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Shifting the Dial: 5 year productivity review


Healthier Australians

Recommendation 2.1 Implement nimble funding arrangements at the regional level

The Australian, State and Territory Governments should allocate (modest) funding pools to Primary Health Networks and Local Hospital Networks for improving population health, managing chronic conditions and reducing hospitalisation at the regional level.


Set aside a small share (say 2 to 3 per cent) of activity-based funding to hospitals to create a Prevention and Chronic Condition Management Fund (PCCMF) for each Local Hospital Network (LHN) to commission activities that improve population health and service quality, or reduce hospitalisations and broader health expenditures.

Where they are directly related to prevention and management of chronic conditions, allocate the expected funding from the Practice Incentives Program and other Medical Benefit Schedule items to Primary Health Networks (PHNs) in each region.

Give LHNs autonomy about how they spend from their PCCMF (including a license to fund innovations) and give them certainty over future funding contributions to allow planning.

Assess the returns from PCCMF investments. Let LHNs retain some of the returns from PCCMFs, with the remainder shared among Australian, State and Territory Governments.

Disseminate the lessons from effective interventions funded through PCCMFs to other regions.

Ensure formal collaboration between LHNs and PHNs to improve population health and the effectiveness and efficiency of primary health care. Where relevant, involve other regional groups with capabilities in managing population health, including Local Governments and community organisations.

The Australian Government should allow LHNs to commission the services of GPs by amending section 19 of the Health Insurance Act 1973, with the proviso that the LHNs operate in formal agreement with their region’s PHN. The Australian Government should also remove any administrative constraints on PHNs allying with LHNs to commission GP services.

Amend the Australian Government’s prospective Health Care Home model so that LHNs and PHNs can introduce local variants, with supplementary funding and design features determined by them through collaboration.

Clinician buy-in is essential to achieving change and will be led by PHNs, which have often built good relationships with local leaders.

Further details are in Conclusions 6.1, 6.2 and 6.3 of Supporting Paper 5.

Recommendation 2.2 Eliminate low-value health interventions

Australian governments should revise their policies to more rapidly reduce the use of low-value health interventions.


More quickly respond to international assessments indicating low-value medical interventions.

Create more comprehensive guidelines and advisory ‘do not do’ lists.

Disseminate best practice to health professionals, principally through the various medical colleges, the Australian Commission on Safety and Quality in Health Care and similar state-based bodies.

Collect and divulge data at the hospital and clinician level for episodes of care that lead to hospital-acquired complications and for interventions that have ambiguous clinical impacts (such as knee arthroscopies).

Provide accessible advice to patients about potentially low-value services and improve their health literacy using the measures covered by Recommendation 2.3.

Ensure that ongoing processes for reviewing existing Medical Benefit Schedule items are more rapid and comprehensive than occurred under the arrangements prior to the Robinson Review.

Give priority to de-funding interventions that demonstrably fail cost effectiveness tests, moving from volume to value.

Remove the tax rebate for private health insurance ancillaries.

More details are in Conclusion 7.1 of Supporting Paper 5.

Recommendation 2.3 Make the patient the centre of care

All Australian governments should re-configure the health care system around the principles of patient-centred care, with this implemented within a five year timeframe.


Develop well-defined measures of people’s experience of care and the outcomes they observe (so-called Patient Reported Experience and Outcome Measures — PREMs and PROMs), and integrate these into disease registries. The Australian Commission on Safety and Quality in Health Care should be the orchestrator of these developments.

Publish results so clinicians, hospitals and patients see how the system is working at a grass roots level.

Consult with consumer groups representing patients and with the various medical colleges to achieve acceptance of the new model and its implications for practices.

Improve patient health literacy to a level that far more people would have a capacity to self-manage chronic conditions, make informed end of life decisions, and be able to solicit from, and interpret information given by, clinicians (Supporting Paper 5).

Use My Health Record and other IT platforms to involve people in their health decisions.

Give people a greater capacity for making choices between alternative suppliers, underpinned by transparent measures of prices and performance.

Give greater weight to patient convenience, and develop and disseminate technologies that assist this.

Systematically include an understanding of patient-centric care in the education and training of new health professionals, and use the various professional bodies to disseminate an understanding of the issues to existing health professionals.

Use data analysis to identify very high service users across all major service types and discover the reasons for their high use (Recommendation 2.4). Use this to customise care plans and other targeted early interventions to improve their health status and reduce their use of services.

