registry, and the National Joint Replacement Registry – but they operate independently. This means important information about an individual patient with multiple conditions – for example someone with a knee problem and heart disease – is kept in separate data sources.

To ensure hospital safety data is more useful, it must be more trustworthy, relevant and accessible. The many different data sets should be linked, and the information should be presented more clearly so doctors can act on it and patients can understand it.

The report calls for more and better safety data to be collected. And it says it is “unethical” not to better use all the data already available to improve patient care.

Some registries act like “secret squirrels” – they know about safety problems but won’t share the information with any body other that the person or clinical unit that contributed the data. Hospitals managers – and patients – remain in the dark.

“Clinicians and managers need to set high standards for what is acceptable in hospitals, and they need to have access to all relevant safety data so they can meet those standards,” Professor Duckett says.

Read the report

Further enquiries: Stephen Duckett, Health Program Director
T. 03 8344 3637 E. media@grattan.edu.au

The government could save up to $175 million a year by changing the way it pays for pathology testing and negotiating a fairer share of efficiency savings with industry, according to a new Grattan Institute report.

Blood Money: paying for pathology services finds that while new technology, industry consolidation and volume growth have transformed the economics of pathology testing since Medicare was introduced, government still pays for tests in the same way it did 40 years ago.

Taxpayers spend more than $2.5 billion a year on pathology services via Medicare, but they’re not getting a good deal, the report shows.

‘Automated technologies mean that additional tests cost the provider very little, yet the government still pays the full average cost for each test,’ says Grattan Health Program Director, Dr Stephen Duckett.

‘And while pathology corporations enjoy the benefits of volume growth, government is missing out on the benefits of price competition.’

The government has negotiated a five-year agreement with the pathology industry to limit growth in spending, but the caps have been exceeded in each of the first four years of the agreement. And when government wants to change policy settings, the pathology companies use the threat of steep co-payments as a bargaining chip.

Blood Money calls for changes to ensure patients are protected from out-of-pocket charges and taxpayers get to share the savings from economies of scale and efficiency gains.

Tendering for services should be part of more commercial purchasing arrangements with pathology providers. A pilot scheme could be trialled in Victoria, where a tendering system already operates in regional areas.

‘It is time to overhaul the way we pay for pathology services,’ Dr Duckett says. ‘This is an opportunity to make savings without cutting services to the sick and vulnerable, and it must not be missed.’

Read the report

For further enquiries: Stephen Duckett, Health Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

The rise of the sharing economy can save Australians more than $500 million on taxi bills, help them to put underused property and other assets to work, and increase employment and income for people on the fringe of the job market, according to a new Grattan Institute report.

Peer-to-peer pressure: policy for the sharing economy shows that the prize for getting this new online economy right is large and governments should not try to slow its growth in order to protect vested interests.

Peer-to-peer platforms such as Airbnb and Uber use online technology to help strangers interact and do business. Platforms host markets in accommodation, travel, art, finance and labour, among other fields.

Grattan Productivity Growth Program Director Jim Minifie says that while the private sector will drive the peer-to-peer economy, government has an important role to play in supporting its growth while reducing any downsides.

‘Some say peer-to-peer platforms bring hidden costs by risking work standards, consumer safety and local amenity, and by potentially eroding the tax base,’ Dr Minifie says.

‘These worries are not groundless but they should not be used as excuses to retain policies, such as taxi regulation, that were designed for another era and no longer fit.’

The report calls on state and territory governments to follow the lead of New South Wales, the Australian Capital Territory and others, and legalise ride-sharing services such as Uber.

In peer-to-peer accommodation, the report urges local councils to allow short-stay rentals run by platforms such as Airbnb, but recommends that state governments give owners’ corporations more power to limit disruptions caused by short-stay letting.

Tens of thousands of Australians are already working on peer-to-peer platforms. These platforms will mostly improve an already flexible labour market, but governments must strengthen rules to prevent employers misclassifying workers as contractors, and bring some platform workers into workers’ compensation schemes.

Tax rules must be tightened to ensure that platforms based overseas pay enough tax.

‘Not all traditional industries are happy with the rise of the peer-to-peer economy, but if governments act fast, consumers, workers and even the taxpayer can come out ahead,’ Dr Minifie says.

Read the report

For further enquiries: Jim Minifie, Productivity Growth Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Powerful and well-resourced business groups, unions and not-for-profits are influencing policy in Australia to serve their interests, sometimes at the expense of the public interest, a new Grattan Institute report has found.

Who’s in the room? Access and influence in Australian politics shows businesses with the most at stake in government decisions lobby harder and get more access to senior ministers.

The gambling and property development industries are hugely over-represented compared to their contribution to the economy.

Major donors to political parties are more likely to get a meeting with a senior minister, and time with ministers is explicitly ‘for sale’ at party fundraising events.

The major parties rely heavily on a handful of big donors to fund their election campaigns: just 5 per cent of donors contributed more than half of the big parties’ declared donations at the 2016 federal election.

Industries at the crosshairs of policy debate sometimes donate generously and then withdraw once the debate has moved on – suggesting that they believe money matters.

More than one-quarter of federal politicians go on to post-politics jobs for special interests, where their relationships can help open doors.

As well as seeking access via backrooms, special interests also try to influence the public debate. Only well-resourced groups such as unions, industry peak bodies and GetUp! can afford major advertising campaigns.

“Who’s in the room – and who’s in the news – matters for policy outcomes,” says Grattan Institute’s Institutional Reform Program Director Danielle Wood.

“Powerful groups have triumphed over the public interest in some recent debates, from pokies reform to pharmaceutical prices, to toll roads and superannuation governance.”

The report recommends stronger checks and balances on policy influence, to make Australian politics cleaner and fairer.

Federal ministers should publish their diaries, as state ministers in NSW and Queensland already do. A list of all lobbyists with security passes to federal Parliament House should be made public and kept up-to-date. Big donations to federal political parties should be disclosed in close to ‘real time’, as they are already in Queensland. Federal MPs and their staff should be legally prevented from moving straight into lobbing roles, with the rules enforced by an independent body. And political advertising expenditure should be capped to reduce the ‘arms race’ between parties and their reliance on a few big donors.

“Australians want to drain the billabong,” Danielle Wood says. “They don’t like the current system and they don’t trust it.

“The changes we propose would improve the quality of policy debate and boost the public’s confidence that policy is being made for all Australians – not just those in the room.”

Read the report

For further enquiries: Danielle Wood, Budget Policy and Institutional Reform Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Urgent action is needed to reduce the risk of power blackouts and restrictions across eastern Australia this summer, according to a new Grattan Institute report.

Powering through: how to restore confidence in the National Electricity Market says the state-wide blackout in South Australia last September and a series of smaller outages and incidents over the past 18 months exposed weaknesses in the system and underscored the need for targeted reform.

Action must be taken. But there is an acute danger of politicians panicking and rushing to decisions that push electricity prices higher and make it harder to reduce Australia’s emissions.

The report calls for market reforms, rather than government investments in generation. New market rules would help to ensure reliable supply when something in the system breaks. And regulators should use their existing powers to recall to service some mothballed generators to ensure reserves are on hand in an emergency, even if that increases costs a little in the short run.

Greater effort is needed to ensure efficient responses to shortages in generation. Power generators should be rewarded for being flexible and responding quickly. And more customers should be offered a financial incentive to relieve stress on the system by limiting the amount of electricity they use during peak times.

In the longer-term, new generation will be needed and the best way to rebuild investor confidence in the National Electricity Market (NEM) is for Australia to finally agree on a serious and sustainable emissions reduction policy.

“A decade of toxic political debates, mixed messages and policy backflips has prevented the emergence of credible climate change policy,” says Grattan Institute Energy Program Director Tony Wood. “Investment in electricity generation, including renewables, is stalling as market participants await clear policy signals from government.”

