The result of all that consulting has just been summarised in a thirteen-page report that shows respondents want governments to do much more than just “manage” homelessness. They want them to prevent and eliminate it by making sure “all Australians have access to safe and adequate housing.”

The summary identifies twelve principles to guide the plan towards this worthy outcome. The principles are sound, and include recognising housing as a basic human right, ensuring housing is accessible and sustainable, and engaging people who have experienced homelessness in designing programs and services. They also propose a “housing first” approach to homelessness that gives people a home before helping them to deal with challenges like mental illness, addiction and unemployment.

The report lists a few practical suggestions too, including stronger tenants’ rights and inclusionary zoning rules to guarantee new residential developments incorporate social and affordable housing.

Many of its key proposals, though, come down to money: building more social housing where it is most needed, for example, and providing sufficient homelessness services to meet demand.

Such aims can’t be achieved without a much higher level of dedicated, consistent government funding. Indeed, the report includes “secure funding and support” as one of its twelve guiding principles. Yet it offers no guidance as to how the necessary revenue might be raised. This is not because people engaged in the consultations failed to put forward ideas; rather, it’s because the most obvious way to secure funding for housing initiatives is to change the way housing is taxed and that’s something the government doesn’t want to talk about. Right from the start the consultation was framed to bracket out any such discussion.

Two new pieces of research reinforce just how glaring and regrettable this exclusion is.

The Centre for Equitable Housing has drawn together current and historical budget data from across different government portfolios to provide a comprehensive picture of federal housing expenditure over time. It found that tax concessions like negative gearing and the capital gains tax discount are eclipsing expenditure on other housing programs. The combined annual value of these tax breaks is more than ten times the sum Canberra disburses each year to the states and territories to build social housing and tackle homelessness. As a result, 43 per cent of federal government housing support is flowing to the top fifth of income earners, while just 23 per cent goes to the bottom fifth.

The report also found that the numerous but disparate housing-related measures in the federal budget lack clearly articulated objectives. In their absence, negative gearing and the capital gains tax discount operate as “a shadow housing policy” driving up prices by encouraging speculative investment in existing housing stock rather than new construction.

The Everybody’s Home campaign, meanwhile, has calculated that the revenue lost to investor tax breaks over the coming decade could fund 550,000 new homes for low-income households. That would be more than enough to eliminate social housing waiting lists around the country.

The single mention of tax in DSS’s summary of its consultations comes in this sentence: “Private investors and landlords need incentives like tax breaks and subsidies to provide more social and affordable housing.” It’s as if negative gearing and the capital gains tax discount are invisible, or don’t exist, and we’re being asked to invent a set of new industry supports to build affordable homes without any reference to the multibillion-dollar concessions already in place.

Again, this isn’t because participants in DSS’s consultations forgot to mention negative gearing and the capital gains discount. Both were raised at the “community conversation forum” I attended in Geelong (and not just by me). While DSS has yet to upload all 517 submissions to its Engage platform, many of those that are available raise tax reform as an essential consideration in the development of the national housing plan. These include submissions by local governments such as the City of Melbourne and Brimbank City Council, by housing providers and support services such as Mission Australia and the Western Homelessness Network, and by expert organisations such as RMIT’s Centre for Urban Research and SGS Economics and Planning.

In a joint submission, the peak industry bodies National Shelter and the Community Housing Industry Association state the problem clearly:

Currently the ability for housing markets to supply enough homes to meet the population’s needs is distorted by settings for capital gains tax and negative gearing that prioritise speculative housing acquisition for capital return over strategies that aim to ensure every household is able to meet their need for affordable housing. A key goal for the Plan should be to explore opportunities to apply taxation settings that support achievement of long-term housing outcomes over speculative investment returns.

True, statements like this go beyond the narrow focus areas offered up for discussion in the original DSS issues paper, and every page of the summary report includes a disclaimer that it “may not include all views presented by stakeholders.” Yet the same disclaimer says that the document doesn’t represent the views of the Australian government. So even though Labor finds it politically inconvenient to talk about negative gearing and capital gains tax, that’s no reason for the report to shy away from such topics.