Recommendation 2.4 Use information better

Australian governments should cooperate to remove the current messy, partial and duplicated presentation of information and data, and provide easy access to health care data for providers, researchers and consumers.


Identify the key relevant health datasets, including those that provide aggregated information about population health, and ensure that:

  • links to health datasets and survey results are included on the Australian Institute of Health and Welfare website
  • registers of health care data are created and published on, in line with recommendation 6.4 of the Productivity Commission’s inquiry into Data Availability and Use (PCDAU).

Implement recommendation 6.6 of the PCDAU regarding the establishment of the Office of the National Data Custodian, which will have responsibility for the implementation of data management policy for health care and other data.

Streamline approval processes for access to data, in line with recommendation 6.7 of the PCDAU.

In doing so, priority should be given to making health datasets available, with a focus on projects that:

  • allow evaluation of initiatives by Primary Health Networks and Local Hospital Networks at the regional level
  • use data analytics to discover bottlenecks in integrated care systems, prospectively identify high-risk groups, identify the long-run effectiveness of preventative measures, and better isolate low-value interventions.

Governments should cooperate to reduce the existing inconsistencies in the multiple population health surveys and hospital and other satisfaction/experience surveys, accompanied by the development of benchmarks for gauging the relative performance of health care providers and purchasers across all national regions.

Any webpages or other sources that provide information to consumers about health care services should be comprehensive and maintained, and if that is not cost-effective, they should cease to be funded by governments.

Ensure uptake of electronic medical records by health professionals and hospitals by making them easy to use, and in some cases, linking access to additional funding to their adoption of integrated information systems.

Use My Health Record for both information and as a platform for providing clinically proven advice to patients, with the potential development of links between it and wearable technologies.

The Australian Commission on Safety and Quality in Health Care, in collaboration with other State and Territory Government agencies, should be a clearinghouse for the results of evaluations of regional innovations, and report on the diffusion of substantiated best practices across regions.

Create a cooperative ‘Champions Program’ that uses people with hands-on-experience with innovations to assist others to copy them.

Recommendation 2.5 Embrace technology to change the pharmacy model

The Australian Government should move away from community pharmacy as the vehicle for dispensing medicines to a model that anticipates automatic dispensing in a majority of locations, supervised by a suitably qualified person. In clinical settings, pharmacists should play a new remunerated collaborative role with other primary health professionals where there is evidence of the cost-effectiveness of this approach.


Identify the best dispensing technologies from those that are currently available.

Determine the necessary credentials for the supervisor of automated dispensing, but with those qualifications involving substantially less training than currently are required for pharmacists.

Consult with the relevant training institutions — most likely in the vocational education and training sector — to develop courses for such qualifications.

Inform the various university departments of pharmacy about the reduced need for future supply of pharmacists.

Determine the locations for automated dispensing, taking into account accessibility and security, but eliminating unnecessary boundaries on locations now endemic in pharmacy planning rules.

Trial the technologies in remote and rural areas where there are currently shortages of pharmacists.

In consultation with Primary Health Networks, Local Hospital Networks, the various medical colleges and any other relevant clinical bodies, define the role of pharmacists in a collaborative clinical model.

Identify where it is cost effective to use pharmacists in primary health, taking into account the capabilities of lower-cost health professionals, and the increasingly greater capacity for information systems to provide accurate advice about medicines to GPs and other professionals.

Phase in the changes after the Sixth Pharmacy Agreement has lapsed, using the time to test it in some natural settings to refine the model.

Recommendation 2.6 Amend alcohol taxation arrangements

The Australian Government should move towards an alcohol tax system that removes the current concessional treatment of high-alcohol, low-value products, primarily cheap cask and fortified wines.


Ideally, this would be achieved through a uniform volumetric tax rate for alcoholic beverages, calibrated to reflect the health impacts of alcohol consumption. Exemptions could be made for the first 1.15 per cent of alcohol (consistent with the current policy for beer).

A transition period would be needed to allow the wine industry time to adapt.

Phasing out the existing range of concessional alcohol excise rates — including for draught beer and brandy — would also help to simplify the tax system and make it less distortionary.

Alternative models that would avoid significant price reductions for expensive products — with the regressive income impacts this would entail — could include a modified WET (wine equalisation tax) system with a minimum volumetric tax or the introduction of floor price regulation.