Knee-jerk policy responses to the electricity market crisis, such as the Federal Government’s “Snowy Hydro 2.0” scheme and the South Australian Government’s “go-it-alone” power plan, risk destroying the NEM’s capacity to drive the new investment Australia needs for low-cost, reliable and low-emissions electricity.

“If that happens, the NEM will be judged to have failed. But in fact, policy decisions will have systematically, if unintentionally, destroyed it,” Tony Wood says.

“The survival of the NEM cannot be assumed. But we should not give up on the market. If governments take matters fully into their own hands, the results are likely to be painful: customers will pay more for their electricity, supply could become even less reliable, and Australia still may not reduce emissions as we have promised.”

Read the report

For further enquiries: Tony Wood, Energy Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Australia’s capital cities should join many of the great cities of the world by charging drivers who use the busiest roads at the busiest times, according to a new Grattan Institute report.

Why it’s time for congestion charging: better ways to manage busy urban roads recommends a three-stage reform: within the next five years, state governments should introduce cordon charging, where drivers pay to cross a boundary into the capital city CBDs in the morning peak and out in the afternoon peak; within the following five years, people should pay to drive along the busiest urban freeways and arterial roads at peak periods; and eventually people should be charged on a per-kilometre basis for driving across the city’s entire road network at the busiest times.

The report shows that a modest cordon charge could mean 40 per cent fewer cars entering the CBDs in the morning peak, and speeds up to 16 per cent faster on roads in the CBD and up to 20 per cent faster on sections of major arterials leading into the CBD.

Modelling shows speeds across the entire Sydney and Melbourne road networks would increase by about 1 per cent. That might sound modest, but Sydney’s WestConnex and Melbourne’s North East Link are predicted to increase network speeds by 3 per cent and 1 per cent respectively – and those roads come with price tags of $16 billion and $17 billion respectively.

‘Everyone wants less congestion: it would make life easier for individual drivers and make our cities work better, too. Our plan tackles congestion without asking communities to pay billions of dollars for major new roads,’ says Grattan’s Transport and Cities Program Director, Marion Terrill.

‘New York, London, Beijing, Singapore, Stockholm, Milan, and Jakarta all have congestion charging or are heading that way. It’s time for Australian cities to embrace the idea.’

If getting public transport right is a pre-condition for congestion charging, there has never been a better time in Australia, with investment in public transport and roads running at more than $30 billion in 2018-19 – an all-time high.

The technology has improved too, with Automatic Number Plate Recognition now accurate enough to use as the primary detection technology for congestion charging.

And the experience from global cities is that initial public hostility quickly turns to support when people see how effective congestion charging can be.

Concerns that congestion charging would hurt those who can least afford it are overblown. In fact the charges would mainly be paid by higher-income drivers, because people who drive to the city each day for work are more than twice as likely to earn a six-figure salary as other workers.

It’s also a myth that lower-income workers drive further. In fact it is typically higher-income workers who drive long distances to work.

Nor is it true that people have no choice but to drive; CBDs are well-serviced by public transport, and most people already get to the city by train, tram, or bus.

‘In the end, if particular roads are in high demand, it’s fairer that people who use them a lot pay more than those who rarely or never use them,’ Ms Terrill says.

But congestion charging should come with a safety net: there should be discounts for low-income people with impaired mobility who need to get to the CBD in peak periods.Grattan’s next report, to be published this time next week, will explain in detail how congestion charging could work in Australia’s two biggest cities, Sydney and Melbourne.

Read the report

For further enquiries:
Marion Terrill, Transport Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Australia’s school education system is not fit for purpose, and we need to rethink the way we teach students, support teachers and run schools, according to a new Grattan Institute discussion paper.

Towards an adaptive education system in Australia says that, despite individual bright spots, overall student performance is declining in international tests, and an unacceptably high number of our students are not ready for life after school.

Australian school education faces three major challenges: improving student learning in core academic areas; better preparing young people for adult life; and closing the gap between the nation’s educational have and have-nots.

The only way to tackle all these challenges at once is to make our education system more adaptive.

“At present, the system is spinning its wheels,” says Grattan Institute School Education Program Director Peter Goss.

“The status quo is not working. We have failed to create an education system that adapts and improves over time – a learning system that systematically learns.”

Student outcomes improve when teachers track how much their students are learning, identify the specific teaching practices that boost learning and those that don’t, and then adapt the way they teach.

However, this process should not be done independently in every classroom, and schools need more help from education systems to make good local decisions.

As a start, Australia should follow the lead of high-performing education systems such as Singapore and Hong Kong by making better use of our best teachers.

‘Master teachers’ should teach fewer classes and instead should spend more time teaching other teachers how to identify and practise the best ways to improve student performance.

And the system leaders – including education ministers and departments and the heads of the Catholic and independent sectors – need to ensure schools and teachers have good access to the evidence about what works best, and the time, tools, training and support to implement these best practices in the classroom.

“If we want to halt the decline and create a system of excellence that supports all students, we need a new approach to reform,” Dr Goss says.

Read the report

For further enquiries:
Pete Goss, School Education Program Director, Grattan Institute
T. 03 8344 3637 E. media@grattan.edu.au

Workers overwhelmingly pay for increases in compulsory superannuation contributions through lower wages, a new Grattan Institute paper finds.

No free lunch: higher super means lower wages uses administrative data on 80,000 federal workplace agreements made between 1991 and 2018 to show that about 80 per cent of the cost of increases in super is passed to workers through lower wage rises within the life of an enterprise agreement, typically 2-to-3 years. And the longer-term impact is likely to be even higher.

‘This trade-off between more superannuation in retirement but lower living standards while working isn’t worth it for most Australians,’ says the lead author, Grattan’s Household Finances Program Director, Brendan Coates.

‘This new empirical analysis reinforces that the planned increase in compulsory super, from 9.5 per cent now to 12 per cent July 2025, should be abandoned. Most Australians are already saving enough for their retirement.’

The paper directly measures the super-wages trade-off for nearly a third of Australian workers – those on federal enterprise agreements. But it shows that other workers are also likely to bear the cost of higher compulsory super in the form of lower wages growth.

Despite the claims of some in the superannuation industry, it is unlikely that future super increases will be different from past increases.

It’s true that wages growth has slowed in recent years, but nominal wages are still growing by more than 2 per cent a year, so employers have plenty of scope to slow the pace of wages growth if compulsory super contributions are increased.

And none of the plausible explanations for lower wages growth – whether slower growth in productivity, technological change, globalisation, an under-performing economy, or weaker bargaining power among workers – helps explain why employers would foot any more of the bill for higher compulsory super this time around.

If employers aren’t willing to offer large pay rises today, it’s hard to imagine why they would pay for higher super. In fact, if workers’ bargaining power has fallen, employers are even less likely to pay for higher compulsory super than in the past.

Grattan’s 2018 report, Money in retirement: more than enough, found that the conventional wisdom that Australians don’t save enough for retirement is wrong.

Now this working paper finds that the conventional wisdom that higher super means lower wages is right.

‘Together, these findings demand a rethink of Australia’s retirement incomes system,’ Mr Coates says.

Read the report

Further enquiries: Brendan Coates, Household Finances Program Director
T. 03 8344 3637 E. media@grattan.edu.au

More than 50,000 students who started university in Australia this year will drop out, according to a new Grattan Institute report.

Dropping out: the benefits and costs of trying university shows that not every incomplete degree amounts to a waste of time and money. A Grattan Institute online survey of students who dropped out reveals many found their course interesting, learned useful skills and made new friends. More than 40 per cent said they would enrol again if they had their time over.

But the report also identifies the costs of dropping out. On average, students pay $12,000 for their incomplete course. They miss out on the additional lifetime earnings that university graduates typically receive. The time they spent at university could have been used working or studying at TAFE. And the online survey shows that most people who drop out feel they have let themselves or others down.

The report pinpoints factors that increase the risk of dropping out. It shows that people who study part-time are much more likely to drop out than full-time students. People who enrol in three or four subjects a year – half as many as a full-time student – have only about a 50 per cent chance of completing their course in eight years. Students who enrol full-time have about an 80 per cent chance.

