Potential Benefits of the National Reform Agenda

COAG's National Reform Agenda (NRA) has the potential to significantly raise national output and incomes in Australia, according to a Productivity Commission study released today.

The study examines the benefits potentially available in the long term from further enhancing competition in key infrastructure areas, reducing regulatory burdens on business, achieving more cost-effective health services and raising workforce participation and productivity.

Productivity Commission Chairman, Gary Banks, said “Australia has greatly benefited from National Competition Policy and the other structural policy reforms of the past two decades. This analysis suggests that there is just as much at stake in pursuing COAG's National Reform Agenda.”

The Commission found that reforms aimed at improving productivity and efficiency in energy, transport and related infrastructure and reducing the regulatory burden on business, if fully implemented, could increase GDP in time by up to around $17 billion or nearly 2 per cent. This would translate into $400 additional income per person in today's dollars. The Commission also considered that there was potential for a 5 per cent improvement in the productivity of health service delivery which, if achieved, would increase GDP by some 0.4 per cent.

In addition, 'human capital' reforms to enhance workforce participation and productivity — targeting health promotion and disease prevention, education and training, and work incentives — could potentially yield even larger gains, depending on program implementation costs (which were not modelled and will depend on Governments' decisions about specific measures).

The Commission found that all jurisdictions would receive increased tax revenues flowing from reform-induced growth. For the competition and regulatory reform streams, Governments' combined net revenues could rise by as much as $5 billion, with a 60:40 split between the Commonwealth and the States/Territories, respectively. Potential net revenue outcomes are more speculative for the 'human capital' reforms, varying significantly across different reform areas and requiring case-by-case assessment taking into account program outlays.

Gary Banks observed “The implications of the NRA for the size and distribution of government revenues cannot be determined definitively at this stage. What seems clear, however, is that people in all jurisdictions stand to benefit significantly from their governments getting on with identified reforms.”