However, further work on these options is needed to determine their feasibility in light of likely administrative burdens and implementation issues.

Tax measures should be accompanied by other policies that increase education about alcohol and assist people with alcohol-related conditions.

Future skills and work

Recommendation 3.1 Improve educational outcomes of school students

Australian governments should:

  • address teaching out of field within a tight time-frame
  • improve the skills and effectiveness of the existing teacher workforce, with comprehensive professional development initiatives and other mechanisms, supported by evidence that these are genuinely effective
  • continue the current reforms to improve the quality and effectiveness of new teachers, but test their value.

Teaching out of field should be addressed through targeted professional development of existing teachers willing to acquire the relevant knowledge. Teacher salary differentials should also be used to overcome subject-based teacher shortages.

To improve teacher effectiveness, a more rigorous micro evidence base about what works in schools and how it should be implemented is required. But existing laws mean that data sharing between governments is poor. This should be the subject of institutional-level reform, as outlined in the Productivity Commission’s recent inquiry reports into Data Access and the Education Evidence Base.

The next 5 yearly Productivity Review could assess the impact and effectiveness of policies to raise student performance outcomes.

Recommendation 3.2 Proficiency not just competency

The Australian Government should develop tools for proficiency-based assessment for skills where employers want to know how well an employee can perform a task, rather than whether they can perform it at all.


The Australian Government — in conjunction with State and Territory Governments and the Australian Industry and Skills Committee — would initiate planning for proficiency-based assessment processes. The Australian Government should not compel vocational education and training (VET) providers to adopt proficiency-based assessment.

Models would be the subject of employer and VET provider review, with a process that supported early adopters to trial and deliver proficiency assessments. Before their broader application, an evaluation of the trials should be completed, with wider consultation across employer groups and institutions.

Recommendation 3.3 Disruption of education through independent assessment

The Australian Government should develop a framework to facilitate the independent accreditation of skills obtained through any learning method.


A capacity to assess and accredit skills and competencies acquired outside of traditional settings should be established and funded by the Australian Government. For university-level qualifications, this may be the Tertiary Education Quality and Standards Agency.

The Australian Government, in conjunction with employers, the Industry and Skills Committee and the Australian Skills Quality Authority, should investigate areas of vocational education and training where an independent certification model could robustly test a person’s skills.

Recommendation 3.4 Covering universities under consumer law

The Australian Government should monitor consumer law developments in Australia and the United Kingdom (UK), to ensure that the Australian Consumer Law applies to the higher education sector.


If, on further examination, it appears that action in Australia is difficult to mount and that the UK arrangements have had a positive impact, the Australian Government should clarify in legislation that the Australian Consumer Law does relate to higher education. This should give the student the right to compensation or the ‘right to a repeat performance’, on the same basis as other products that prove to be not fit for purpose.

Recommendation 3.5 Make it easy to access learning options

The Australian Government should ensure that Australians of all working ages can readily access comprehensive and up-to-date information about career and education options, including how to make career changes later in life.


As a first step, the Australian Government should consolidate the existing range of career guidance and education information websites into a single portal to provide school leavers and existing workers with a comprehensive one stop shop. It should outline:

  • future career opportunities
  • areas of skills need
  • educational requirements for different careers
  • the range of education institutions providing relevant qualifications
  • measures of the performance of institutions (vocational education and training and universities) in each course, including student experiences and outcomes (such as future employment and income).

A further step is for the Australian Government to establish a cross-portfolio review of the policies needed to develop a workforce with greater capacity to adapt to structural change. The review would examine the changes needed in the education and training and tax and transfer systems along with the need for awareness raising approaches.

Better functioning towns and cities

Recommendation 4.1 Improve governance arrangements for public infrastructure

  • It is essential that governments ensure that proposed projects are subject to benefit-cost evaluations, and that these as well as evaluations of alternative proposals for meeting objectives are available for public scrutiny before decisions are made.
  • The institutional and governance recommendations of the Productivity Commission’s 2014 Public Infrastructure Inquiry remain valid and should be implemented by all governments as a priority. The 2014 Report has a dedicated chapter on how to do it.

Recommendation 4.2 Short-term reforms to improve road provision

Several steps can and should be undertaken by State and Territory Governments in the short term to improve the quality and value for money from road services, and as preconditions for a subsequent move to road pricing.