School results are important. Students with ATARs below 60 are twice as likely to drop out of university as otherwise similar students with ATARs above 90.

Students in health courses are more likely to complete their course than students in IT or engineering courses. And people who study off-campus have a slightly higher risk of dropping out.

The report calls on governments and universities to do more to alert prospective students to their risk factors. People planning to study part-time should be particularly warned. Universities should check that prospective part-timers have a credible plan to complete their course.

Once they accept students, universities have a responsibility to help them succeed – or, if things are not working out, universities should help students exit at least possible cost.

In the lead-up to the university ‘census date’ – the deadline for students to dis-enrol before they pay for their subjects – universities could send students a text message alert. And universities should do more to follow up on students who are not engaged with their studies, to get them back on track or encourage them to leave before they accrue a HELP debt.

“Too many students drop out of Australia’s universities. Fewer would if we helped them to make better decisions,” says Grattan Institute Higher Education Program Director Andrew Norton.

“The aim is not to reduce the number of drop-outs to zero: Australia makes it easy to try university, and some students will always decide it is not for them.”

“But we can and should aim to reduce the number of young Australians who leave university with nothing but debt and regret.”

Read the report 

For further enquiries:
Andrew Norton, Higher Education Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Grattan Institute was pleased to announce today that Medibank Private has become its newest affiliate partner.

As part of a three-year arrangement, Medibank will provide funding to support Grattan’s research aimed at improving the lives of all Australians through better public policy.

Medibank Managing Director Mr George Savvides said that he was pleased to be supporting Grattan’s efforts to tackle Australia’s most pressing policy issues, including how to sustain Australia’s world-class health system.

“Medibank is committed to improving the transparency, affordability and value of Australia’s healthcare system, and we believe a key part of this is supporting evidence-based research undertaken by organisations such as Grattan.

“The Grattan team has a great track record of producing influential research and analysis that provides clear direction for where our nation needs to head, including addressing the challenges facing our health system.”

Grattan CEO John Daley said the partnership reflects the two organisation’s shared commitment to rigorous and independent policy development that has long-term benefits for all Australians.

“We are grateful for Medibank’s support and look forward to sharing the insights from our research with Medibank and the community,” Mr Daley said.

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Winding back superannuation tax breaks is an acid test of our political system, and should be one of the first items of business in the current Parliament, according to a new Grattan Institute paper.

A better super system: assessing the 2016 tax reforms finds that the Federal Government’s plan to restrict superannuation tax breaks would create a fairer superannuation system more aligned to its purpose of providing income to supplement the Age Pension.

The plan would not only trim overly generous super tax breaks enjoyed by the top 20 per cent of income earners – people wealthy enough to be comfortable in retirement and unlikely to qualify for the Age Pension – it would save about $800 million a year.

The Government’s proposals would affect about 4 per cent of superannuants, almost all with enough income and assets to prevent them from ever qualifying for a part Age Pension.

Claims that the proposed changes would be retrospective are incorrect, says Grattan CEO John Daley. “Many reforms affect investments made in the past, and no-one suggests they are retrospective. The changes will simply affect taxes paid on future super earnings, and entitlements to make future contributions to super.”

Alternative proposals by the Australian Labor Party, which broadly supports the Coalition’s reforms, would save more than $2 billion a year. The paper shows that many of these alternatives would further align superannuation with its purpose.

The paper shows that there is broad agreement between the Government’s proposals and the ALP’s policy. If the Government concedes on some of the details to get a deal with the ALP in the Senate, it will probably improve the budget position.

“The Government’s considered position is built on principle, supported by the electorate, and our main parties largely agree on both ends and means. In these circumstances, a failure to get reform would signal there is little hope for either budget repair or wider economic reform,” says Mr Daley.

Mr Daley says the superannuation proposals are an important step in the right direction, but only a step. “Even with these reforms, super tax breaks will still overwhelmingly flow to high-income earners. And the long-term cost will remain unsustainable. Further changes will be needed in future.”

Read the working paper

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Competition in electricity retailing has failed to deliver lower prices for consumers, and governments will need to step in and re-regulate prices if the industry does not lift its game, according to a new Grattan Institute report.

Price shock: Is the retail electricity market failing consumers? finds prices in Sydney, Melbourne, Brisbane and Adelaide have almost doubled over the past decade.

In Victoria, the profit margin for electricity retailers appears to be about 13 per cent – more than double the margin regulators traditionally considered fair when they had responsibility for setting prices. Victorians would save about $250 million a year – about $100 per household – if the profit margin of their electricity retailers was the same as for other retail businesses.

Although lower price deals are available, consumers find the market so complicated that many give up trying to find them. As a result many Australians, including some of the most vulnerable, pay more than they need to.

The way retailers advertise their discounts is confusing and possibly misleading. An advertised “30 per cent discount” can end up being a discount on only a small part of the bill, not the whole bill. And even consumers who take advantage of discounts can end up paying much higher prices when their contract expires.

Competition has also failed, so far, to deliver the promised innovation in customer services. Most ‘offers’ merely provide a discount for people who switch their retailer or pay their bills on time or via direct debit. But retailers have been slow to build offers based on the benefits available through smart meters, or the bundling of new technologies such as solar-power and battery-storage systems.

The report urges governments to act to ensure customers get lower prices and better service.

Retailers should be required to tell customers, in ways that are easy to compare, how much they will pay under ‘discount’ deals. They should also tell customers how much extra they will pay if they do not act when the discount expires. And retailers should provide detailed data on their profit margins to an independent body such as the Australian Energy Market Commission.

“It is too early to give up on competition,” says Grattan Institute Energy Program Director Tony Wood.

“We may yet see fairer prices and better service. But if competition still fails to deliver the promised benefits, then government will have no choice but to return to price regulation.”

Read the report

For further enquiries: Tony Wood, Energy Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Australia should introduce a tax on sugary drinks to help recoup some of the costs of obesity to the community, according to a new Grattan Institute report.

A sugary drinks tax: recovering the community costs of obesity calls for a new excise tax of 40 cents per 100 grams of sugar, on all non-alcoholic, water-based drinks that contain added sugar.

The tax would increase the price of a two-litre bottle of soft drink by about 80 cents, raise about $500 million a year, and generate a fall of about 15 per cent in the consumption of sugar-sweetened beverages, as consumers switched to water and other drinks not subject to the new tax.

The report, to be released at Parliament House in Canberra on Wednesday, calculates obesity costs Australian taxpayers more than $5.3 billion a year.

Obese people are more likely to go to doctors and be admitted to hospital more often than other people. They are also more likely to be unemployed and therefore paying less tax than the rest of the population.

These costs – more taxpayer dollars spent on healthcare and welfare, and less tax raised – are caused by obesity but borne by the entire community. The new tax would help redress that imbalance.

Obesity is rising dramatically in Australia: one in four adults are now classified as obese, up from one in ten in the early 1980s. Perhaps even more worryingly, about 7 per cent of our children are obese.

The report stresses that a new tax is not a “silver bullet” solution to Australia’s obesity epidemic – that would require a whole suite of new policies and programs. But the proposed tax would encourage healthier lifestyles.

“Obesity is one of the great public health challenges of modern Australia, and so this is a reform whose time has come,” says Grattan Institute Health Program Director Stephen Duckett. “We target these drinks because most of them contain no nutritional benefit.”

The many countries that already have or are planning to introduce a tax on soft drinks include France, Belgium, Hungary, Finland, Chile, the UK, Ireland, South Africa and parts of the United States.

The report says the Australian government could use the $500 million a year raised by the new tax to reduce the budget deficit or boost healthcare funding, or the money could be spent on programs designed to treat obesity and promote healthy eating.

“How we use the money is a debate for later,” Dr Duckett says. “For now, Australia should introduce this tax because it offers twin benefits: it will reduce the number of people who become obese and it will ensure fewer taxpayer dollars have to be spent on the damage done by obesity.”

