Ideas@TheCentre – The Centre for Independent Studies

Ideas@TheCentre

Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

Big three states splurge on infrastructure

Robert Carling

21 June 2019 | Ideas@TheCentre

With the NSW Treasurer handing down the state’s 2019-20 budget this week, the big three states — which also include Victoria and Queensland — have now tabled their fiscal plans.

There are several common themes. Budgets are under pressure. Revenue has weakened because of the housing slump — to which stamp duty revenue is highly sensitive — and sluggish consumer spending.

All three states are running slender operating surpluses with (as usual) promises of better to come, based on assumptions that may prove too optimistic. They are all spending up big on capital works (‘infrastructure’), with $55 billion budgeted for 2019-20 alone. This spending, combined with slender operating surpluses, is producing large cash deficits and a rapid build-up in debt over the next four years.

Capital expenditure, provided it is wisely allocated, will benefit the economies of these states, but the associated growth in debt is worrying. Queensland already lost its triple-A credit rating long ago. NSW and Victoria cannot be relaxed about keeping theirs.

NSW is managing the pressures somewhat better, despite experiencing the biggest housing downturn. The state’s stamp duty revenue from property transfers slumped from $9.7 billion in the peak year of 2016-17 to a projected bottom of $6.9 billion in 2019-20. NSW has weathered this huge loss basically because it has taken a more cautious approach to manage operating expenditure (particularly staff costs) than Victoria and Queensland.

In the four years to 2018-19, state government employee expenses ballooned by 33% in Victoria and 30% in Queensland as both staff numbers and pay rates rose rapidly. The comparable figure for NSW was a more normal 18%.

NSW is also in a better position now because of privatisations in recent years, which have resulted in a lower debt burden than the other states despite the large capital program. Queensland has shunned privatisations, while Victoria acted on most of its privatisation opportunities many years ago.

Reflecting the different approaches to expense management and privatisation, NSW is so far getting away without tax increases, whereas both Victoria and Queensland announced contentious tax increases in their budgets.

All three states’ budgets are light on anything that can be called ‘reform’. However, NSW has made a small gesture toward reform of property stamp duty by indexing thresholds to the consumer price index and is establishing its own review of reform of federal-state finances — which is welcome but will lead to very little without the cooperation of the Commonwealth and other states.

Ads highlight CSR concerns

Jeremy Sammut

21 June 2019 | Ideas@TheCentre

The concerns my new book outlines about Corporate Social Responsibility (CSR) leading to the politicisation of the role of companies have been underlined by recent events.

In the past two weeks, we have witnessed full page newspaper ads proclaiming that a slew of big companies “support the Uluru Statement from the Heart”. This followed the announcement of support for Recognition by 21 investment banks, super funds and accounting firms.

This renewed bout of corporate politicking was clearly planned in anticipation of an election victory by the Labor party, which had pledged to fast-track a constitutional referendum on a Voice to Parliament.

In the wake of the Morrison government’s re-election, big business — like many commentators and pundits — have found themselves on the wrong side of history … and found out just how tin their political ear is.

The election result offers a timely opportunity for those operating within the corporate bubble to reconsider what is being done by companies in the name of CSR.

I hope my book encourages such a reconsideration through the critique it offers of the current — highly political — approach to ‘social responsibility’ that is being enthusiastically embraced at the highest levels of business.

What the election result has demonstrated is the validity of the insider vs outsider thesis about modern politics.

The Quiet Australians’ rejection of Labor’s embrace of identity politics and progressive ideology has exposed the cultural divide between so-called inner city elites and ordinary Australians in the outer suburbs and regions holding mainstream views.

What the election result also ought to burst is the insider bubble —the propensity for corporate elites to live, work, and socialise with like-minded elites and not question self-reinforcing progressive agendas.

Bursting the bubble surrounding CSR exposes the contradiction that lies at heart of the CSR philosophy.

The standard argument for CSR is that that in order to earn a ‘social license’ to operate, companies must fulfil a range of social obligations beyond their traditional profit-making role, by considering the social impacts of their activities on the interests of broader groups of stakeholders in the community.

The book turns around the reputational and branding arguments for CSR to make the case against CSR by pointing out what the election result has now made even more obvious.

This is that corporate involvement in divisive social questions on which there is no community consensus among shareholders, stakeholders, employees and customers, can have negative brand and reputational consequences for companies that risk acquiring reputations for being ‘being political’.

The book, therefore, argues that because CSR politicking can be bad for business, corporate leaders should be encouraged to take a more hardheaded approach.

This is an edited extract of a speech given at the launch of Dr Jeremy Sammut’s book CORPORATE VIRTUE SIGNALLING: HOW TO STOP BIG BUSINESS FROM MEDDLING IN POLITICS (Connor Court) at the CIS this week. See the video here…

Kudos to NSW for phonics check trial

Blaise Joseph

21 June 2019 | Ideas@TheCentre

The NSW budget included some very welcome education news: a trial of the Year 1 phonics screening check in some government schools.

This is a great outcome for NSW children, and CIS is particularly pleased to see it, as we have been advocating this policy for several years.

South Australia was the first state to have a trial — the feedback on which was overwhelmingly positive from students, teachers, and principals — and now conducts the check annually in all government schools (it is bi-partisan policy, with the trial having been introduced by the then Labor government).

There shouldn’t be anything partisan about wanting to ensure high-quality reading instruction in the early years of school. It is well-established that early reading ability is crucial and strongly influences later literacy skills and achievement across subject areas. It’s vital we identify students who are falling behind as soon as possible so we can intervene to help them.

And phonics instruction is especially important for students from lower socioeconomic backgrounds. A comprehensive review by the NSW Centre for Education Statistics and Evaluation found that explicit phonics instruction substantially reduces the reading gap between disadvantaged and advantaged students.

The context is that too many children aren’t learning how to read in primary school. The 2016 PIRLS test found that one in every five Australian Year 4 students had reading levels below the international literacy benchmark.

While the focus in the past has been on lifting education spending, it is more important that school systems implement evidence-based policies, with accountability and transparency.

The NSW government also announced in the budget that, along with a significant increase in school spending, in future, there will be an outcomes-based approach to NSW schools. Unsurprisingly, this was controversial, with a former NSW education minister labelling it a “bad idea”.

Imagine… a government wanting to ensure that additional billions of taxpayer dollars spent on schools actually leads to better outcomes? Just outrageous.