To invite community members, housing practitioners and experts to engage in a national dialogue and then to ignore what they have to say makes a mockery of the process of consultation. The Albanese government said it wanted to hear ideas on how to tackle one of the most pressing social and economic issues confronting the nation. Many of us took that invitation at face value and went to considerable lengths to contribute. We can only feel let down. •

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During those two weeks the Financial Review began a series on “the new middle class.” It opened with a long article analysing survey results that revealed how households on $140,000 a year — a lot of money in those days — didn’t consider themselves particularly well-off. Great, I thought — this’ll make for a solid ten or fifteen minutes. I hurried over to the presenter of the program and showed him the article. “Good God,” he exclaimed after reading the opening paragraphs. “How do people manage on that kind of money?”

Sociologists Marcos González Hernando and Gerry Mitchell open their new book, Uncomfortably Off, with an incident that makes a similar point in a slightly different way. In an episode of the BBC’s Question Time during the 2019 British election campaign, IT consultant Rob Barber accused a Labour MP of lying when he said the party’s plan to lift taxes on high earners would only affect people on the highest incomes. Labour wouldn’t be lifting taxes for the remaining 95 per cent, the MP promised.

“But you are!” Barber replied angrily. “Because I’ve read your policy!” The tax would apply to incomes above £80,000, and that meant he’d be among those who’d pay it. “I’m nowhere near the top 5 per cent, let me tell you. I’m not even in the top 50 per cent.”

Barber was wrong: a salary of £80,000-plus put him comfortably in the top 5 per cent of earners. (At around the same time, an Australian earning $180,000 would have snuck into the same bracket here.) His likely mistake, according to Hernando and Mitchell, was to habitually compare himself with people who earn as much as he does or, more importantly, those who earn much more.

As its title suggests, Uncomfortably Off attempts to explain why people on relatively high incomes don’t feel particularly affluent. (Hernando and Mitchell’s interviewees, all British, were drawn from the top 10 per cent of earners, though not the top 1 per cent.) Partly it’s because, like Barber, they compare themselves with people who earn more than they do. Partly it’s because their spending has increased as their incomes have risen and they have to find the money to cover increases in school fees, rising private healthcare costs and mounting lifestyle expectations.

These pressures contribute to what the authors call a fear of falling — the fear that they or their children will end up further down the income ladder. And those pressures have only worsened in recent years. The Conservative government’s austerity program of 2010–19 encouraged wealthier households to abandon overstretched public schools, healthcare and other publicly provided services, adding to the pressure on household finances, and the growing crisis in British schools, hospitals and community care has only added to the incentive to bail out.

But why would well-heeled earners look up rather than down when they’re assessing their own position? Increasingly segregated schooling and housing, more marriage within rather than between income groups, much less shared experience of healthcare and other social services, a greater focus on paid work and its monetary rewards — these are a large part of the explanation, say Hernando and Mitchell.

“All these tendencies,” they write, “mean that it’s increasingly rare for high earners to get to know people outside their usual interaction with friends, family, work and education, especially when other networks (such as those based on religion or hobbies) either dwindle or move online.” Asked to place themselves in the income hierarchy and feeling under pressure, they compare themselves with the relatively small segment of the population that seems typical to them.

This wouldn’t be quite such a problem if it weren’t for the fact that wealthy people have disproportionate political power. Once they withdraw from the spheres that most people inhabit — government-provided schools, healthcare or childcare, for instance — it’s no longer in their interest for those services to be adequately funded. This sets up a malign cycle: underfunded public services push people who can afford it into the hands of private providers. Their services cost more — often much more — and that puts pressure on their own finances, increasing their resistance to taxes and making them more likely to support government cutbacks.

Some of these trends are hard to reverse. We can’t do much about people marrying within their own milieu, for example. But we can begin the slow process of changing that milieu. The obvious place to start is in the school system, where private schools (generally the preserve of the wealthiest families) are reinforcing social segregation to an alarming degree.

