Category Archives: Media

How to stop Australia becoming a Stagnation Nation

Australia risks descent into economic stagnation as the mining investment boom fades, according to a new Grattan Institute report.

Stagnation Nation? Australian investment in a low-growth world urges governments and policymakers to do more to ensure Australia remains a dynamic, growing economy.

Australia is experiencing its biggest ever five-year fall in mining investment, as a proportion of GDP. And non-mining business investment has fallen from 12 per cent to 9 per cent of GDP, lower than at any point in the past 50 years.

What’s needed is perspective, not panic. The shift to a services economy, and a fall in the price of capital goods, mean businesses can thrive with lower levels of investment. And there are some green shoots in the non-mining states.

But this is no excuse for complacency. A third of the fall in non-mining investment is a result of slow economic growth, and that’s a problem requiring concerted action.

The report says the Federal Government’s key policy prescription – a cut in the company tax rate from 30 per cent to 25 per cent over ten years – would attract extra foreign investment, but at a cost: it would also reduce national income for years and hit the budget. Committing to the plan now, before the budget is on a clear path to recovery, risks reducing future living standards.

Any cut in the company tax rate should be part of a wider package of reforms that explicitly funds the cost to the budget.  The package could include an increase in the GST rate from 10 per cent to 15 per cent, which would bring in about $11 billion of extra revenue a year, even after compensation for lower-income households. The tax treatment of capital gains, borrowing and superannuation could also be adjusted.

Federal and state governments should also introduce broader reforms to promote growth. They could invest more in infrastructure – but only if they can build better infrastructure. They should improve workforce participation, by ensuring tax, transfer, and childcare support do not impose high effective marginal tax rates on the second earners in households. They should improve the efficiency of urban land use, by permitting more density in the middle and inner suburbs of Australia’s major cities.

“There are no silver bullets for Australia, only tough choices,” says Grattan Institute Productivity Growth Program Director Jim Minifie.

“Australians cannot take economic growth for granted, and the risk is real: we could join the global low-growth pack as our mining boom winds down.”

Read the report

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

How to create classrooms that improve learning

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

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

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

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

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

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

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

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

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

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

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

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

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

Read the report

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

A loan fee for all tertiary students who borrow would make HELP fairer and stronger

A 15 per cent fee on all new tertiary education loans could save the Commonwealth $700 million a year and make the Higher Education Loan Program more affordable for government, according to a new Grattan Institute report.

Shared interest: a universal loan fee for HELP argues that the fee would offset the government’s interest costs, while being fair to all students and preserving the loan program’s social goals.

Interest subsidies are the difference between the interest rate the government charges students – CPI – and the cost of government borrowing on the commercial market.

HELP’s potential interest costs are masked by current low interest rates. Interest costs would increase substantially if real interest rates returned to their average level over the last ten years.

Grattan Institute Higher Education Program Director Andrew Norton said that since its introduction in 1989, HELP has greatly expanded access to tertiary education.

But he warned that with $52 billion of HELP debt outstanding the government has to find ways to control its costs.

A 15 per cent universal loan fee would replace the existing fees – of 25 and 20 per cent respectively – paid by full-fee undergraduate and vocational education students. Postgraduate and government-supported students currently pay no loan fee. Charging some students high loan fees and other students no loan fees is unfair and has no policy rationale.

As now, there would be no upfront charges with a universal loan fee. The loan fee would be added to the student’s total debt. The fee would only affect graduates at the end of their repayment periods when their incomes are generally higher.

And because of HELP’s income contingent repayment system, students and graduates on low incomes would not have to repay their loan fee.

But loan fees would encourage students who can afford to pay upfront to do so.

“Loan fees are both fair and necessary. Without change, HELP’s costs will escalate, risking damaging cuts to other education programs,” Mr Norton said.

Read the report

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

Australia has a historic opportunity to fund all schools properly, at no extra cost

A new deal among governments and school systems can end Australia’s toxic school funding debate and transform teaching and learning in schools, without costing the Commonwealth more money, according to a new Grattan Institute report.

Circuit breaker: a new compact on school funding argues that historically low inflation rates give the Government an unprecedented opportunity to reduce excessive school indexation payments that are locked into legislation, saving the nation billions of dollars.

The report calls on all governments to use part of the savings to create the needs-based funding system all main parties say they want, as well as new roles for expert teachers to lift student performance.

As education ministers prepare to meet next month to discuss a new funding model, Grattan Institute School Education Program Director Peter Goss says the compact offers the circuit breaker Australia’s 50-year old argument over school funding desperately needs.