Read the report

For further enquiries: Stephen Duckett, Health Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Australia can achieve a net-zero carbon emissions electricity system without threatening affordability or reliability of supply, according to a new Grattan Institute report.

Go for net zero: a practical plan for reliable, affordable, low-emissions electricity debunks the myth that Australia needs to continue to rely on coal-fired power stations to keep electricity bills down.

But it also warns against a rush to 100 per cent renewable energy, because ensuring reliability would be costly – especially in the depths of winter in the southern states when electricity demand is high, solar supply is low, and persistent wind droughts are possible.

Grattan Institute developed an economic model of Australia’s National Electricity Market (NEM), finding that moving to a system with 70 per cent renewable energy – and closing about two-thirds of today’s coal-fired power plants – would not materially increase the cost of power but would dramatically reduce emissions.

The economic modelling suggests that moving to a system with 90 per cent renewable energy – and no coal – could also be reliable. But some additional costs – such as more generation, transmission, and storage – would be necessary to ensure supply when the wind isn’t blowing and the sun isn’t shining. Nonetheless, this would be a low-cost way to nearly eliminate emissions in the NEM, and offsetting any remaining emissions each year could well be the cheapest way to reach net zero.

‘This report is good news for Australia – it shows that we can make the historic transition to a low-emissions electricity system without the lights going out and without power bills skyrocketing,’ says lead author and Energy and Climate Change Program Director Tony Wood.

But getting to 100 per cent renewable energy over the next two decades would be expensive unless there are major technological advances to backup renewable supply through rare winter wind droughts. That’s why Australia should commit only to net zero emissions in the NEM by the 2040s, not absolute zero emissions or 100 per cent renewable energy.

The report identifies gas generation with negative-emissions offsets as the lowest-cost ‘bridging’ technology until a zero-emissions alternative, such as hydrogen-fired generation, pumped hydro storage, or carbon capture and storage, becomes an economically competitive backstop.

‘Gas is likely to play the critical backup role, though not an expanded role,’ Mr Wood says. ‘Australia will make a gas-supported transition to a net-zero emissions electricity system – but not a “gas-led recovery” from the COVID recession.’

Noting that most of Australia’s coal-fired power stations are scheduled to be retired by 2040, the report urges governments not to use taxpayers’ money to extend the life of existing coal-fired generators, or to subsidise the entry of new coal-fired generators.

‘The scaremongers are wrong,’ Mr Wood says. ‘The analysis in our report shows that Australia can achieve the trifecta of reliable, affordable, low-emissions electricity — and we can do it without coal.

Read the report

For further enquiries: Tony Wood, Energy Program Director
M. 0419 642 098
E. tony.wood@unimelb.edu.au

One in every nine patients who go into hospital in Australia suffers a complication, and if they stay overnight the figure increases to one in four, according to the new Grattan Institute report.

All complications should count: Using our data to make hospitals safer shows that a patient’s risk of developing a complication varies dramatically depending on which hospital they go to: in some cases, the additional risk at the worst-performing hospitals can be four times higher than at the best performers.

The report calls for all hospitals to lift their safety performance to the level of the best 10 per cent of Australian hospitals. This would mean an extra 250,000 patients leaving hospital each year free of complications.

At present, a veil of secrecy hangs over which hospitals and clinicians have higher rates of patient complications, and which are safety leaders. Hospital safety statistics are collected, but they are kept secret, not just from patients but from doctors and hospitals.

Patients should have access to the information on complication rates in different hospitals and for different procedures, so they – and their GPs – can make better-informed decisions about how and where they are treated.

Doctors and hospitals should have access to the information so they can see how they are performing compared to their peers – and so they can learn from the best-performing hospitals and clinicians.

At present, official hospital safety policies focus on only a small subset of serious complications classified by government as being ‘preventable’.

Policy should instead aim to reduce the incidence of all complications to the best rate achievable. This requires building up a comprehensive picture of the whole gamut of hospital safety performance, from catastrophic but rare errors to less harmful but prevalent complications. The data should highlight the areas where there is a big gap between the best and the worst-performing hospitals, and it should enable patients – and taxpayers – to see which hospitals are improving and which are not.

Private health insurers should release the information they gather on private hospitals, because reducing complication rates would mean quicker recoveries and lower premiums for their members.

“Australians expect all hospitals to provide high-quality and safe care, but this report reveals that some hospitals achieve much better results than others,” says Grattan Institute Health Program Director Stephen Duckett.

“The reforms we recommend could cut the complication rate in Australian hospitals by more than a quarter.”

Read the report

Further enquiries: Stephen Duckett, Health Program Director
T. 03 8344 3637 E. media@grattan.edu.au

The Federal Government should boost funding by about $10 billion a year to help fix Australia’s broken aged care system, according to a new Grattan Institute report.

The extra spending could be funded by some combination of a new Medicare-style levy on taxable income, changes to the pension assets test and/or the residential aged care means test, and/or reductions in excessively generous tax breaks on superannuation.

Properly administered, the extra money could transform the aged care system: clearing the 100,000-long waiting list for adequate home care, providing higher-level care at home for longer, employing at least 70,000 more aged care workers, and lifting the amount of care per person and ensuring a qualified nurse is on site 24/7 in all residential care homes.

‘The aged care system is a stain on Australians’ conscience,’ says lead author and Grattan Health and Aged Care Program Director, Stephen Duckett.

‘None of us want to end up in the present shameful system. Many of us feel guilty if we decide to pack our elderly mum or dad off to care.

‘The Prime Minister and the Treasurer must get serious about fixing aged care. This is more than a political problem, it is a moral imperative.’

The Grattan report, The next steps for aged care: forging a clear path after the Royal Commission, calls for a streamlined and integrated aged care system under a new, rights-based Aged Care Act that guarantees care and support to all who need it.

It recommends universal funding of care costs, just as there is universal funding through Medicare of patients’ costs in public hospitals. This would provide universal insurance for people who have high care needs, and would mean people would not need to worry about how they are going to fund their possible care needs in older age.

The cost of a reformed, universal aged care system will only grow as Australia’s population continues to age and there are fewer working-age people paying taxes to fund the care of retirees.

The Government could consider a 1 per cent aged care levy on taxable income, and it should find more money for aged care by reducing the excessively generous tax breaks for wealthy older Australians.

More of the value of the family home should be included in the Age Pension assets test. And superannuation earnings in retirement – currently untaxed for people with superannuation balances of less than $1.6 million – should be taxed at 15 per cent, the same as superannuation earnings before retirement.

‘Surveys consistently show that Australians are willing to pay more tax to fix aged care,’ Dr Duckett says.

‘The time to act is now. The Aged Care Royal Commission report leaves the Government with nowhere to hide. This Grattan report shows how a better funded and designed aged care system would protect the rights, uphold the dignity, and celebrate the contribution of older Australians.’

For further enquiries: Stephen Duckett, Health and Aged Care Program Director
M. 0447 837 741
E. stephen.duckett@grattan.edu.au

Taxpayers end up paying too much for major road and rail projects in Australia because governments don’t drive a hard bargain on contracts with the big construction firms, according to a new Grattan Institute report.

Megabang for megabucks: driving a harder bargain on megaprojects calls on governments to stop worrying about the profitability of the industry and start delivering quality services at the lowest long-term cost to the community.

Australia’s transport infrastructure costs are above the global average, and there is a government culture of caving in to contractor demands after contracts are signed.

About 25 per cent of projects end up costing taxpayers more than the government expected when construction started.

To get quality infrastructure at a sharp price, competition is fundamental. But as the size of projects has grown, so has the size of contracts – and with larger contracts, competition inevitably thins.

Few firms have the technical and financial capability to win contracts worth $1 billion or more. Yet Australian governments often give undue priority to domestic experience, making it hard for international firms to win contracts.

State governments often rush projects to market, so they can announce and start them before the next election. But in the rush, governments don’t always identify or mitigate expensive problems such as contaminated soil, and they’re not systematic enough about dividing projects into bundles or choosing the contract type with the right incentives for the particular job.

