You would have seen coverage of the National Reform Summit in Sydney, which attracted a galaxy of corporate and political power players including RBA Governor Glenn Stevens, CBA chief Ian Narev, and Wesfarmers head Richard Goyder.
While politicians like Joe Hockey and Bill Shorten showed up, it’s interesting – and probably concerning – to note that it was the two national newspapers, The Australian and The Australian Financial Review, who organised the national conference to discuss much needed critical reforms.
It wasn’t the Government.
That shows a lack of leadership from the Australian Government, and indeed the Parliament, when it comes to economic reform. It is business that is concerned enough (or frustrated enough?) to run their own summit to generate ideas with the hope of stimulating growth and confidence.

“Australia presents as a motorcar that operates with square wheels”

We agree summits and conferences like this are a good idea and should be held; it’s important to get business leaders together to mobilise actions, but did the Summit address the core problem facing Australia?

A more important reform

The Summit had a clear message: reform is now urgent. It highlighted four areas of reform:

  1. Lifting productivity growth and workforce participation;
  2. Tax reform;
  3. Fiscal policy for a growing economy;
  4. Sustainable retirement incomes.

We also agree that Australia urgently needs reform to kick-start growth and create a base for sustainable maintenance of our standard of living.
We think it’s sensible the Summit identified the need to reform the Australian tax system. We note the former head of Treasury, Martin Parkinson, highlighted how Ken Henry’s tax reform proposals have in the main been ignored and this has been detrimental to Australia.
But we pose the question: shouldn’t we actually be looking to reform a constitution and governing structure that was set up 115 years ago? Does anyone truly believe that our founding fathers envisaged the world and the Australia that exists today?
Imagine if you put all those business leaders, Goyder, Narev, etc, in a quiet side room at the Summit, plus some of the deepest non-business thinkers in Australia and gave them a blank piece of A4 paper. Then you asked them to outline the structure of Government that they would adopt for the Australia they live in today.
Would they adopt the same structure that was formed some 115 years ago? Probably not.

What would we look at reforming?

What would we write down on our piece of A4 paper?
We think, for a start, that Australia’s governance is excessive at its three levels – local, state and federal. Why do we need this, and aren’t the state and local governments or councils really just conducting an administrative role?
That means the country is over-regulated and over-governed with confusing and inconsistent approaches to laws and tax.
States openly compete with each other for business through differing taxation regimes and incentives. Councils adopt planning strategies for property that belies their real role of keeping parks clean and collecting garbage.
But does all this governance result in higher productivity or does it detract from it?

Why reform the governing structure or constitution?

Australia presents as a motorcar that operates with square wheels. It is not broken, it does operate, but it could be so much better and smoother. So in addressing our problems do you merely accept that it is not broken so why change it? Or do you fix the wheels so they are circular and we roll forward a bit quicker? Or do you say that yesterday’s motorcar is not the motorcar of tomorrow? The opportunity is to fully upgrade the car and maybe we adopt an electric model or one run on solar energy.
These analogies may be simplistic but in addressing Australia’s problems then surely the smartest people of today and our elected politicians are entitled to change the inefficiency at its core. We suspect the core inefficiencies need a stronger solution tinkering around the edges.

The benefits of a better governing structure

Changing the structure would make it easier to implement reforms such as raising the GST rate. The decision to leave this in the hands of the states is a debacle. It stifles a coordinated taxation adjustment that includes direct and indirect taxation.
There should be a national endeavour to always do better, yet the way we’re set up doesn’t allow that.