Hernando and Mitchell conclude that cracks are opening up in the fearful barriers wealthy Britons have erected against an increasingly underresourced public sphere. “This book’s aim is to invite the top 10 per cent to consider a future in which, for the price of giving up the barriers through which they seek to distinguish themselves from the rest” — a price that would include higher taxes — “they could become less anxious, more secure and less isolated.”

Can Australia learn from Britain’s uncomfortable wealthy? While 7 per cent of British children are educated in private schools, the Australian figure is 35 per cent. Add in selective government schools, particularly in New South Wales, and our school system rates among the most segregated in the Western world. But the groundswell of support for the Gonski report (before it was fatally compromised by federal and state governments of both varieties) shows the soil is fertile. •

Uncomfortably Off: Why the Top 10% of Earners Should Care about Inequality
By Marcos González Hernando and Gerry Mitchell | Policy Press | £19.99 | 256 pages

The post Fear of falling appeared first on Inside Story.

Yet, having spent six months studying one of the nation’s most pressing issues, the committee failed to transcend the predictable ruts of partisan politics and reach shared conclusions.

At their best, parliamentary inquiries are powerful democratic instruments and an aid to good government. Inquiring minds delve into complex issues, build up an evidence base, interrogate expert witnesses and listen to the stories of those directly affected by the matter at hand. Rival parliamentarians with diverse convictions work collegially to piece together a coherent picture of a messy problem and then offer joint suggestions as to how it might be tackled. In the past, this has been particularly true of Senate committees, which are more likely to involve influential crossbenchers, and where major-party senators felt less constrained by party discipline than their colleagues in the lower chamber.

My first appearance before a Senate committee in 2006 strengthened my confidence in Australia’s democratic institutions and processes. The questioning was acute, engaged and nonpartisan. Committee members were well briefed and had read our submission carefully. Most impressively, the senators were genuinely interested in discussing novel approaches to a difficult policy area — in this case the future of the horticultural labour force — including proposals that sat in tension with their party platforms.

But my appearances before a few other committees since then have failed to match that experience. Most committee members appeared to listen attentively and grapple with issues in good faith, yet over the years I sensed a growing tendency for parliamentary inquiries to become venues for political theatre. Genuine engagement and collaboration are giving way to point scoring as committee members select evidence to confirm their established positions.

I can’t comment on the day-to-day conduct of the 2023 rental inquiry. I made a submission but wasn’t invited to appear, and I haven’t studied the transcripts of public hearings. But the final report is a missed opportunity that reaches no substantial conclusions.

The committee affirmed that “a dwelling of good standard and equipment is not only the need but the right of every citizen” — a view first articulated in 1944 by the Commonwealth Housing Commission and often honoured in the breach. The report, released on the last day of parliament for 2023, proposes no new measures to realise that failed wartime ambition, simply saying that “while the problems are significant and self-evident, the solutions are less clear.”

The report’s concluding comments include two recommendations carried over from September’s interim report and outline some other points of agreement that are too general to have policy impact. These are followed by three separate sets of recommendations — one from government senators, one from Coalition senators and one from committee chair, retiring Victorian Greens senator Janet Rice.

No one expected members of rival parties to find common ground on questions where battlelines are entrenched and heavily fortified. Labor and the Coalition were never going to back the Greens’ call for a two-year rent freeze or agree to reform negative gearing and other tax concessions and invest the extra revenue in social housing. But given the stakes, senators from all parties should have joined forces to make at least some constructive suggestions.

They had plenty of material to work with in the report itself, which is a concise and easy-to-read digest of some key drivers of our rental crisis that fairly canvasses competing views.

The report’s main sections focus on boosting the stock of social and affordable rental housing, immediate financial relief for renters, improving rental conditions and strengthening tenants’ rights. Along the way, it looks at the impact of short-stay accommodation like Airbnb (and options for its regulation), considers the potential of the build-to-rent sector, and examines arguments for planning reform and rent regulation.

But senators failed to make common cause on topics where evidence is overwhelming and uncontested. Take the lack of affordable homes for renters on very low incomes. Across the political spectrum, it’s generally agreed that providing homes for this group is the responsibility of governments, not private investors. A “conservative” official estimate is that 377,000 households need social and affordable housing today, and a statutory review of the National Housing Finance and Investment Corporation Act found that an extra 614,000 social housing dwellings are required by 2036.