The report calls on governments to only sign contracts that they are prepared to enforce, and to award all infrastructure contracts through an open tender process.

And it recommends Australian governments investigate how similar countries overseas manage to build high-quality transport infrastructure more cheaply.

‘Our governments are getting major projects wrong, and taxpayers are left to pick up the tab,’ says lead author and Grattan Institute Transport and Cities Program Director Marion Terrill.

‘Our report shows how Australia can build better.’

For further enquiries: Marion Terrill, Transport and Cities Program Director
M. 0428 123 323
E. marion.terrill@grattan.edu.au

Australia’s multi-billion-dollar private health industry urgently needs a rescue plan to prevent it spiralling to its death, according to a new Grattan Institute report.

Stopping the death spiral: creating a future for private health urges the Federal Government and industry leaders to get together and forge a plan to:

• Rein-in greedy surgeons who charge patients exorbitant fees.
• Stop private hospitals keeping patients in hospital too long and giving them care they don’t need.
• End the rorts in the prosthesis and device supply chain so private patients and their insurers pay no more than public patients.
• Ensure private health insurers that aren’t giving their members value for money are prevented from charging ever-higher premiums.

‘The COVID crisis hasn’t saved private health,’ says lead author and Grattan Health Program Director Stephen Duckett. ‘The industry was in a death spiral before the pandemic and it’s still in a death spiral today.

‘The Government and the key players need to make dramatic changes quickly, because more than 40 per cent of the population has private health insurance and it’s a big industry – most procedures are done in private hospitals.’

The report shows that for the past 20 years, private health insurance premiums have been rising faster than wages and inflation. Australians are paying more but getting less.

As the population ages and uses more expensive healthcare services, insurers have to pay out more in benefits to their members. As benefits paid increase, so do premiums. Rising premiums make health insurance less affordable and less attractive – particularly to younger and healthier people. As younger, healthier people drop their insurance, the insurance risk pool gets worse, premiums go up, more young people drop out, and the cycle continues.

But the industry also needs to face up to the fact that it is responsible for at least some of its woes.

A small number of surgeons charge patients way more than they should. About 6 per cent of specialists’ services in hospitals are billed at more than twice the Medicare fee, and these services account for 89 per cent of patients’ out-of-pocket costs. Patients who have been paying insurance all their lives are understandably angry to get these surprise bills.

The industry should rein-in these ‘greedy’ doctors, and the Government should ensure patients know more before surgery about the costs they could face, so they get fewer nasty surprises after surgery.

Over-servicing is much more prevalent in private hospitals than public hospitals. Ensuring private hospitals don’t keep patients in hospital longer than necessary and don’t give patients care of little or no clinical value could cut private health insurance premiums by about 5 per cent.

Exposing the prostheses market to competition could reduce the cost of hip and knee replacements and further reduce premiums.

And the Minister for Health should be more willing to reject premium-rise applications from insurers that can’t show they offer their customers good value for money.

‘Together, the Government and the industry can create a viable future for private health in Australia,’ Dr Duckett says. ‘This report charts the path.’

For further enquiries: Stephen Duckett, Health and Aged Care Program Director
M. 0447 837 741
E. stephen.duckett@grattan.edu.au

Rethinking permanent skilled migration after the pandemic shows that abolishing the Business Investment and Innovation Program and boosting the number of skilled worker visas would supercharge the economic benefits of Australia’s skilled migration program and result in nearly $4 billion in extra personal income tax receipts alone over the lifetime of each yearly migrant intake.

Other reforms, including making employer-sponsorship available for workers in all occupations provided they earn above median full-time earnings of $80,000 a year, would better target visas to people with the most valuable skills, and simplify the sponsorship process for firms and migrants. And it could boost the fiscal dividends by at least another $9 billion from each yearly intake.

The report finds the Federal Government has recently moved policy in the wrong direction by shifting the composition of the permanent skilled intake towards older, less-skilled migrants.

As a result, more than one-in-four permanent skilled visas are allocated to boosting business investment and to the unproven Global Talent program. These changes should be reversed because they have reduced the lifetime fiscal dividend from each annual intake of permanent skilled migrants by at least $2 billion.

‘When we reopen the borders, Australia should unashamedly select permanent skilled migrants for their long-term economic potential,’ says lead author and Grattan Institute Economic Policy Program Director Brendan Coates.

‘Skilled migrants tend to be younger, have more skills, and earn higher incomes than the typical Australian – so they generate a fiscal dividend for Australians because they pay more in taxes than they receive in public services and benefits over their lifetimes.’

The report shows that Business Investment and Innovation Program, or BIIP, visa-holders bring fewer benefits than skilled migrants selected through other streams, because they are older, speak little English, and earn lower incomes.

The new Global Talent Program, which was being expanded rapidly before the pandemic, should be scaled back while its value is assessed.

The number of skilled worker visas – allocated via employer-sponsorship and the points-test – should be expanded.

Employer-sponsorship should be available for workers in all occupations, provided they earn above median full-time earnings of $80,000 a year.

Points-tested visas should no longer be restricted to occupations identified as having skills shortages, and points should no longer be awarded for undertaking regional study or a professional year.

‘One positive from the COVID catastrophe is the unique opportunity for Australia to reset and improve our skilled migrant intake,’ Mr Coates says.

‘Our report shows how we can seize this moment to make Australia an even better place – for those of us who already live here and for those who aspire to come here.’

This is the first of a series of Grattan reports on migration, co-authored by Grattan fellow Henry Sherrell, one of Australia’s leading experts on migration policy. The series does not seek to determine the size of Australia’s population or annual intake, but looks at how we can improve our migration system to ensure that it delivers the biggest possible benefits for Australia.

Contact: Brendan Coates, Economic Policy Program Director: 0412 798 229, Brendan.coates@grattaninstitute.edu.au

Drivers should be charged $5 to enter the Sydney and Melbourne CBDs in the morning peak and another $5 to exit in the afternoon peak, as part of a package of reforms to make our biggest cities work better, according to a new Grattan Institute report.

Right time, right place, right price: a practical plan for congestion charging in Sydney and Melbourne shows the scheme would reduce the number of cars entering the CBDs each morning by about 40 per cent.

It recommends that the money raised be spent on upgrading CBD streets to make them safer and less congested for pedestrians.

Last week’s Grattan report, Why it’s time for congestion charging, showed that congestion charging was the fairest and most effective way, with the least cost and hassle to travellers, to ease congestion in Australia’s capital cities. This new report details how charging should work in the two biggest cities.

The $5 charge should apply from 8am to 9.30am, and from 4pm to 6pm. A $3 charge should apply in the half-hour either side of the morning peak, and in the hour before and the half-hour after the afternoon peak. Trucks should pay a higher charge, because they cause more congestion.

Driving to and from the CBDs would remain free at all other times of the day, on weekends, and on public holidays.

The ‘cordon’ for the Sydney CBD should cover the area west of and including the Domain, north of Central Station, and east of Pyrmont.

The cordon for the Melbourne CBD should include the Hoddle Grid, the high-rise areas of Docklands and Southbank, and the wedge to the north of the city formed by Victoria, La Trobe, William, and Peel streets (encompassing the Queen Victoria Market).

Transport modelling by Veitch Lister Consulting for the report shows that in Sydney, average speeds on CBD roads would increase by 11 per cent in the morning peak – good news for tens of thousands of bus commuters. The cordon charge would materially speed up a number of routes toward the city from the eastern suburbs, the airport, the inner west, and the north shore, and could improve traffic flow as far from the CBD as Frenchs Forest in the north, Brighton-Le-Sands in the south, Burwood in the inner west, and Macquarie Park in the north-west.

In Melbourne, average speeds in the Hoddle Grid would increase by about 16 per cent during the peaks. Arterial roads to the city from all points of the compass would flow better, including major north-south tram corridors such as Sydney Road and Brunswick Street. Traffic speeds could increase as far from the CBD as Niddrie in the north-west, Mulgrave in the south-east, Hampton in the south, and Altona North in the west.

