Six reforms Australia needs

A new-look Cabinet has an opportunity to make their mark by tackling much-needed reform. The ‘Governance of the Nation: A Report Card on Progress’ report delivered mixed reviews for Australia’s reform journey.

It's clear from the latest polling that Australians are tired of leadership instability and the focus on personality in Canberra. Voters want to see long-term policy and sensible reform..

The leadership speculation and internal party division on both sides of politics has undermined the ability of governments to achieve reform. Hard work has been delayed. It is imperative now that Prime Minister Scott Morrison focuses on the governance and policy reforms that will drive long-term growth and prosperity for all Australians. Last year the Australian Institute of Company Directors (AICD) launched an updated reform agenda, The Blueprint for Growth. The recommendations covered a broad spectrum of policy objectives. Earlier this year, the AICD issued a report card on the progress the nation had made towards those reforms. The overall message was simple for leaders across all sectors – since it is not government’s role alone to champion reform – 'could do better'.

It is now the job of Prime Minister Morrison and parliamentarians of every stripe to push forward reform. These are six policies they should take on. For more, you can read the Blueprint for Growth here and the Report Card on Progress here.

1. Fixing term length

While politicians may be fatigued by constitutional issues (particularly s44), Australia’s democracy will improve if they deliver on four year House of Representative terms. On average, Australia’s last 15 federal governments served terms of only two and a half years, which means three out of every 10 years are lost to election campaigning.

A move to fixed, four-year terms would, in the AICD’s view, improve certainty and support a focus on longer term policy outcomes.”

While the AICD praises the commencement of debate across the aisle, bipartisan support and movement towards constitutional reform is integral to long term reform.

2. Tax reform

The AICD urges comprehensive tax reform with a fresh look at the GST being critical.

;Tax reform without changes to the current GST regime, by definition, will be piecemeal and incomplete.”

On 8 April, the Federal Treasurer Scott Morrison introduced a new breakdown for GST distribution with WA and Victoria seeing increases in their share, according to the ABC. However, the country still awaits the Productivity Commission report on GST distribution in May, as well as consideration as to how to grow the GST base itself.

“The 10 per cent rate is half the global average, and the base to which the tax is applied is shrinking, as household spending on items not taxed (e.g. education, healthcare, fresh food), grows more quickly than spending on items subject to the GST,” the Report Card found.

The AICD proposes a GST increase to 15 per cent with a substantial compensation package for lower income earners, along with a broadening of the tax’s application. However, reviewing GST arrangements must be part of a broader look at the mix of state and federal taxes, from stamp duty to the corporate tax rate.

3. Combatting risk aversion

Rt Hon Sir John Key, former Prime Minister of New Zealand, extolled the virtues of NZ’s principles-based 50 page Corporations Law at the March Australian Governance Summit. By contrast, the Australian equivalent numbers in the hundreds of pages encouraging on a focus on compliance and caution.

Year on year, our research reveals that a majority of directors surveyed report a risk-averse culture on boards. Australian corporate law should better support the responsible risk-taking needed for innovation and economic growth.”

2017 saw some progress in this area with the introduction of ‘safe harbour’ provisions to recalibrate insolvency laws. The reform goes some way to mitigating concerns around “inadvertent breaches of the law” that early-stage investors and directors cite when expressing reluctance towards start-up investment.

4. STEM & VET

Ensuring the workforce of the future is “job-ready” will require planning, collaboration and a concerted effort from business, educators and government.

Australia is not producing enough university and vocational graduates who are job-ready to face the great challenges associated with, among other things, artificial intelligence, automation and the digital economy.

Innovation and Science Australia’s (ISA) 2030 Strategic Plan aims to improve teacher training, particularly in the Science, Technology, Engineering and Maths (STEM) fields. Addressing the Committee for Economic Development of Australia in April, ISA Chair Bill Ferris AC said, “The changing nature of work in the future means that reskilling and life-long training and learning will be essential to establish a competitive workforce and to maintain a fair and inclusive society out to 2030 and beyond. The Plan therefore recognises and recommends the urgent need to restore and enhance the reputation and capability of the vocational education training (VET) sector.”

Ferris noted Opposition commitments to review higher education including VET saying, “we take that as a promising sign that this vital issue is being seriously considered by all sides of politics… as it should be”.

5. Five-year funding cycles for NFPs

According to the 2017 Australian Charities Report, 43 per cent of charitable revenue (as much as $61 billion) comes from federal, state and territory governments.

As a result, government funding practices have a significant impact on the sustainability, effectiveness and governance of [not-for-profits]. Many NFPs are subject to short-term, precarious funding arrangements which undermine their ability to plan effectively and to deliver the essential services on which our community depends.”

The AICD is championing five year funding commitments from all Australian governments, a move that would deliver much-needed stability for NFPs.

6.  Building blocks

Infrastructure Australia’s recently release of its updated priority list (worth over $55bn) was a welcome step toward a long term infrastructure strategy.

Cementing the Council of Australian Governments’ (COAG) role in this process is integral to ensuring states and territories don’t circumvent coordination and announce projects which don’t meet nationally consistent criteria. The AICD recommends a COAG commitment to a 15 year infrastructure plan.

For more information on other recommended reforms, read the full Report Card here.