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.

Too much spending, not enough reform

Robert Carling, Tony Makin, Peter Tulip, Simon Cowan

09 October 2020 | Ideas@theCentre

The Budget is very focused on the short-term, too heavy on spending and too light on permanent structural reform.

“New spending is enormous, and although most of it is supposed to be temporary one wonders whether it will be fully unwound. Over four years spending increases outweigh tax decreases by more than $4 to $1,” CIS Senior Fellow Robert Carling says.

“It is unsatisfactory that stage 3 of the income tax cut has not been brought forward at all, let alone to 1 July 2020 like stage 2. It is stage 3 that contains the real reform in this tax cut, but it may never happen — even though it is currently in legislation.

“There is also no permanent investment allowance. The full expensing of new investment only applies up to 2022 and is subject to a size-of-company cap. The investment allowance is inferior to a company tax cut, but the government should at least adopt a permanent investment allowance if the company tax cut is politically unachievable.

“It was similarly disappointing that there was no word on the rate of JobSeeker allowance after the end of this year.”

CIS author and Griffith University Professor of Economics Tony Makin agrees there should be serious concern about the prospective doubling of Australia’s net public debt to around $1 trillion within a few years.

“We’re told it is not a problem because our public debt had been relatively low compared to other developed economies. But Australia mostly borrows from abroad, unlike other developed economies (except for Greece), with public debt interest paid to foreign bondholders already a multiple of the foreign aid budget, Prof Makin says.

“”It’s been assumed that interest rates payable on that debt in coming years will stay very low, but this is highly speculative and overly optimistic, as the sharp rise in debt heightens the risk of a future credit rating downgrade and/or the emergence of an interest risk premium.

“In addition, world interest rates are likely to be significantly higher when the public debt has to be refinanced in light of massive recent global borrowing and the inflationary pressures likely to arise from excess money creation around the world.

“International empirical evidence suggests the sharp escalation of federal and state public debt will act as a drag of up half a per cent on Australia’s economic growth going forward.”

Prof Makin also says that boosting infrastructure is not the answer to restoring jobs temporarily lost in the services industries (eg hospitality, tourism) due to the government-imposed restrictions.

“All projects included in the infrastructure spend (an additional $14 billion in new and accelerated infrastructure projects over the next four years — thankfully less than many were expecting) have to pass muster on cost benefit grounds for them to add to long run productivity.

“There will be inevitable administrative delays in starting infrastructure projects and a serious mismatch of skills between those who lost their jobs due to the lockdowns and those needed to build infrastructure.  Baristas, waiters and beauticians are unlikely to want to wield picks and shovels in regional areas.”

CIS Chief Economist Dr Peter Tulip applauds that the Budget did not expand social housing.

“As a welfare measure, there are higher priorities, like helping the unemployed,” Dr Tulip says.  “As a stimulus measure, social housing never made sense.  The main constraint on construction is planning restrictions, and NIMBYs oppose social housing even more fiercely than they oppose private development.  If planning approval can be accelerated, then the private sector is eager to provide new housing at zero cost to the taxpayer.”

CIS Research Director Simon Cowan says the focus on short term solutions also left Australia’s workers facing the potential pay cuts and job losses from the planned super guarantee rise.

“The government’s failure to abandoned the proposed super increase is another example of its failure to prosecute a longer term reform agenda in this budget,” he says.

Closures undermined education

Glenn Fahey

09 October 2020 | Ideas@theCentre

New CIS research confirms the breadth of educational damage of school closures — especially troubling for Victorian students finally returning to class next week.

The analysis paper Parents’ perspectives on home-based learning in the covid-19 pandemic revealed that around 1.25 million students (over 40% ) across NSW, Victoria, and Queensland may have fallen behind while learning at home. It’s estimated Victoria’s disadvantaged students may have gone backward up to six weeks in their progress over the extended period of closures.

The new research makes clear that the quality of schools’ support to children and parents is decisive in how students fared with their learning — and that the quality of this support was mixed.

The secrets to success with home-based learning are sophisticatedly simple: students need regular interaction online with teachers, and parents need regular contact with schools.

Yet, a concerning number of students — as high as 30% in Queensland — didn’t have regular contact online with their teachers. Instead, they were relegated to completing worksheets and working independently. It comes as no surprise that these students were much more likely to have fallen behind.

Parents who were regularly contacted by teachers felt more informed and confident helping supervise learning. However, while many parents were contacted daily or most days, some weren’t contacted at all. Over 50% of parents who weren’t regularly contacted by schools say their child fell behind.

The better equipped parents are, the more effective support they can provide for their child’s learning — a fact that’s as true during the pandemic as it is in more normal times.

It’s clear that the school closures experience will leave lasting impressions to schooling; for students, teachers, and parents.

In households where the home-based learning wheels were well-oiled, parents gained more positive opinions about teachers’ work and schools’ education standards, compared to pre-covid. That’s evidence that parents appreciate the lengths many teachers and schools went to under such difficult circumstances.

It also shows there’s goodwill to be tapped in order to forge more constructive relationships going forward. Capitalising upon this would better support the work of schools, see parents as informed participants in schooling, and ultimately be more conducive for students’ learning.

The pandemic has been an unwelcome disruption to students, teachers, and parents.

Not only is there students’ learning loss for schools to now contend with, but also an imperative that lessons are learnt so that more effective schooling may yet be a silver lining.

‘Benevolent’ surveillance

Monica Wilkie

09 October 2020 | Ideas@theCentre

Governments have shown a disturbing desire to control the behaviour of their citizens with technology.

The NSW government intends to ban cash poker machines and require would-be punters “to register for a government-issued gambling card.” But there’s more: NSW pubs and clubs could be required to install “facial recognition technology to identify problem gamblers.”

Apart from being incredibly intrusive — governments should never dictate how you spend your money — a gambling card or camera will likely just push problem gamblers to other sources, such as the variety of apps or online games that act virtually the same as pokies.

But gambling is not the only area in which governments are using technological innovation to modify behaviour.

Although society is growing less reliant on cash, the federal government wants to give this a nudge and ban cash payments over $10,000. Such ludicrous overreach is only possible because of the invention of online banking; which will now be manipulated by government to turn some cash transactions into criminal offences.

Technology can be useful in solving crime. If you were attacked at an ATM while withdrawing $9999 you would like to think the perpetrator could be apprehended using footage from surveillance cameras.

But using a camera to catch a thief is quite different from using one to try and protect you from … yourself.

Government interventions are often justified by claiming to reduce harm. Those people in favour of using cameras to watch you play the pokies will be called virtuous, while those against such an intrusion will be branded as heartless and uncaring.

Interestingly, Australians rightly raise their collective brows at the surveillance state in China. But we seemingly accept similar interventions into our lives because we believe our government to be ‘benevolent’.

However, given governments’ willingness to use technology to nudge us into the ‘correct’ behaviour, you would be justified in concerns about whether they have a limit.

Australian governments are willing to watch you at the pokies, ban legal tender, and control what you see online.

Australians, thankfully, do not have to deal with punitive consequences like the Chinese. So why do we seem happy to let our government take innovations designed to make our lives easier and turn them into coercive tools to enforce ‘good’ behaviour.