“It shows how we can reallocate funds to get all schools to their needs-based funding target by 2023, without spending any more money over the next four years than the Turnbull Government proposed in its 2016 Budget.”

Under its proposals, under-funded schools are much better off compared to the model legislated by the Gillard government in 2013 and the 2016 Budget. Chronically disadvantaged schools gain the most.

About half of schools close to or at their targets would have slower funding growth than under the legislation. But they maintain their purchasing power and most of them will be better funded than today.

A very small number of over-funded schools (only 3 per cent) would get less money.

“These changes are essential to create a school system that gives every Australian child a fair chance in life,” Mr Goss said.

“But money alone cannot create that system. It must be spent well. All the evidence shows that if you want to lift student outcomes, you have to invest in the most effective teaching.”

The compact recommends a structural change to create two new roles: Master Teachers and Instructional Leaders who will work in schools and across clusters of schools to improve teaching effectiveness in maths, science, English and other fields.

“It is time to end the exhausted funding debate and to start the debate that counts in this century – how to improve teaching for all students in all schools,” Mr Goss said.

Read the report

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

Why we should tax sugary soft drinks

Australia should introduce a tax on sugary drinks to help recoup some of the costs of obesity to the community, according to a new Grattan Institute report.

A sugary drinks tax: recovering the community costs of obesity calls for a new excise tax of 40 cents per 100 grams of sugar, on all non-alcoholic, water-based drinks that contain added sugar.

The tax would increase the price of a two-litre bottle of soft drink by about 80 cents, raise about $500 million a year, and generate a fall of about 15 per cent in the consumption of sugar-sweetened beverages, as consumers switched to water and other drinks not subject to the new tax.

The report, to be released at Parliament House in Canberra on Wednesday, calculates obesity costs Australian taxpayers more than $5.3 billion a year.

Obese people are more likely to go to doctors and be admitted to hospital more often than other people. They are also more likely to be unemployed and therefore paying less tax than the rest of the population.

These costs – more taxpayer dollars spent on healthcare and welfare, and less tax raised – are caused by obesity but borne by the entire community. The new tax would help redress that imbalance.

Obesity is rising dramatically in Australia: one in four adults are now classified as obese, up from one in ten in the early 1980s. Perhaps even more worryingly, about 7 per cent of our children are obese.

The report stresses that a new tax is not a “silver bullet” solution to Australia’s obesity epidemic – that would require a whole suite of new policies and programs. But the proposed tax would encourage healthier lifestyles.

“Obesity is one of the great public health challenges of modern Australia, and so this is a reform whose time has come,” says Grattan Institute Health Program Director Stephen Duckett. “We target these drinks because most of them contain no nutritional benefit.”

The many countries that already have or are planning to introduce a tax on soft drinks include France, Belgium, Hungary, Finland, Chile, the UK, Ireland, South Africa and parts of the United States.

The report says the Australian government could use the $500 million a year raised by the new tax to reduce the budget deficit or boost healthcare funding, or the money could be spent on programs designed to treat obesity and promote healthy eating.

“How we use the money is a debate for later,” Dr Duckett says. “For now, Australia should introduce this tax because it offers twin benefits: it will reduce the number of people who become obese and it will ensure fewer taxpayer dollars have to be spent on the damage done by obesity.”

Read the report

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

How politicians’ reckless promises are distorting transport infrastructure spending

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

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

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

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

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

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

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

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

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

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

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

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

Read the report

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

Why Australia must heed the warning from one state’s electricity shock

Soaring South Australian wholesale electricity prices in July have exposed the urgent need for Australia to develop climate change and energy policies that combine to maintain reliable, affordable and sustainable power, according to a new Grattan Institute report.

Keeping the lights on: lessons from South Australia’s power shock documents how the state’s wholesale electricity price averaged $230 per megawatt hour over the month – three and a half times the price in eastern states.

The price even skyrocketed to nearly $9000 per megawatt hour on July 7, when a lack of wind, coupled with the closure of two coal plants and the temporary closure of a back-up electricity connection meant that gas was generating nearly all the state’s power needs.

The intermittent nature of wind – which now generates about 40 per cent of South Australia’s electricity – creates challenges for the price and reliability of power generation in the state.

Yet while the high July prices triggered a furious blame game, the report argues that criticisms of wind farms, gas generators or the electricity market are alarmist and unfair.

“The market worked, the lights stayed on and prices have since fallen to levels more comparable with the eastern states,” says Grattan Energy Program Director Tony Wood.