Within five years of the CBD cordon charges being introduced, a per-kilometre charge should be imposed in peak periods on the most congested arterial roads and urban freeways in both cites.

A 30-cents per kilometre change could increase speeds on the charged roads by more than 10 per cent in the morning peak.

In Sydney, the ‘corridor charge’ could apply to sections of the A3 and the A6, the Victoria Road – Western Distributor (A4) corridor, and the M5 East – M1 corridor past the airport.

In Melbourne, the corridor charge could apply on Hoddle Street – Punt Road, the Eastern Freeway – Alexandra Parade – Elliot Avenue corridor, the West Gate Freeway, and the Monash Freeway.

Eventually, drivers should be charged on a per-kilometre basis for driving across each city’s entire road network at the busiest times – but only as part of a package of measures including abolishing fuel excise and creating a safety net to ensure people on low incomes and with impaired mobility are not disadvantaged.

‘It’s true that politicians in Australia have been sceptical about congestion charging, but our designs show that it is feasible, effective, and can be done fairly,’ says Grattan Institute’s Transport and Cities Program Director Marion Terrill.

‘Ambitious reforms are always challenging for governments. But Australian governments have the advantage that they can learn from cities around the world that have already successfully implemented congestion charging,’ Ms Terrill says.‘It’s time for Sydney and Melbourne to join these cities in the fast lane.’

Read the report

For further enquiries:
Marion Terrill, Transport Program Director
T. 03 8344 3637 E. media@grattan.edu.au

More than $2 billion in surpluses from teaching are being used to fund research in Australian universities, according to a new Grattan Institute report.

The cash nexus: how teaching funds research in Australian universities shows that on a conservative estimate, one dollar in five spent on research comes from surpluses on teaching.

International students, who usually generate more revenue per student than domestic students, contribute a substantial proportion of this surplus.

The finding is concerning because while university research matters to Australia, the evidence that it improves teaching is less clear, Mr Norton said. “Direct spending on teaching, by contrast, is far more likely to ensure that universities offer the high-quality courses students want.”

The report finds that universities earn up to $3.2 billion more from students than they spend on teaching, and have powerful incentives to spend the extra money on research.

Although research spending has tripled in the past two decades, academics still want to do much more research than is currently funded. And universities worry about their position in research-driven global university rankings.

The report calls for policies to ensure that universities spend money intended for students on teaching and student services.

“Under the current system there is no guarantee that any new investment in universities – whether from public or private sources – will benefit students,” Mr Norton said.

It also calls for better costing data so that Australians can see how universities spend $11 billion in student subsidies and loans and $6 billion in fee revenue.

“With better information taxpayers and students will know they’re getting what they pay for when they invest in university education,” Mr Norton said.

Further enquiries: Andrew Norton, Higher Education Program Director
T. +61 (0) 3 8344 3637  E. media@grattan.edu.au

Grattan Institute’s first book, City Limits: Why Australia’s cities are broken and how we can fix them, by Jane-Frances Kelly and Paul Donegan, is now available at bookstores and through Melbourne University Publishing.

Our bush heritage helped to define our identity, but today Australia is a nation of cities. A higher proportion of Australians live in cities than almost any other country, and most of our national wealth is generated in them.

For most of the twentieth century, our cities gave us some of the highest living standards in the world. But they are no longer keeping up with changes in how we live and how our economy works.

The distance between where people live and where they work is growing fast. The housing market isn’t working, locking many Australians out of where and how they’d like to live. The daily commute is getting longer, putting pressure on social and family life and driving up living costs.

Instead of bringing us together, Australia’s cities are dividing Australians—between young and old, rich and poor, the outer suburbs and the inner city. Neglecting our cities has real consequences for our lives now, and for our future prosperity.

City Limits  synthesises insights from Cities Program reports with new analysis and real-life case studies of how individuals, families and businesses experience life in cities today.  It provides a readable account of why Australia’s cities are broken, and how we can fix them.

Attend the book launches in Melbourne or Sydney.

Read the media release

Childcare should be made cheaper to enable more women to do more paid work and to help lift the economy out of the COVID recession, according to a new Grattan Institute report.

Cheaper childcare: A practical plan to boost female workforce participation calls on the Federal Government to spend an extra $5 billion a year on childcare subsidies.

The payoff would be an $11 billion-a-year increase in GDP from the boost to workforce participation – and $150,000 in higher lifetime earnings for the typical Australian mother.

The report recommends raising the childcare subsidy for low-income families from 85 per cent to 95 per cent, gradually tapering for households with income above $68,000. Under this scheme, 60 per cent of families would pay less than $20 per day per child for childcare, and no family would be worse off.

The report identifies a range of policy, cultural, and social factors that conspire to prevent many Australian women from working the paid hours they would prefer.

A combination of tax, welfare settings, and childcare costs means some second-earners take home little or no extra pay for additional hours of work. This ‘workforce disincentive rate’ can be particularly punishing for the fourth and fifth day of work for the primary carer, still generally a woman.

‘We can hardly be surprised that many mothers conclude that working an extra day for no or virtually no take-home pay makes no sense,’ says Grattan Institute CEO and report lead author Danielle Wood.

‘And Australia’s high out-of-pocket childcare costs bite even harder now for families that have lost jobs or hours because of the COVID crisis.’

Australia’s female workforce participation rate is above the OECD average, but Australian women are much more likely to work part-time. Before the COVID crisis, a typical Australian woman with pre-teenage children worked 2.5 days a week.

Women in Australia continue to do most of the unpaid household work, which further constrains their choices about doing more paid work.

Women are quick to embrace flexibility in their working arrangements after they have a child, but men’s work hours and contribution to household duties change very little. Men do more unpaid work in countries with more dedicated parental leave for fathers.

The Federal Government should extend the parental leave scheme to offer six weeks ‘use it or lose it’ leave at minimum wage for each parent, plus 12 weeks they can share between them. This would cost an extra $600 million a year, but would help fathers to spend more time with their children in the critical first year of the child’s life.

‘Cheaper childcare is a win-win – it would boost the economy and give Australian women enhanced life choices,’ says Ms Wood.

‘It should be central to the Government’s plans for lifting Australia out of recession.’

For further enquiries contact: Danielle Wood: 0405 510 763, Danielle.wood@grattaninstitute.edu.au

Some university students with low school results would be better off doing vocational education instead, according to a new Grattan Institute report on Australia’s post-school education system.

Risks and rewards: when is vocational education a good alternative to higher education?finds that vocational diplomas in construction, engineering and commerce typically lead to higher lifetime incomes than many low-ATAR university graduates are likely to earn, especially those with degrees in popular fields such as science and humanities.

“Especially for low-ATAR men, some vocational alternatives to university are worth considering,” says the lead author, Grattan’s Higher Education Program Director Andrew Norton. “Schools need to give them better career advice alerting them to these possibilities – and governments should end funding biases against vocational education.”

But the report shows that vocational education alternatives for women are less attractive. Few women enrol in vocational education engineering, and those who do often have poor career and earnings outcomes.

“Engineering occupations are male-dominated, often deny women employment, and are inflexible in providing part-time work,” Mr Norton says.

Teaching and nursing are popular university courses for low-ATAR women, and often lead to stable careers. These students are unlikely to do better in a vocational education course.

“For lower-ATAR men, a few vocational education courses would probably increase their employability and income. But for lower-ATAR women, higher education is almost always their best option.”

The report shows that higher education has expanded rapidly in Australia over the past 20 years, but vocational education has flat-lined.

This has led to concerns that students, especially lower-ATAR students, are being encouraged to enrol in higher education and to overlook potentially better-paid vocational education alternatives in fields with good job prospects.

The report concludes that these fears are only partly justified. Low-ATAR university students are vulnerable, but only sometimes have clearly better vocational education alternatives.“Like higher education, vocational education has risks as well as potential rewards,” Mr Norton says. “A good tertiary education system steers prospective students towards courses that increase their opportunities and minimise their risks. Australia’s post-school system does not always achieve this goal.”