Given such daunting numbers, the interim report’s joint recommendation that the Australian government “continue investment in public, social, community and genuinely affordable housing” is so vague as to be risible. There is no shared view on how much should be built or what proportion of Australia’s rental stock should be subsidised.

Committee chair Janet Rice called on the government to quantify the annual investment needed to meet the shortfall in public and community housing. But this was a step too far for Labor senators, whose additional comments at the conclusion of the report essentially rehash current policies, including the Housing Australia Future Fund, the $2 billion social housing accelerator, the $3 billion in incentives to build 1.2 million homes in five years and the 15 per cent increase in Commonwealth Rent Assistance.

Labor senators claim these measures constitute “the most significant investment in social and affordable housing in more than a decade.” True, but that’s not much of a claim since the Coalition abandoned the housing field almost entirely from 2013 to 2022. The Albanese government’s initiatives to date are welcome but fall far short of what is needed.

The second recommendation carried over from the interim report is for the federal government to take “a coordinating role to implement stronger rental rights.” Labor’s senators seem to feel this has already been achieved thanks to the “better deal for renters” struck at national cabinet in August. Their additional comments essentially reiterate what was agreed there, including better protecting tenants’ personal data, “phasing in” minimum standards for rental properties, establishing a nationally consistent policy on reasonable grounds for ending a lease, and making it illegal to solicit rent bids — that is, stopping agents from asking prospective tenants to pay more than the advertised rate. Such measures will improve the situation of tenants but are weak and short on detail.

The report warns, for example, that bans on “soliciting” rent bids fail because desperate prospective tenants will voluntarily offer higher amounts anyway. Widely used rental technology platforms also ask tenants to specify the amount of rent they are willing to pay, which essentially amounts to a blind auction.

In response to this evidence, the best the senators could agree on was that “further consideration of state tenancy regulation may be required to close this potential loophole.” To call this response wishy-washy would be too kind.

Is Labor so determined to distinguish itself from the Greens that it couldn’t sign on to Rice’s unremarkable proposal to ban unsolicited rent bidding, ensuring that the advertised rent matches the actual rent agreed in the lease?

Similarly, Labor could have found common cause with the Greens’ call for more specific minimum quality standards for rental properties, such as basic levels of energy efficiency and thermal comfort. The committee was told that Australia could borrow from New Zealand’s Healthy Homes standards for heating, insulation, ventilation, moisture, drainage and draught stopping.

Yet all Labor senators could come up with to improve renters’ welfare was a suggestion that “the contents of the committee report may be useful guidance” for the states and territories as they update tenancy regulations. Coalition senators, meanwhile, seem less concerned with helping tenants than with protecting the existing rights of property investors — those “overwhelmingly quiet, aspirational Australians looking to safeguard their retirement.”

Coalition senators see the best response to Australia’s rental crisis as an individual one — pay your own mortgage instead of someone else’s and avoid getting “stuck in a rent trap.” This rubs salt in the wounds of generations of Australians who’ve watched rising real estate values rapidly outstrip wages, mostly on the Coalition’s watch. For decades, the dogged support for first homebuyers offered by both major parties has coincided with falling rates of home ownership, the misguided subsidies simply making the problem worse by pushing up property prices. Yet the Coalition senators’ main recommendation is to “to revitalise the culture of home ownership” by letting first homebuyers access their super.

Senators could have made a united call for a review of Commonwealth Rent Assistance. The committee heard the scheme is ripe for reform because funds are flowing to some households that are relatively well off while others in dire need miss out. Research shows that reallocating rent assistance to better reflect housing need could have saved $1.2 billion in 2022 — or about a quarter of the annual cost to taxpayers in that budget cycle. Given that spending on rent assistance will rise to $5.5 billion this financial year, there is a compelling case to evaluate the program to see if money might be better targeted. Political rivalry seems to have overwhelmed any inclination to pursue such evidence-based initiatives.

