Category Archives: Media

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Make childcare cheaper to recharge the economy: Grattan Institute

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

New Grattan Institute book lays out Australia’s road to COVID-19 recovery

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:

Launch a $1b tutoring blitz to help students catch-up after the lockdowns

Australia should launch a $1 billion, six-month tutoring blitz to help 1 million disadvantaged school students recover learning lost during the COVID-19 lockdowns, according to a new Grattan Institute report.

COVID catch-up: helping disadvantaged students close the equity gap calls on governments to send a battalion of 100,000 tutors into schools between now and Christmas to conduct intensive small-group sessions on reading and maths.

The report shows that many disadvantaged students – those from the poorest 25 per cent of families and rural areas – will have fallen further behind their classmates during the COVID-19 school closures.

Even where remote learning was working well for advantaged students, disadvantaged students are likely to have lost a month of learning on average during the six-to-nine weeks of school closures in NSW, Victoria, Queensland, Tasmania, and the ACT.

About 1 million disadvantaged students should attend tutoring sessions three-to-five times a week for up to three months, in groups of about three, either during regular school hours or before or after school.

Done well, these sessions could boost their learning by five months between now and the end of the year.

The tutors should be drawn from teachers and teacher aides who work part-time, but especially from young university graduates and pre-service teachers, who have been hit hard by the COVID-19 job and income losses.

Most tutors would work about eight hours a week. They could earn up to $6,300 over the six months.

The tutoring blitz would cost about $1 billion, but the benefits to the economy would be much larger. The young tutors would have extra income during the recession, and would be likely to spend it quickly, helping stimulate the economy between now and Christmas. And disadvantaged students who gained extra learning would earn more over their lifetime, boosting the economy in years to come.

The report also recommends governments spend $70 million expanding successful literacy and numeracy programs, especially for students in the early years, and $30 million on trials of ‘targeted teaching’ and extra support for student well-being.

‘Our schools, teachers, and students adapted remarkably well when the COVID-19 crisis forced them to switch almost overnight to remote learning,’ lead author and Grattan Institute Education Fellow Dr Julie Sonnemann said.

‘But this report shows that most students did not learn as much while at home as they would have in their classroom – and disadvantaged students were hardest hit.

‘Our tutoring blitz plan is a win-win-win: the tutors get extra income, the economy gets extra stimulus and, most importantly, our disadvantaged students get the chance for a better life.’

Forget bullet trains and be wary of expensive rail renovations

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@grattanintstitute.edu.au
W. www.grattan.edu.au

New energy plan to boost exports, create jobs, and cut emissions

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

COVID-19 could see up to 3.4m Australians out of work

Between 14 and 26 per cent of Australian workers could be out of work as a result of the coronavirus shutdown, according to a new Grattan Institute working paper.

Shutdown: estimating the COVID-19 employment shock warns that the crisis will have an enduring impact on jobs and the economy for years to come.

More than half of all workers in the hospitality industry could be off work, as will many workers in retail, education, and the arts.

Lower-income workers are twice as likely to be out of work as high-income earners. Younger Australians and women are also likely to be hit harder, because they are more likely to work in occupations and industries most affected by the shutdowns and spatial distancing measures imposed to slow the spread of the virus.

‘If our estimates are even close to accurate, Australia is facing either the worst or one of the worst economic downturns in its history,’ says lead author and Grattan Institute Household Finances Program Director, Brendan Coates.

Warning of the dangers of a ‘second wave’ hit to the economy even after the immediate health threat eases, he says: ‘History tells us that recovery from periods of high unemployment is rarely fast.

‘The longer this downturn goes, and the worse it gets, the less likely the labour market and the broader economy can spring back afterwards.’

Grattan researchers used a range of methods to estimate the size of the COVID-19 employment shock, including data on which jobs require people to work in close proximity to other workers or the public.

They conclude that Australia’s unemployment rate will probably rise to about 12 per cent – the highest since the Great Depression in the 1930s.

The Federal Government’s $130 billion JobKeeper wage subsidy will disguise much of the impact of the crisis on employment. Some Australians off work will continue to be regarded as ‘employed’ because they will receive pay from their employer via the JobKeeper scheme. And others, especially older workers, will give up looking for work and will therefore not be counted in the unemployment rate.

‘Our governments are rightly spending record amounts trying to cushion Australian workers and businesses from the worst impacts of this unprecedented crisis,’ Mr Coates says. ‘But our paper shows that the economic shock from COVID-19 is going to be so big, and the effects so long-lasting, that more support will be needed.’

For further enquiries: Brendan Coates, Household Finances Program Director
T. 03 9035 9881‬ E. brendan.coates@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