Read the report

For further enquiries:
Andrew Norton, Higher Education Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Grattan Institute is delighted to announce the appointment of Marion Terrill, a former leading public servant and Business Council of Australia advisor, to head up its new Transport Program.

Ms Terrill has extensive experience in the Commonwealth public service. She helped to write the 2010 Henry Tax Review, and also worked as Director of Policy at the Business Council.

Grattan CEO John Daley said that Ms Terrill’s experience across a wide range of policy areas and the public and private sectors made her an ideal person to help shape Australian transport policy.

“Australia desperately needs a transport system that better serves the needs of the economy and of people,” Mr Daley said.

“Our cities are expanding, and population growth is greatest on the urban fringe while job growth is strongest in city centres. We need better ways to link people to jobs.”

“The demands on our freight network are also expanding and we need a more coordinated approach that better links decisions about pricing, use and investment.”

“Marion is the perfect person to think through these problems in a rigorous, practical way, and she will make a great contribution to Grattan and to public policy in this area.”

Ms Terrill said she was very pleased to accept the position at the Grattan Institute.

“I’ve worked in the Treasury and the Departments of Finance and Family Services, among other places, and I’m fascinated by how economic and social policy can work together to improve the lives of Australians.”

“A good transport system is vital not only to the economy but to balancing the work and home lives of millions of people. I know that Grattan’s work makes a big difference to national policy thinking and I’m keen to contribute.”

Ms Terrill will take up her position in April.

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

State governments should be wary of following the Turnbull Government’s advice to introduce “value capture” schemes to fund major new transport projects, according to a new Grattan Institute report.

As Australians in capital cities struggle to cope with clogged roads and crowded trains, the Turnbull Government wants to stop being just “an ATM for the states” and is urging them to use value capture taxes to fund infrastructure.

Value capture is the name given to a policy whereby governments “capture” some of the windfall gains for landowners that result from building a new piece of infrastructure, and use the money to help fund the project.

At first glance, value capture seems marvellously fair, because it only applies to those who benefit from the particular new project. So the people of western Sydney do not help fund a new railway station on the North Shore.

But in practice, value capture schemes are less obviously fair.

Drawing a boundary around a new project to distinguish between those who must pay the new tax and those too far away to benefit is bound to involve rough justice. People on one side of the boundary will not be happy to get a tax bill when their next-door neighbour doesn’t.

The apparent fairness of value capture may be an illusion, because it is hard to apply to infrastructure such as roads and hospitals where the benefits tend to be spread more broadly. There is nothing fair in the beneficiaries of rail projects paying extra tax while the beneficiaries of road and other projects do not.

Value capture schemes are also less efficient than broad based taxes because they require more precision in valuation and create opportunities for corruption.

While many financiers are keen on “tax increment financing”, the arguments for them are specious. Ultimately such innovative financing mechanisms, cost governments more than borrowing for themselves, don’t necessarily improve risk management, and still involve taxing landowners.

As a result, an additional broad-based, low-rate property tax on all land may be a better option for governments seeking to fund major new projects.

If governments nevertheless want to try to capture value from specific projects, then the tax should be part of a consistent legislative regime designed to minimise corruption, and levied on all properties within a designated zone at a fixed rate of the increase in the unimproved land value between the date of official commitment and 2 years after completion.

Whatever the taxation arrangements, governments can realise additional value from infrastructure projects by joint development around them. They can sell government land that is no longer needed after construction, or sell new development rights from rezoning land in the neighbourhood. But the value of such schemes will depend on how much the government already owns, and the demand for new intensive development.

“It may be attractive in theory, but there is nothing easy about capturing value,” says Grattan Institute Transport Program Director Marion Terrill.

Read the report

For further enquiries:
Marion Terrill, Transport Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Australia’s urban commuters have little to fear from population growth, if recent experience is any guide, according to a new Grattan Institute report.

Remarkably adaptive: Australian cities in a time of growth shows that the population boom has had little impact on commuting – contrary to frequent media reports.

The average commute distances and times barely increased over the five years to 2016, even as Sydney and Melbourne’s populations grew at rates among the highest in the developed world, by 1.9 per cent and 2.3 per cent each year. Brisbane, the Gold Coast, the Sunshine Coast, Canberra and Darwin also grew strongly.

The benign impact of population growth is partly explained by the spread of jobs within the major cities. It’s a misconception that jobs are centred in CBDs, which become harder to get to as cities grow. In reality, fewer than two in ten people work in CBDs, whereas three in ten work in a suburb just away from home.

The importance of suburban `employment centres’ is overblown. Parramatta is the location of only 2.3 per cent of Sydney’s jobs, and Clayton, home of Monash University and medical centre, accounts for only 1.7 per cent of Melbourne’s jobs. In Sydney, Melbourne, Brisbane, Adelaide and Perth, three quarters of jobs are dispersed all over the city, in shops, offices, schools, clinics, and construction sites.

Even though commutes are not getting much worse, the level of congestion in the largest cities is a problem. Trains, buses and trams can be overcrowded, and commuting times can be unreliable. While most drivers are delayed no more than five minutes getting to work, the delay can be much longer on bad routes.

But the situation is not spiralling out of control. Migration has not brought cities to a standstill. Cities have coped even though major new projects including Melbourne Metro, WestConnex in Sydney, and Brisbane’s Cross River Rail have not yet been completed.

“People adapt – they are not hapless victims of population growth, depending for their wellbeing on governments building the next freeway or rail extension,” says Grattan Institute Transport Program Director Marion Terrill.

Governments should focus on facilitating the natural adaptations people make. They should limit zoning and planning barriers to people and firms locating where they want to be. They should follow the ACT’s lead and phase out stamp duty, which effectively locks people into staying put when they otherwise might move house. And Sydney and Melbourne should introduce congestion charges, to encourage drivers who don’t really need to travel at peak times to stay off the most congested roads.

“With these changes, the benefits that draw people to live and work close together can outweigh the congestion and crowding that trigger demands to shut new people out,” Marion Terrill says.

Read the report

For further enquiries:
Marion Terrill, Transport Program Director
T. 03 8344 3637 E. media@grattan.edu.au

A new deal among governments and school systems can end Australia’s toxic school funding debate and transform teaching and learning in schools, without costing the Commonwealth more money, according to a new Grattan Institute report.

Circuit breaker: a new compact on school funding argues that historically low inflation rates give the Government an unprecedented opportunity to reduce excessive school indexation payments that are locked into legislation, saving the nation billions of dollars.

The report calls on all governments to use part of the savings to create the needs-based funding system all main parties say they want, as well as new roles for expert teachers to lift student performance.

As education ministers prepare to meet next month to discuss a new funding model, Grattan Institute School Education Program Director Peter Goss says the compact offers the circuit breaker Australia’s 50-year old argument over school funding desperately needs.

“It shows how we can reallocate funds to get all schools to their needs-based funding target by 2023, without spending any more money over the next four years than the Turnbull Government proposed in its 2016 Budget.”

Under its proposals, under-funded schools are much better off compared to the model legislated by the Gillard government in 2013 and the 2016 Budget. Chronically disadvantaged schools gain the most.

About half of schools close to or at their targets would have slower funding growth than under the legislation. But they maintain their purchasing power and most of them will be better funded than today.

A very small number of over-funded schools (only 3 per cent) would get less money.

“These changes are essential to create a school system that gives every Australian child a fair chance in life,” Mr Goss said.

“But money alone cannot create that system. It must be spent well. All the evidence shows that if you want to lift student outcomes, you have to invest in the most effective teaching.”

The compact recommends a structural change to create two new roles: Master Teachers and Instructional Leaders who will work in schools and across clusters of schools to improve teaching effectiveness in maths, science, English and other fields.

“It is time to end the exhausted funding debate and to start the debate that counts in this century – how to improve teaching for all students in all schools,” Mr Goss said.