Actionable reforms include:

  • restructuring governance arrangements to: i) ensure that representatives of those who pay for roads — that is, users — contribute to project selection and funding decisions, and ii) provide for independent appraisal of all major road expenditure proposals
  • measuring the road asset base and identifying roads that should, in fact, be priced, as well as clarifying the standards that should apply to roads
  • hypothecating road-related fees and charges to roads expenditure so that charges paid by drivers for using roads are linked to spending on roads.

Recommendation 4.3 Establish road funds

State and Territory Governments should establish Road Funds to hypothecate road-related revenues to expenditures. Initially designing Road Funds on the basis of heavy vehicle revenues and expenditures will help to sequence heavy vehicle and broader road transport market reform objectives and facilitate compositional shifts to new road funding sources over time.

Recommendation 4.4 Road user charging pilots

To communicate the need for road funding reform to the community, State and Territory Governments should consider the use of road user charging pilot programs, as has been successful in overseas jurisdictions.


Conducting trials in major capitals that utilise the opening of new (unpriced) additions to the system and testing behaviour under different pricing regimes (for example, refunding users’ excise while measuring their use of new infrastructure with a charge and netting off the outcome over a sustained period) would be a significant advance in knowledge and awareness.

Recommendation 4.5 Apply competition principles to land use policies

There should be national agreement to apply competition policy principles to land use regulation and policies.

There should be a particular ban on regulation that explicitly or implicitly favours particular operators and sets proximity restrictions.

Recommendation 4.6 Better provision for growth


Take steps to improve consultation and planning processes, as outlined in Conclusion 10.2 of Supporting Paper 10. This includes:

  • State, Territory and Local Governments genuinely engaging with the community on alternatives for meeting development goals
  • State and Territory Governments providing formal guidance on how Local Government planning strategies should be developed and on the application of overarching planning policies
  • State, Territory and Local Governments ensuring adequate provision in growth strategies for infrastructure and public amenities (such as ‘green’ space) given the difficulty of retro-fitting these features.

Recommendation 4.7 Implement best practice in development assessment

State and Territory Governments should implement known best practice in development assessment processes, as embodied in the model developed by the Development Assessment Forum.

Recommendation 4.8 Remove stamp duties and implement transition to land tax

State and Territory Governments should move from stamp duties on residential and commercial properties to a broad-based land tax on the unimproved value of land.


Phase out stamp duties on residential and commercial property transfers and replace them with a broad-based tax based on unimproved land value.

Transition over several years to aid adjustment.

A shift to land-based taxes should include provision for low income households to defer property taxes and fund them from their estate at death or on the sale of the asset (whichever comes first), with low interest rates applying to debts.

Improving the efficiency of markets

Recommendation 5.1 Urgent action is needed to fix Australia’s energy markets

Australian governments must cooperate to reform the national electricity market as a priority.


Australian governments must work cooperatively to resolve the issues currently confronting Australian energy markets. They must:

  • stop the piecemeal and stop-start approach to emission reduction, and adopt a proper vehicle for reducing carbon emissions that puts a single effective price on carbon
  • clearly articulate the acceptable trade-off between reliability and cost
  • achieve more efficient pricing, by ensuring that:
    • prices paid to producers reflect any additional costs they impose on the  system (such as frequency management)
    • access to the grid, rather than just use, can be priced (so people using the grid as a back-up pay for this service)
    • prices to consumers reflect the nature of the demand that they require from the system
  • provide clear strategic direction to the expert bodies, and a clearer accountability for outcomes
  • let the market regulators and participants get on with their work, holding them to account for the outcomes
  • ensure that short-term fixes are technologically neutral and move the system toward a sustainable long-run outcome.

Recommendation 5.2 Creating an environment more conducive to innovation

Australian governments must be more responsive and willing to experiment to create a more innovative ecosystem for Australian business.


There are a number of things Australian governments can do to create an environment more conducive to innovation without giving firms an incentive to seek support. Such action will help, but four other areas where governments can make a material difference is in:

  • establishing consumer rights over their own data, including the right to transfer their data
  • removing the barriers to greater use of public data, including developing secure access that still respects privacy
  • adopting a copyright law with fair use exceptions
  • removing the competition law exemption for intellectual property.

More effective governments

Recommendation 6.1 Seek Commonwealth-state/territory agreement to a formal joint reform agenda


A formal commitment and an institutionally-supported process are both needed to sustain cooperation on reforms of this nature beyond any one term of government.

