All posts by Andrew McDonald

A 12-year blueprint to reform teaching and boost student results

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 one
hour 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

Higher superannuation means lower wages: Grattan

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

Appointment of Danielle Wood as new CEO of Grattan Institute

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

Making private hospital insurance pay

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

Summer reading list for the Prime Minister 2019

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

A blueprint to rein in doctors’ bills, reduce hospital costs, and cut private health insurance premiums

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

$10 a day: how congestion charging would work in Sydney and Melbourne

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

Australia should move to congestion charging

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

How to clean up Australia’s energy policy mess

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

A $1.6b blueprint to boost teacher quality and student performance

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