The views of renters themselves might not have influenced the recommendations but they did make it into the interim report. With the first of its terms of reference referring to “the experience of renters and people seeking rental housing” the inquiry made a significant effort to hear directly from Australians struggling to keep or find a home.

Ada, a public servant in Canberra, described how, heavily pregnant, she holed up in the smallest room in her house in a desperate bid to keep warm. She blocked the vents, covered the windows in bubble wrap and only splashed out on heating her whole home after going into labour.

Amity in Sydney told the committee that her 11-year-old son had already moved house five times.

The last few years people have been asking me, “Which high school will he go to?” “I don’t know,” has been my reply because on a periodic lease I know that I can be evicted an any time for no reason with only ninety days’ notice.

Mark, a father in Brisbane, told the inquiry that rental stress prevents him and his partner from being their best selves:

The burden absorbs so much of our headspace. We have not been able to do our best as a spouse, a parent a friend or an employee… We have been left constantly worrying about where we are to live and how we are to pay our next bills. This is not healthy for us or our family or our child.

In their separate concluding comments and recommendations, Greens, Labor and Coalition senators thanked those who gave evidence to the committee. But if I were Ada, Amity or Mark I would feel let down by their failure to transcend party politics and agree on ways to jointly advance tenants’ cause.

The committee says it “heard a diversity of views on possible strategies and measures to address the crisis.” But their job was to do more than admire the problem; they needed to reach shared conclusions about how to fix it. •

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Many politicians and public servants have described to me his rare magic in combining academic rigour with clear communication and a talent for finding a cut‑through line. His retirement this year is a good excuse, if one were needed, to talk about tax reform, the subject of his major academic and policy contributions. Indeed, his research and writing read like a tax reform to‑do list.

Pick up the Financial Review on any given day and you’ll find opinion pieces grounded in John’s decades-long efforts to unpick the efficiency and equity impacts of different tax reform options. He has also made the case for these reforms directly to government as a consultant to the Henry tax review, on the review panel of the NSW Federal Financial Relations Review and in other forums.

And while he has done the hard work of tilling the ground, and has no doubt been pleased with some of the progress made on tax reform, much of the broad agenda he has articulated remains on the shelf.

The question is: why? Why, after so many decades of discussion and so many points of broad economic consensus, does tax reform remain so challenging? Is progress possible or is tax reform simply an impossible dream?

To answer this question, we need to first understand why someone with John’s rare talents decided to use them to make the case for tax reform. The bottom line is that tax matters. It matters to all of us: how much we collect and how it’s collected have implications for economic activity, governments’ capacity to deliver services, and levels of inequality.

One challenge we face when we talk about tax reform is that different people start with very different objectives. So let’s unpack some of those.

The first is economic efficiency. Economists rightly focus on the fact that how we collect tax — that is, what we tax and how much — affects the “economic drag” created by the tax system. Almost all taxes come with some loss of welfare, but some drag on growth more than others.

In a static sense, this can be measured by the “marginal excess burden” — how much economic activity is lost for every dollar collected. As Treasury and others have reminded us, this varies significantly between taxes.

But while there can be big differences in the estimates different modellers come up with, they broadly agree that a tax-mix switch from higher-burden to lower-burden taxes would deliver an economic dividend.

The most clear-cut example is a move from stamp duties to taxes on land. Stamp duties are among the most inefficient of taxes. Treasury estimates suggest that every dollar collected can reduce economic activity by up to 72 cents. Stamp duties discourage people from moving to housing that better suits their needs, and sometimes discourage people from moving to better jobs. Overall, they distort choices and gum up the economy.

Another reason we might advocate for tax reform is to make government budgets sustainable and future‑proof our tax system. At a time when the treasurer has just delivered the first budget surplus in fifteen years and we are seeing apparently endless revenue “upgrades,” it may seem strange to be having this conversation right now.

But government spending overall is projected to average 26.4 per cent of GDP over this period — compared with less than 25 per cent over the three decades before Covid — and revenues have not kept up. The federal government’s latest Intergenerational Report reminds us that the ageing population and the fallout from climate change will only see this fiscal challenge grow over the next forty years. The same is true of state budgets.