Nevertheless, the incident exposed two big potential problems for Australia’s power future.

First, the nation has no credible policy to reduce emissions in the power sector and enable Australia to meet its global climate change commitments.

Second, the current design of the wholesale electricity market may not provide the secure and reliable power that Australians take for granted.

The report urges Commonwealth and state governments to take three actions:

  • Use the 2017 Commonwealth review of climate change policy to develop a credible plan that all states support and that works with the electricity market.
  • Review the market to ensure that power flows reliably and affordably.
  • Explain that a transition to a low-emissions future will happen and that it will cost money.

“These events in one state were a canary in the coalmine, warning of the risks in our power future. It is time to listen,” says Tony Wood.

Read the report

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

Why the main parties must work together to tackle super tax breaks

MEDIA RELEASE

Winding back superannuation tax breaks is an acid test of our political system, and should be one of the first items of business in the current Parliament, according to a new Grattan Institute paper.

A better super system: assessing the 2016 tax reforms finds that the Federal Government’s plan to restrict superannuation tax breaks would create a fairer superannuation system more aligned to its purpose of providing income to supplement the Age Pension.

The plan would not only trim overly generous super tax breaks enjoyed by the top 20 per cent of income earners – people wealthy enough to be comfortable in retirement and unlikely to qualify for the Age Pension – it would save about $800 million a year.

The Government’s proposals would affect about 4 per cent of superannuants, almost all with enough income and assets to prevent them from ever qualifying for a part Age Pension.

Claims that the proposed changes would be retrospective are incorrect, says Grattan CEO John Daley. “Many reforms affect investments made in the past, and no-one suggests they are retrospective. The changes will simply affect taxes paid on future super earnings, and entitlements to make future contributions to super.”

Alternative proposals by the Australian Labor Party, which broadly supports the Coalition’s reforms, would save more than $2 billion a year. The paper shows that many of these alternatives would further align superannuation with its purpose.

The paper shows that there is broad agreement between the Government’s proposals and the ALP’s policy. If the Government concedes on some of the details to get a deal with the ALP in the Senate, it will probably improve the budget position.

“The Government’s considered position is built on principle, supported by the electorate, and our main parties largely agree on both ends and means. In these circumstances, a failure to get reform would signal there is little hope for either budget repair or wider economic reform,” says Mr Daley.

Mr Daley says the superannuation proposals are an important step in the right direction, but only a step. “Even with these reforms, super tax breaks will still overwhelmingly flow to high-income earners. And the long-term cost will remain unsustainable. Further changes will be needed in future.”

Read the working paper

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

The number of science graduates are growing but the jobs are not

Many recent science and information technology graduates are failing to find full-time work at a time when science, technology, engineering and mathematics (STEM) education is a priority for government and industry, according to a new Grattan Institute report.

Mapping Australian higher education 2016 shows that in 2015, only half of bachelor degree science graduates seeking full-time work had found it four months after completing their degrees, 17 percentage points below the average for all graduates.

Among recent science graduates who found full-time jobs, only half say their qualification is required or important for their job – about 20 percentage points below the average.

Although job outcomes improve over time, science bachelor degree graduates are less likely than other STEM graduates to work in high-skill managerial or professional jobs.

Mapping Australian higher education 2016, Grattan Institute’s regular overview of key trends in higher education, focuses on STEM graduate employment.

Grattan Institute Higher Education Program Director Andrew Norton says that despite poor employment outcomes, demand for science courses continues to grow.

‘Prospective students thinking about studying science need to know that a bachelor science degree is high risk for finding a job. Often students need to do another degree to improve their employment prospects,’ Mr Norton says.

While there are many more potential jobs in IT than science, a third of recent IT graduates cannot find full-time work.

IT students are less satisfied with their skills development, and are more likely to leave their courses without finishing, than are other students. IT industry and professional bodies suggest that university IT courses need improving.

Engineering graduates have better employment prospects than science or IT graduates.  Three-quarters of new engineering graduates have full-time work, and have the highest rate of professional or managerial employment of all STEM graduates.

In other trends examined in Mapping Australian higher education 2016, domestic enrolments exceeded one million for the first time in 2014, with the fastest growth in health.

International student numbers are growing again, after a fall between 2010 and 2012. Student satisfaction with teaching is also increasing.

Australia performs well in global research rankings, but in recent years levels of university research expenditure and outputs have stopped growing.

Read the report

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

How a targeted approach could reduce our hotspots of health inequality

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

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

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

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

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

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

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

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

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

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

Download an audio recording of Stephen Duckett discussing the report

Read the report

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