As the election hangover fades and a new government brings itself to bear on the nation, we have a chance to remake Australia for a new century. In a special post-election series, Crikey asked leading Australian thinkers to sketch a blueprint for a future Australia. Their brief: to spell out how Australia might fully realise its potential.

Renowned social commentator Eva Cox wrote on social justice. Author David Lindenmayer from the Fenner School of the Environment & Society at The ANU pointed out opportunities for the new Rudd government on the environment, sociologist John Carroll has taken a look at Australia’s place in the world, and Miriam Lyons, Director of the Centre for Policy Development, shared her thoughts on remaking Australian culture, for want of a smaller topic.

Today, economist and CEO of Lateral Economics Nicholas Gruen looks at the hydra-headed issue of economic reform:

Reform, reform, reform: They’ll love you for it tomorrow

In 2002 a former cheerleader for New Zealand’s more ideological, crash-through style of economic reform, the New Zealand Business Roundtable’s Roger Kerr was complementing Australia on its “remarkably consistent, coherent and credible strategy”.

Ironically the best was already behind us. Growing out of an unlikely but ultimately successful dynamic tension between the Treasury and the Accord in the 1980s, comprehensive economic reform saw Australia become a “miracle economy” and the only country in the Anglosphere where policy leant against the wind of increasing market inequality.

But reform became formulaic focussing essentially on promoting competition and freer markets. By the time it lost office, the previous ALP Government could have broadened this agenda. Its failure and the failure of its successor to do so means it now falls to the Rudd Government should it be so minded.

There are lots of things that are still barely part of the reform agenda that could not just make us richer, but directly improve the quality of our lives and even give expression to our more idealistic side.

And here’s the key – they’re not focused on vague yearnings for a better life like more “community” (how does policy deliver that?). Rather, they are focussed on that old chestnut of micro-economic reform, thereby addressing market failure.

Better information

Economic theory and commonsense tell us that economic systems depend on good information for their efficiency. The sub-discipline of the economics of information has studied the costs of information failure, but remarkably little effort has been put into exploring ways of improving information flows.

Yet unlike the US and the UK, Australians still can’t get good information on the quality of hospitals and the “value” schools add to their students scores (making allowance for their socio-economic backgrounds). Imagine how it could improve the schools’ and hospitals’ performance if we could get that information and/or if government funders used it to drive improvements.

Firms already survey their workers’ job satisfaction, and the better ones have an incentive to publish the results of those surveys to attract increasingly hard to recruit labour. Why don’t they? Because no standard exists against which to report and so compare results. It might only take a little leadership from government (or an inspired opposition?) to get a voluntary standard going.

Though investment advisors are encrusted in regulation and investment products require elaborate disclosure, none of it helps us find an advisor whose track record demonstrates their expertise. Imagine how much more efficiently we might use capital if the mass of regulation actually assisted the market to do its job rather than just weighing it down in (frequently nonsensical) compliance burdens.

Risk

Rationalising the number and type of entities Governments own and manage has been sensible – with privatisation and contracting out. But this has shifted risk away from governments which can often bear it better than the firms or individuals who now assume the risk. Governments can begin redressing the balance by borrowing to build assets for the future, in the same way firms and families do.

Remember, Messers Rudd, Swan and Tanner, the board members of BHP Billiton are economic conservatives. That means they’re focused on growing their net worth at acceptable risk. They like debt – they just don’t want too much of it.

Robert Shiller disclosed a whole new agenda for governments in his recent book The New Financial Order. Governments should explore what informational infrastructure they can establish to assist risk markets to develop further. For instance, new instruments for financing housing investment are emerging with better statistical information on the movement of house prices. By taking an active interest governments can assist this process of development.

The previous Government’s creation of the Future Fund establishes the worthwhile principle that Governments should invest in a diversified portfolio with equities managed at arms length. Such investment should also be done counter-cyclically – that is with Governments seeking to increase holdings of asset classes that are depressed and decrease holdings where asset classes are booming as the Reserve Bank did in the foreign exchange market in the 1980s. It generates the double dividend of stabilising the relevant market while generating higher expected returns for governments.

And where we’ve shifted greater risk onto individuals, as for instance with superannuation, we should help people manage the transition. As in New Zealand, Governments should encourage the establishment of “default” settings for the level of superannuation savings whereby employees’ contributions rise over time to some broadly acceptable level – say 15% – unless employees opt out.

And like Sweden there should be default investment strategies which people would be free to use if they were too confused, intimidated or suspicious to use investment advisors/salespeople.

Federalism and regulation

We need some real breakthroughs in our Federal arrangements on which to build reform in health, education and other areas so that increased funding isn’t wasted, s well as being prepared to take over areas that aren’t working (courtesy of the precedent set by this Government’s so called “conservative’ predecessors), Labor should introduce national regulatory systems to operate alongside state ones for national firms – in areas such as workers’ compensation, OHS and other technocratic areas – like building codes for instance.

We should acknowledge that in its 20 year history, for all its good intentions, “regulation review” has been a fizzer – another unsuccessful piece of regulation, this time of regulators. Complex systems like regulatory regimes require much more than “regulatory impact statements” at the outset. Like markets they require ongoing optimisation down to the minutest detail. So we need to develop a new regulatory jurisprudence providing those who are regulated with enforceable “rights to alternative compliance”. And why limit those rights to firms? They should extend to all citizens.

And while reform has focussed on improving private incentives, something profound has been going on. Technology and globalisation have seen a new burgeoning of new global public goods – and bads!

Just as there’s a global interest in fighting new public bads – terrorism and the pandemics that threaten to become global within weeks of initial infections – so the internet has generated new and important classes of public goods.

Wikinomic reform

Open source software, Wikipedia and the ABC website are all global public goods available to all comers at zero marginal cost. There’s a whole reform agenda right there! Public goods are core government business.

The ABC has aggressively moved to the global forefront in the new medium of podcasting. Let’s do even better. Wouldn’t it be exciting to lead the world here – as we did with HECS, the Child Support Agency and the targeting of social security? Let’s make the entire ABC archive available for download from the net – a glowing global advertisement for Australian talent and curiosity.

Then let’s buy up some strategic intellectual property. Some copyrights of classic Australian culture, some patents of low value which might nevertheless be barriers to research. Let’s experiment with some public seed funding of some strategic open source software.

How many schools and universities could use Linux, Firefox and Open Office, rather than the usual Microsoft stuff? Students might get involved in the global effort to continue improving these community programs.

None of this need cost much. Some of it will save money.

But whatever we do, we should advertise the fact and invite other countries, and philanthropic people, and groups to join us. Think of the impact we could have!