The implications of not taking policy action are clear: we are asking future generations to bear the costs of today’s inaction.

Governments have three levers they can pull to tackle long-term budget challenges: they can make economic reforms to “grow the pie,” they can increase taxes and they can reduce spending.

Pursuing policies to boost growth is critical. Much of Grattan Institute’s work has focused on this first lever. And I look forward to pursuing this in a big way when I join the Productivity Commission in a couple of weeks’ time. But, as Grattan highlighted in our Back in Black? report earlier this year, we can’t rely on higher growth alone to close the budget gap.

Given the scale of the challenge, governments will also need to find ways to reduce spending and/or boost revenue. After a decade of looking at this challenge I have come to the view that we will need to do both. The scale of the challenge, and the greater buy‑in that can come when the costs are spread across the population are arguments for looking to both sides of the budget for answers.

If we do accept that some additional revenue is needed to respond to the structural challenge outlined, then we want to make sure that additional revenues are collected with the lowest possible economic costs. In fact, this can also help us grow the pie: more efficient, less distorting taxes are one of the Productivity Commission’s “enduring policy priorit[ies]” for productivity growth.

On the other hand, if we do nothing, we may end up on the path of least resistance: collecting ever-more revenue through ever‑creeping taxes on wage and salary earners. Bracket creep may be the most politically painless way to raise revenues, but it is far from the best.

Tax reform for budget sustainability should aim to broaden the base of income taxes — looking at loopholes and overly generous concessions as well as orientating our collections towards more efficient bases such as consumption, wealth, externalities or resource rents. In other words, we need to revisit the John Freebairn back catalogue.

The atrophying of tax reform in recent decades might make us pine for a golden era. In truth, though, tax reform has never been easy. So let’s take a short history lesson — five decades of tax reform in five minutes — and see what we can learn.

Let’s start in 1975. Many elements of our tax system today can be traced back to the 1975 Asprey tax review. This comprehensive, independent review was commissioned by the McMahon government in response to concerns about bracket creep and tax evasion. (Sound familiar?)

The review outlined the basic principles of efficiency, fairness and simplicity that remain our lodestars and made the case for many aspects of the system we have today, including fringe benefits tax, capital gains tax and a broad-based consumption tax.

But the report initially had little impact. Landing in the final, tumultuous year of the Whitlam government, it was written off in the media as a “tax flop,” and its main recommendations not adopted.

It took another decade for momentum to build. In 1985, fresh off the Prices and Incomes Accord and the floating of the dollar, prime minister Bob Hawke and treasurer Paul Keating turned their attention to tax reform. They released a draft white paper on reform options and hosted a tax summit with unions, business and community groups.

These processes resulted in the adoption of some of Asprey’s recommendations, including a capital gains tax, negative gearing reform, fringe benefits tax, dividend imputation and taxation of foreign source income.

But it was a case of “two steps forward, one step back.” A broad-based consumption tax was central to Keating’s original vision but failed to win support and was dropped. And the pioneering negative gearing reforms were repealed two years later.

So the Asprey blueprint was partly implemented. Another long reform slumber followed. The next big push was John Hewson’s Fightback! platform for the 1993 election, which proposed, among other things, a broad-based consumption tax. Fightback! proved to be a false start — Hewson lost the “unlosable” election — but consumption taxes were back on the agenda.

Another six years had to pass for the reform dream to become reality. Prime minister John Howard took a proposal called A New Tax System, which included the GST, income tax cuts and the abolition of a host of inefficient state taxes, to the 1998 election. He narrowly won and the legislation ultimately passed in 1999, twenty-four years after the release of the Asprey report.

We’ve seen precious little in the way of significant, lasting tax reform since then. The landmark Henry review is close to celebrating its fourteenth birthday with most of its meaty recommendations untouched. State and territory tax reform has also, mostly, been a non-starter, despite a succession of reviews converging on similar recommendations.

So what should we take from this history? What can we learn from those rare moments when we managed to overcome the many barriers I outlined before? I see four key steps for would-be reformers.

