Download Productivity Commission

Institutional Foundations of
Economic Reform and Integration
Bernard Wonder
Head of Office
Productivity Commission
Tokyo
26 February 2007
1
Task

Working regionally to develop
national capacities
2
What can we usefully do?

From the perspective of Australia’s
Productivity Commission
–
the Australian Government’s principal
review and advisory body on
microeconomic policy and regulation; and
– the institution most identified in Australia
with microeconomic reform
3
Regional co-operation

Share experiences

Share institutional solutions

Share priorities for reform agenda

Focus on particular priorities
4
1. Share experiences

Number 1 (beginning of 20th century)
in world per capita incomes

To Number 4 (of 23 OECD countries)
in 1950

To Number 9 in the early 70s and
16 by late 80s
5
Australia’s relative
productivity performance
Average annual labour productivity growth
GDP per hour
4.0
Australia
OECD
3.0
2.0
1.0
0.0
1950-1973
1973-1990
1990-2005
6
Why was this so?

High cost manufacturing sector

Low levels of innovation and skill
development

Outmoded technologies

Inflexible work practices

High cost government provided
infrastructure services
7
Reform strategies that
worked for Australia

Opening the borders

Unilateral liberalisation

Gradual change

Reform on a broad front

Specific adjustment measures
8
Fall and rise of Australia’s
economic ranking
Rank based on GDP per capita, in 2005 EKS$, 23 OECD countries
1
3
Australia ranked 4th in 1950
5
Australia back to 6th in mid 2000s
7
9
11
13
15
17
Australia ranked 16th in late 1980s
19
21
23
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
9
2. Share institutional
solutions to:
– Obstacles to structural reform; and
– Promoting and sustaining reform
10
Obstacles to structural reform





Costs are concentrated. Benefits are
diffuse
Potential winners poorly informed
Bureaucratic structures aligned with
sectional interests
Costs of reform front-loaded, benefits
long term
Multiple jurisdictions
11
Promoting and sustaining
reform

Neutralising vested interests

Building community-wide
support
12
Productivity Commission Model
Well informed policy decision-making and
public understanding on matters relating to
productivity and living standards, based on
independent and transparent analysis from
a community-wide perspective.
Supporting
Government
Regulation
Research
Commissioned
Review
Competitive
projects
Performance
Neutrality
Reporting
Complaints Office
13
What is it about the Productivity
Commission model that makes it work
(in Australia)?






Independent, transparent and economy-wide
analysis
Well researched advice that is impartial
Extensive public input
Draft and final reports
Opportunity for governments to respond to
Commission reports
Wider awareness of the costs of existing
policies and the benefits from reform
14
3. Share priorities for
reform Agenda
15
The future agenda








Strengthening the national electricity market
Enforcing ‘water allocation and trading
regimes
Delivering a more efficient freight transport
system
Addressing costly regulation
Addressing greenhouse gas abatement
Improving consumer protection policies
Reviewing the entire health system
Examining vocational education and training
16
4. Focus on particular
priorities

What might be a good example?
– regulation
17
Growth in Australian
Government regulation
Estimated growth in pages of Australian Government primary legislation
60 000
Total Pages Passed
50 000
40 000
30 000
20 000
10 000
0
1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s
18
The paper burden (a small
business perspective)
19
Rethinking Regulation
20
Common regulatory problems

Unclear or questionable objectives

Failure to target the regulation at the
‘problem’

Undue prescription and complexity

Overlap, duplication and inconsistency

Excessive reporting and paper work

Unwarranted differentiation from
international standards
21
Recent decisions:
New regulatory framework

Australian Government
responded to the Report of
Regulation Task Force and
announced the 'New Regulatory
Framework’ on 15 August 2006
22
What might be the product
of regional focus?





Principles of good regulatory
process?
Better understanding of good
regulatory analysis
Compliance Cost checklist
Competition assessment checklist
Sharing of national approaches to
regulatory assessment
23
24
Institutional Foundations of
Economic Reform and Integration
Bernard Wonder
Head of Office
Productivity Commission
Tokyo
26 February 2007
25