Category Archives: Media

Commonwealth Orange Book 2019: a policy manifesto for a better Australia

The winner of the May 18 federal election should defy the national mood of reform fatigue and stare down special interests to pursue a targeted policy agenda to improve the lives of Australians, according to a new book from the Grattan Institute.

Commonwealth Orange Book 2019: priorities for the next government rates Australia’s performance against similar countries and proposes policy reforms to schools and universities, hospitals and housing, roads and railways, cities and regions, budgets and taxes, retirement incomes and climate change.

It includes Grattan Institute’s new ‘International Scorecard’, which shows Australians live longer than most other people, and public debt is relatively low. But our electricity supply is more polluting, less reliable and more expensive than in comparable countries; we lag behind other developed economies on school results; and housing costs and homelessness are relatively high.

Lead author and Grattan CEO John Daley says the challenge for the next government, of whatever political colour, is to revive Australia’s proud tradition of enlightened public policy.

“The next government needs to choose to do less, but deliver more,” he says. “We can continue to be the lucky country, but we must make our own luck.”

Drawing on 10 years of Grattan research and reports, the Orange Book finds Australians’ living standards have stagnated, the pace of economic reform has slowed, people are increasingly anxious about their financial prospects – and our political system is not dealing well with these challenges.

On health, the Orange Book calls for a universal dental care scheme, so all Australians can go to the dentist when they need to; a boost to primary care, with new reforms to Primary Health Networks and GP payments; and a comprehensive review of the private health sector, including private health insurance.

On housing, the book recommends that the Commonwealth provide incentives to states to loosen planning laws so that higher density is permitted in the established middle suburbs of our capital cities; a 40 per cent increase in the maximum rate of Commonwealth Rent Assistance; and funding for additional social housing tightly targeted towards Australians at high risk of homelessness.

On retirement incomes, it urges the next government to abandon the current plan to increase compulsory superannuation payments from 9.5 per cent to 12 per cent, which would force workers to accept lower living standards today even though they are already likely to enjoy living standards in retirement comparable to living standards while working. It advocates changes to the Age Pension assets test that would loosen the assets test taper but include more of the value of owner-occupied housing. And it backs proposals to select “best in show” funds for default superannuation, to drive down costs and improve returns.

Major tax reform is needed to support economic development. The book recommends reducing income tax and modifying welfare tapers and childcare benefits to remove barriers and increase incentives for second income earners (usually women) to participate in the workforce. It also advocates an accelerated depreciation scheme for new investment by companies. To pay for these changes (and avoid other tax increases), the next government should cut the capital gains tax discount from 50 per cent to 25 per cent; wind back negative gearing; tighten superannuation tax concessions; and broaden or increase the GST. To increase workforce participation of older Australians, the government should ask the Productivity Commission to investigate the costs and benefits of raising the pension age to 70.

On energy, the book urges the incoming government to develop a clear, credible policy to tackle climate change. Our political leaders must be honest with voters: Australia needs to move to a low-emissions economy, and that transition will cost money. A raft of reforms to electricity generation, distribution and retailing are also required to push down energy costs.

On transport, the book calls for a more disciplined approach to assessing, selecting and reviewing major projects, to put brakes on spending billions of dollars in the wrong places for the wrong (often politically motivated) reasons.

On school education, it suggests that the government needs to finish off school funding reforms, and set up a national evidence institute, while strengthening incentives for universities to improve initial teacher education.

On higher education, it recommends a return to demand-driven funding of universities. Reforms to the HELP loan scheme are needed to help fund this change, and potential increases in funding for vocational education. The government should encourage more students into vocational education, although better funding arrangements for vocational education need careful thought and negotiations with the states.

On budgets, it suggests enshrining fiscal targets in legislation, giving the Parliamentary Budget Office responsibility for macroeconomic forecasts that underpin the budget and publishing an Intergenerational Report that includes long-term projections of both Commonwealth and state government revenues and spending.

The Orange Book identifies a crisis of trust in politics in Australia, with a growing sense that people in government look after their own interests and can’t be ‘trusted to do the right thing’. It calls for institutional changes to help restore faith in our democracy, including introducing a strong integrity commission, capping expenditure on political advertising during election campaigns, and new rules to ensure voters know who is donating to the political parties and who is lobbying our political leaders.

The book urges a reversal of the recent trend toward government intervention in electricity generation; an end to government programs designed to artificially divert population from the cities to the regions; and an end to government giveaways which supposedly help first homebuyers but which actually mostly benefit property investors and real estate agents.

“These are evidence-based policy recommendations designed to serve the interests of all Australians rather than sectional interests,” Mr Daley says.

“Our next government should seize the opportunity to forge a happier, healthier and more prosperous Australia. We can do better. The Orange Book shows how.”

Read the report

For further inquires:

On the Orange Book in general and priorities for
the next Commonwealth Government: John Daley
On Economic Development: John Daley
On Regional Development: John Daley
On Housing: Brendan Coates
On Retirement Incomes: Brendan Coates
On Budget: Danielle Wood
On Integrity Reforms: Danielle Wood
On Transport: Marion Terrill
On Energy: Tony Wood
On Health: Stephen Duckett
On School Education: Peter Goss
On Higher Education: Andrew Norton

T. +61 (0)3 8344 3637 E.

A universal dental care scheme for Australia

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.

Keep calm about electricity reliability

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

Fear not: Australians are likely to be comfortable in retirement

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.

Orange Book 2018: A state-by-state (and territory) policy agenda

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.

Gaming of the wholesale market remains a concern

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 11thOctober, 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.

New report card on NAPLAN results reveals big differences between the states

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.

The myth of the bulging, out of control Australian city

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.

Australia’s gender pay gap narrows

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 2018shows 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.

Making hospitals safer will save taxpayers’ money

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.