Recognition should be offered that not all parties are likely to progress all changes at the same rate. But neither should a veto be offered to any one party, once agreement is achieved. A year (2018) should be allowed to strike such an agreement.

The role of monitoring and reporting on an agreed Joint Reform Agenda should be assigned to an independent body, such as a revamped National Competition Council or the Productivity Commission.

The monitoring body should be empowered and resourced to collect information on the progress and outcomes of reforms at Commonwealth and State and Territory levels and to report on a biennial basis.

Local Government should be invited to participate, once an agreement is struck.

An overall assessment of the progress and impact of the reform agenda should be included in the 5 yearly Productivity Reviews to be undertaken by the Productivity Commission.

Recommendation 6.2 Tax reform as an integral part of the joint reform agenda

To improve confidence between levels of government, and support more efficient provision of public services, governments should adopt a commitment to tax changes that improve revenue-sharing arrangements between governments as an essential element of a Joint Reform Agenda.

There is then every reason for the participants to pursue reform together.

Recommendation 6.3 Improve fiscal strategy disciplines

Governments should adopt measures that will better inform and improve accountability for spending and fiscal strategy decisions.

  • The Australian Government should adopt specific fiscal targets to assist budget management and credibility.
  • To strengthen the credibility of targets and the likelihood of them being met, the Joint Select Committee on the Parliamentary Budget Office could ask the Parliamentary Budget Office to report annually on the ability of budgets to achieve targets, and at mid-year on whether and how the progress of measures through the Parliament and discretionary decisions of Government have altered the likelihood of targets being met.
  • All governments should adopt longer-dated projections of selected major programs to better inform the formulation of budgets.
  • All governments should develop a whole-of-nation intergenerational report (IGR).
  • Shifting responsibility for the IGR at the Commonwealth level to the Parliamentary Budget Office would ensure that the IGR is a non-partisan report and help achieve a consolidated view of governments’ fiscal sustainability.

Recommendation 6.4 Renew intergovernmental relations


First, while not broken, the system of cooperative exchange at the apex of Australia’s federation — COAG — is in need of renewal. This is not an expensive undertaking — it has a cost only if it is insincere.

In order to arrive at agreement on fundamental reform at the apex, a practical division of responsibilities that is focused on the nature of the policy problem at hand and the parties most willing to design effective change should be taken. This means not treating the existing intergovernmental committee structures as sacrosanct.

Seeking reform primarily through control of payments should be least preferred.

Recommendation 6.5 Ensure accepted Public Service reforms are implemented


The Australian Public Service Commission (APSC) should evaluate what has been done over the past five years in relation to the themes arising from agency and sector-wide reviews. The APSC evaluation should be used to inform subsequent training initiatives to address any shortcomings.

The Australian Government should:

  • require the entities responsible for implementing the findings of reviews to commit to deadlines for delivery and report publicly against implementation timelines
  • require the Secretary of the Department of the Prime Minister and Cabinet to issue a charter letter to each department head at the start of government terms outlining expected agency capabilities and public sector reform priorities to lift those.

The Joint Committee on Public Accounts and Audit could be tasked by Parliament to oversee progress on agreed sector-wide reforms on an ongoing basis.

Recommendation 6.6 Strengthen internal capabilities

Australian Governments should implement a suite of changes to strengthen policy development and delivery.


No policy areas should be immune from proper appraisal — ex ante and ex post. But Regulatory Impact Statement processes should emphasise sound policy-making rather than simply adherence to rules.

To help ensure that programs remain well-targeted and administered, governments should make greater use of sunset clauses on programs with a fixed deadline for the completion of evaluations before new funding is committed.

Similarly, governments should make the continuation of program funding conditional on completion of a written evaluation (and the rectification of significant problems identified in the evaluation).

Governments should adopt high quality international standards wherever possible and make  better  use of information and evidence developed elsewhere (including randomised controlled trials).

Recommendation 6.7 Support local Government performance

State and Territory Governments should draw on the experience of Victoria and require more meaningful (including comparable) performance reporting by Local Governments, providing support on this where needed.


The Victorian Government’s reporting framework could be used as a model or starting point for other States and Territories. The more effective use of performance measurement would:

  • improve the accountability of Local Governments to residents and taxpayers
  • identify best-practice methods in Local Governments for future policy development
  • provide an incentive for Local Governments to improve their performance by highlighting differences in performance between similar Local Governments.

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