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PC News - May 2019

The Productivity Commission 20 years on

Last year marked the twentieth anniversary of the Productivity Commission. Established by the Australian Government in 1998, the Commission’s mandate is to provide independent research and advice to government on a range of economic, social and environmental issues affecting the welfare of Australians.

The Commission has deep roots in economic policy making and reform in Australia. It was created by a merger of the Industry Commission, the Bureau of Industry Economics and the Economic Planning Advisory Commission. The Industry Commission itself was preceded by the Industry Assistance Commission, which had replaced the Australian Tariff Board.1

As Chairman of the Industry Commission, Bill Scales oversaw the establishment of the Productivity Commission. Gary Banks was its inaugural Chairman from 1998-2013 and Peter Harris was Chairman from 2013-2018, with Michael Brennan commencing as Chair in September 2018.

Many of the Commission’s core functions and operating principles reflect those of its predecessor organisations.

The Commission’s work is based on three core principles

  • Independence. The Commission operates under its own legislation, with an arm’s length relationship to government.

    Transparency. The Commission’s advice to government, and the information and analysis on which it is based, are all open to public scrutiny. Its processes provide for extensive public input and feedback through hearings, workshops and other consultative forums, and through the release of draft reports and preliminary findings.

    A community-wide focus. The Commission is required to take a broad view, encompassing the interests of the economy and community as a whole, rather than particular industries or groups.

The Productivity Commission has a wide remit. It covers all sectors of the economy, as well as social, regional and environmental issues, with a view to better informing policy making to raise national productivity and living standards. The Commission’s activities cover all levels of government.

With its broad mandate, the Commission’s focus has evolved over time, reflecting changes in the structure of the Australian economy, and new policy challenges.

A central and enduring focus in the Commission’s work is improving prosperity and living standards. Productivity growth is the main driver of sustained economic growth and rising living standards – the wellbeing of Australians depends on persistent growth in productivity. Governments have an important influence on productivity growth through policies and regulations that affect investment in human and physical capital and the functioning of markets.

Inquiries undertaken in recent years examining foundational aspects of productivity growth include Public Infrastructure and Workplace Relations Arrangements . And in the context of data (and its analytics) being the most significant renewable resource discovery this century, the Data Availability and Use and Intellectual Property Arrangements inquiries recommended reforms to improve data access and use, enabling new products and services that can transform everyday life, drive efficiency and safety, create productivity gains and allow better decision making.

The Productivity Commission undertakes reviews of Australia’s productivity performance on a five-yearly basis and recommends productivity-enhancingreforms. The first Productivity Review, Shifting the Dial , was released in October 2017. The report focused on education, health, and the shaping of urban investment and infrastructure. These fast-growing areas of the economy are critical for sustaining economic growth. They are also areas where individuals can personally benefit from change.

The Commission has also considered the capacity to adjust to structural changes in the economy, including studies into Geographic Labour Mobility and Transitioning Regional Economies .

Government regulation brings economic, social and environmental benefits, but can also impose costs – some unavoidable, but some unnecessary for achieving the regulatory objective. Throughout its history, the Commission has undertaken many inquiries and studies into how regulation can be more efficient and effective. Recent examples include: Electricity Network Regulation, the National Access Regime, Regulation of Agriculture, and Regulation of Airports.

International trade and investment are vitally important to the Australian economy. An open trade policy has contributed to making our economy resilient to shocks over more than 25 years of uninterrupted growth. Barriers to trade and investment pose a risk to economic growth and living standards. The Productivity Commission reports annually on developments in trade policy, as well as industry assistance, in the Trade and Assistance Review. In addition, the Commission’s trade-related work over the last decade includes: an inquiry into Bilateral and Regional Trade Agreements, and self-initiated research into Rising Protectionism: Challenges, Threats and Opportunities for Australia and Developments in Anti-Dumping.

Financial sector issues have been a recent focus for the Commission, with a three-stage inquiry into the efficiency and effectiveness of the Australian superannuation system, and an inquiry into competition in the Australian financial system.

The Commission has applied its economic framework and community-wide focus to the analysis of social policy issues. Over the last decade, the Commission has undertaken inquiries and studies into: Paid Maternity, Paternity and Parental Leave; Gambling; Caring for Older Australians; Disability Care and Support; Childcare and Early Childhood Learning; Reforms to Human Services; and National Disability Insurance Scheme (NDIS) Costs. And the Commission is currently undertaking an inquiry into mental health. In this, and many other inquiries, the Commission brings a cross-sectoral approach, considering the various sectors – health, education, housing, justice, etc – involved in supporting effective outcomes.

The Commission has also focused on policy issues with social dimensions in its self-initiated research program, including reports on An Ageing Australia: Preparing for the Future; and Housing Decisions of Older Australians.

More recently, a Commission self-initiated research project examined inequality in Australia. Building on earlier work by the Commission, the paper, titled Rising Inequality? A stocktake of the evidence, brought together and took stock of the latest and most complete evidence measuring the prevalence of, and trends in, inequality, mobility and disadvantage across Australian society.

Over the last decade, the Commission has examined a range of environmental issues including: an inquiry into Government Drought Support, a study into Emission Reduction Polices and Carbon Prices in Key Economies, and an inquiry into Barriers to Effective Climate Change Adaption.

In 2015, the Productivity Commission was given specific water functions following the abolition of the National Water Commission. Under the Water Act 2007 (Cth), the Productivity Commission is responsible for triennial assessments of progress towards achieving the objectives and outcomes of the National Water Initiative. The first inquiry was undertaken in 2017. The Commission is also responsible for conducting five-yearly assessments on the effectiveness of the implementation of the Murray-Darling Basin Plan and associated water resource plans, the first of which was undertaken in 2018.

Many aspects of the Commission’s work, including on water, involve Commonwealth-State matters, with inquires and studies often examining issues, and making recommendations, relevant to all Australian governments. Other Commission work has focused directly on the structure of Commonwealth-State relations – such as the recent inquiry into Horizontal Fiscal Equalisation.

The Commission also has responsibility for undertaking reviews of nationally signifi cant sector-wide agreements between the Australian, State and Territory governments – the first of which was the National Disability Agreement Review released in February 2019 – and for the COAG Performance Reporting Dashboard. The Dashboard provides a single, streamlined source of information on progress towards key COAG commitments. It contains assessments of progress at the national level, and for each state and territory.

The Commission provides assistance to all Australian governments and the Council of Australian Governments (COAG). It provides secretariat, research and report preparation services to the intergovernmental Steering Committee for the Review of Government Service Provision. In this capacity, the Commission produces the Report on Government Services (RoGS), the Overcoming Indigenous Disadvantage report and the Indigenous Expenditure Report, and collates National Indigenous Reform Agreement performance information. It is also piloting reviews of ‘What Works’ to improve service outcomes as a complement to the RoGS.

Another stream of work on Indigenous policy evaluation is underway. The Commission is developing a whole-of-government evaluation strategy for policies and programs that affect Aboriginal and Torres Strait Islander Australians, to be used by all Australian Government agencies. This work is being led by Romlie Mokak, who was recently appointed to the new Indigenous Commissioner position.

All reports referred to above are available on the Commission’s website.

Footnotes

  1. For a history of the Productivity Commission and its predecessor agencies, see Productivity Commission 2003, From industry assistance to productivity: 30 years of ‘the Commission’ , Canberra. An overview of the first 10 years of the Productivity Commission was included in the April 2008 edition of the PC Update . Return to Footnote 1 in the text

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