Read the report

For further enquiries: Pete Goss, Program Director, School Education
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

The divide between where people live and work in Australian cities is growing, with most new jobs being created close to city centres while most population growth is occurring in the outer suburbs, according to a new book from the Grattan Institute.

City Limits: why Australia’s cities are broken and how we can fix them shows that more than half the employment growth in our five largest cities is occurring less than 10 kilometres from the city centre.

But a dysfunctional housing market means not enough homes are being built in these areas, forcing more than half of all population growth into suburbs more than 20 kilometres from the city centre.

In large outer areas of Australia’s biggest cities, less than 10 per cent of all jobs in the city can be reached in a 45-minute drive.

City Limits shows the costs of this divide include heavy traffic congestion, long commute times and a big drop for many city residents in the quality of family and social life.

One in four full-time employees in Australia’s big cities spends more time commuting than with their children.

The divide is also financial: the average full-time job located 20 kilometres or more from the centre of Australia’s five big cities pays $56,000 a year. Within 10 kilometres of city centres, the average full-time job pays $77,000 a year.

City Limits argues that the failure of the Australian housing market is creating a divide between older homeowners and a younger generation that is either locked out of home ownership or pushed to the fringes of cities, far from jobs and good transport.

Meanwhile a new army of renters – one in four households – are forced to live in some of the most insecure tenancy arrangements in the developed world.

“Cities are the engines of our economy, producing nearly 80 per cent of national income, yet
policy-makers must address failures in housing, tax and transport to ensure our economic and social future,” says City Limits co-author Jane-Frances Kelly.

“We’re a nation of city dwellers. Our future prosperity depends on thriving cities offering good jobs and opportunities to everyone living in them.”

City Limits: why Australia’s cities are broken and how we can fix them, by Jane-Frances Kelly and Paul Donegan, is published by Melbourne University Press (mup.com.au, RRP $32.99, March 2015).

For further enquiries: Paul Donegan, City Limits co-author. 
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

More than half of consumers in and around Perth could pay $120 less a year for power – and some could pay $500 less – under a tariff scheme that better reflects the cost of delivering electricity, according to a new Grattan Institute report. The report analysed individual customer records to understand the impact of reform.

Fair pricing for Western Australia’s electricity shows that new demand tariffs combined with targeted subsidies for low-income households could also reduce annual electricity bills for the most vulnerable consumers in remote areas by an average of $275 a year.

The report finds that reforming network tariffs so that Western Australians’ power bills reflect the true cost of their electricity will lead to fairer prices immediately and cheaper electricity for all in the long run.

At present customers pay to use the network based on their total electricity use over a given period. But the cost of the network is shaped by its use at peak times, usually in summer. Charging customers for their use at peak times – not total use – will reduce unfair cross-subsidies among customers and reduce future costs.

Demand tariffs can provide price signals that encourage customers to use less power at peak times. “They are the best way to encourage people to use power more efficiently, and so reduce the need to build expensive infrastructure that is hardly ever used,” says Grattan Energy Program Director Tony Wood.

Getting the design right is crucial. Electricity pricing in WA faces particular challenges, including complex subsidies, and high costs to supply remote areas.

Better designed network pricing can encourage consumers to adopt new and clean technologies, such as solar PV with batteries, further reducing costs.

Yet reform is stalling because pricing changes create winners and losers, and can be hard for governments to explain.

“A firm commitment to pricing reform must be combined with a clear explanation of the benefits,” Mr Wood says. “It might be politically difficult, but fairer and cheaper power prices will be worth it.”

Read the report

For further enquiries: Tony Wood, Energy Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

A new career path for expert teachers could transform Australian schools and boost student learning by 18 months by the time they turn 15, according to a new Grattan Institute report.

Top teachers: sharing expertise to improve teaching reveals that as the performance of Australian students is falling in international tests in reading, science and especially maths, we are failing to use our best teachers to improve teaching across all schools.

A Grattan Institute survey of 700 teachers and principals, conducted for the report, shows that top teachers are often given ‘add-on’ coaching roles, with inadequate time, training, or support to do the job properly. And some teachers believe those promoted to instructional leadership roles are mates of the principal rather than the best people for the job.

The report calls for two new roles for Australia’s top teachers, giving them dedicated ‘day jobs’ to improve teaching across all schools.

‘Master Teachers’ (the top 1 per cent of the profession) would have no formal classroom load but would be the overall pedagogical leaders in their subjects, working across a network of schools in their region. They would help identify teacher needs and coordinate training. They would guide ‘Instructional Specialists’ (limited to 8 per cent of the workforce), who would split their time between classroom teaching and instructional leadership. Instructional Specialists would work in their own schools to support and guide other teachers. 

Both roles would focus on specific subjects such as maths, science, and English. By 2032 there would be more than 20,000 Instructional Specialists and 2,500 Master Teachers. Every teacher, in primary and secondary schools and in government, Catholic and independent schools, would benefit from more than onehour a week with Instructional Specialists in their subject area. The new roles would help to spread teaching practices that have been shown to work well, and to generate new research in high-priority areas where Australian teachers or students may be lagging. 

The roles would be prestigious and well paid. Master Teachers would receive salaries of about $180,000 a year ($80,000 more than the highest standard pay rate for teachers), and Instructional Specialists up to $140,000.

The new expert teacher career path would cost about $560 per government school student per year by 2032. Governments can afford it: our blueprint would cost less than the planned increases to government school funding through the Gonski 2.0 model, and it would be one of the best possible ways to use the extra money. Non-government schools have had significant funding increases over the past decade and should fund the new model through their existing resources. 

‘Australia’s schools must do better,’ says the report’s lead author, Grattan Institute’s Education Program Director, Dr Peter Goss.‘The Gonski 2.0 report recommended better career paths and better professional learning for teachers. Our Top teachers report shows how to do both in one go,’ says the report’s co-author, Grattan Education Fellow Julie Sonnemann.

Read the report

Further enquiries: Peter Goss, School Education Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Australia should establish a national school education research organisation to investigate the most effective ways of teaching and spread the word across schools, states and sectors, according to a new Grattan Institute report.

The Commonwealth’s role in improving schools calls for a national debate on how to boost the performance of Australian students.

It says the new research body should be charged with lifting the standard of education research in Australia, creating a long-term research agenda for school education, and promoting key findings across the country.

It could link-up all research on education for people from birth through to age 18, so policy makers and the community better understand the continuum of learning, from early childhood to school and vocational education.

The Australian peak body could be modelled on successful overseas organisations such as the US Institute of Education Sciences. It should be independent of government but backed by the Commonwealth and the states.

The report says that the Commonwealth-commissioned review on ways to achieve excellence in Australian schools (known as the ‘Gonski 2.0 Review’) should focus on reforms like this where the Commonwealth can make a genuine contribution.

The danger is that the Gonski 2.0 Review is used as a platform for Commonwealth interventions into school education that sound good, but don’t actually help on the ground. Experience shows that well-meaning Commonwealth interventions into systems primarily run by the states and territories can end up just increasing red tape and destroying policy coherence.

The ‘Gonski 2.0’ funding deal struck last year will deliver an extra $23 billion in Commonwealth funds to schools over the next ten years. But it needs to be kept in perspective: the extra money will be only 3 per cent of all government spending on schools over the decade. The states and territories still overwhelmingly fund and run schools.

Key priorities for states and territories include supporting schools more so that teachers know what works in the classroom, and know how they can adapt their methods to better target their teaching to the needs of their students.

“Because it doesn’t manage schools or school systems, Commonwealth intervention in school management is likely to be counter-productive,” says Julie Sonnemann, the report’s co-author and Grattan’s School Education Fellow.

But the Commonwealth could help with a research body. “If Australia wants to achieve excellence in schools, we need more and better education research,” says Peter Goss, co-author and Grattan Institute School Education Program Director.

Read the report

For further enquiries:
Pete Goss, School Education Program Director, Grattan Institute
T. 03 8344 3637 E. media@grattan.edu.au