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.

Closing the gap billions must be evaluated

Charles Jacobs

16 February 2018 | Ideas@TheCentre

The Prime Minister’s annual Closing the Gap speech unsurprisingly revealed that for yet another year we have failed to deliver on the majority of the seven targets. As a result, Mr Turnbull has dedicated billions more to a project that has seemingly already hoovered $130 billion out of the nation’s coffers.

Closing the gaps between Indigenous and non-Indigenous Australians is essential. However, given that the government has committed to reviewing its entire strategy, it seems a bit premature to be announcing a raft of new funding measures.

Take the $184 million Turnbull just committed to reducing rates of smoking in the Indigenous population. In 2010, $100 million was allocated to resolving this problem. In 2016, another $116 million was granted.

Undoubtedly, smoking is a major health issue and must be addressed. Indigenous smoking rates fell 9% between 2002 and 2014-15. This is notable progress, but given overall Australian smoking rates more than halved in this period it must be asked where all that funding went.

Similar questions must be asked about the $4.4 billion education funds loading increase for Indigenous students. Year 12 attainment and early childhood education targets are on track. However, reading and numeracy measures are not.

Before this multibillion dollar increase is confirmed, it is important to investigate the developments over the last decade. What is behind these successes? Can it be replicated? How can previous mistakes be avoided?

It seems particularly strange to endorse such a large funding increase when — by the government’s own admission — the Closing the Gap strategy is in significant need of a refresh.

Before any more funding is committed the government must get serious about integrating greater evaluation and accountability into the $6 billion spend on Indigenous programs and service delivery.

Closing the gap is the bottom line, however, these services are the day to day coalface. Making sure each and every program is working is essential to success.

Previous CIS research has revealed that the impacts of an overwhelming number of Indigenous programs are not being evaluated. It is time to resolve this, otherwise the government risks committing more billions over the next 10 years without have learned the lessons of the past 10.

Higher minimum wage will lower economic health

Sarah Ray

16 February 2018 | Ideas@TheCentre

Bill Shorten’s proposal to permanently link the minimum wage rate to 60% of the median wage, creating a so-called ‘living wage’, is a desperate appeal to low-income earners, working families and the left-wing voters of Australia. But what impacts will this feel-good policy have on the overall health of our economy?

In short, the proposed “living wage” would actively undermine Opposition’s other stated policy goals of boosting investment, growth, jobs, and to lift all wages over time.

In economics, a wage is just another word for the price of labour.  If you increase the price of any input you are going to negatively impact the demand for the input.  So a big increase to the minimum wage that is not linked to productivity improvements or a greater demand for new workers will result in job losses for the most vulnerable, lower-skilled workers in our society.

Low skilled workers who were formerly earning the previous minimum wage will be forced into competition with the higher-skilled workers now earning the same higher wage. For a firm to be in the best profit-maximising positon, the natural course of action is to keep the higher skilled workers and let the lower skilled workers go.

Mr Shorten has also made claims of Australia being a “left-behind-society”, – but the stats just don’t add up. With the current minimum wage of $18.29 per hour, Australia is visibly above that of the UK, which is AU$12.71 per hour and the US, which is AU$12.97 per hour.

The Opposition leader’s recent comments have shown a lack of understanding of basic economics – and little regard to truly growing the economy.

Sarah Ray is an intern in the economics program at the Centre for Independent Studies.

In praise of John Hyde

16 February 2018 | Ideas@TheCentre

In economic policy, as in fashion and music, the 1970s were generally a dreary decade: Keynesianism, stagflation, energy crisis. But out of that miserable era rose a generation of free-market giants in public life — among them the former Western Australian federal Liberal MP John Hyde, whom the Atlanta-based Foundation for Economic Education recently honoured as an international hero. (Read this excellent tribute by Andrew Pickford, the executive director of the Perth-based Mannkal Economic Education Foundation.)

Hyde was a federal backbencher for less than a decade, from 1974 to 1983. But he was a rare thing: a public intellectual and a public figure, whose ideas of tariff cuts and economic reform helped eventually transform Australia from a regulated, protected and highly unionised economy into the envy of the industrialised world.

One reason Hyde’s ideas were successful is that they were grounded in data, hard facts and evidence-based public policy. The former farmer, who lost his right arm in a farm accident, was a classical liberal because he believed in the power of free markets and free trade. But he was also a conservative because he believed that Canberra’s attempts to transform the nation via regulation and centralisation was something the federal government does at its own peril — and everyone else’s.

Hyde was not always popular with his fellow Coalition parliamentary colleagues. That’s because he publicly called out the likes of Malcolm Fraser, agrarian socialist then-Country Party politicians and even paternalistic Liberals as defenders of economic protectionism that had long been a pillar of Australian nationhood. Hyde led the ‘dries’ against those ‘wets’; and in 2002 he wrote Dry: In Defence of Economic Freedom, an intellectual memoir dedicated to the ground-breaking episodes in Australian economic history.

In recognising John as an international hero, FEE observed he was “the farmer who freed Australia’s economy” and he “never let political affiliation get in the way of doing the right thing.”  Count CIS and our supporters among his many admirers.