Step 1: Put reform on the agenda

History shows that an external push is often needed to put tax reform on the agenda. In 1985, fears about Australia’s economic decline and resentment about tax avoidance pushed the discussion forward. In 1997, the High Court’s decision to strike down a key state tax left a significant hole in the states’ budgets and opened the reform window for the GST.

The optimist in me can’t help but draw parallels with last month’s High Court decision to strike down Victoria’s electric vehicle levy. Perhaps we might have another golden opportunity for a grand intergovernmental tax reform bargain on our hands?

Tax reform was hardly on the radar for the Howard government until civil society groups — representing both social services and business — started championing the cause. The Australian Council of Social Service and the Australian Chamber of Commerce and Industry, in particular, pushed in a coordinated way, culminating in the National Tax Reform Summit in 1996. The strong and united messaging put the GST and tax reform firmly back on the political agenda.

Today many groups feel similarly. Federal independent MP Allegra Spender has been spearheading a push to unite academic, business and civil society leaders to build some consensus on the need for tax reform and the way forward.

Step 2: Build a coherent package

While rewriting thousands of pages of the tax code at once would be a recipe for chaos, relying on incremental changes is probably not going to get the job done either.

History shows that reform packages can work well. In 1985, reforms that broadened the income tax base were bundled with income tax rate cuts and tax avoidance measures — a coherent story to sell to the public. In 1999, removing narrow and inefficient, but lucrative, state taxes and widely variable wholesale sales taxes made sense in the context of the broader GST deal shoring up state budgets.

Packages provide the opportunity to dull the sting of reform by sharing the costs more broadly and perhaps offering some compensation to the losers.

The major tax reforms of the past two decades have come at an upfront cost. The GST package overcompensated households by about $12 billion a year, through personal income tax changes and increases to pensions and family payments. This was a key part of its sales pitch. Former Treasury secretary Ken Henry recalled that:

the distributional tables outlining the impact of the GST were the most “thumbed” part of the documentation, certainly by those Treasury officers answering phone queries. Of course, it helped that every individual and family represented across all income levels appeared better off.

Compensation packages are particularly important where there are equity implications for lower-income households. Australians tend to reject reforms that seem unfair. But, crucially, potentially regressive reforms, such as broadening the base of the GST, can form part of larger, fairer reform packages. For example, the carbon tax package involved substantial assistance for households, particularly lower-income households, to address concerns that poorer households would be particularly affected by higher energy and food prices.

Given the long‑term budget challenges, high‑cost packages of the type needed to ensure there are “no losers” from tax changes are difficult to justify. But it is certainly possible to design packages with much lower upfront costs that still compensate vulnerable households. For example, Grattan’s previous work on the GST proposed a revenue-positive package, with a 15 per cent GST, cuts to income taxes, and an increase in welfare payments, that would leave the lowest 40 per cent of income earners better off on average.

Packages might also help address some of the other political economy challenges of reform. Ironically, opening up more fronts in the tax debate may quiet some of the more over-the-top reactions. As Ken Henry has argued, “if you give a lot of well-armed people only one target to shoot, it will take a pounding. Incrementalism sets up a single target on a battlefield occupied by well-resourced attack forces.”

And while my goal here is not to opine on the “what” of tax reform, let me give a sense of some of the types of packages that a government could put forward.

• On income tax reform, we could return to the logic of 1985: broadening the income tax base by winding back loopholes and overly generous concessions, to support a cut in rates. This could include targeting discretionary trusts and super tax concessions, or reforming capital gains tax — either by reducing the capital gains tax discount or returning to the indexation of gains.

• Another package could tackle the inconsistent tax treatment of different savings options, to reduce the distortion in savers’ choices and simplify the system. This would mean lower taxes on interest from bank accounts and bonds, and somewhat higher taxes on other savings vehicles such as superannuation (which is very lightly taxed even after accounting for the long holding periods). An even “bigger bang ” version would be a dual income tax where income from savings is taxed at a consistent low rate, regardless of source.

• On the corporate tax front, we could better tax resource rents to fund a company tax cut. We could also consider more wholesale reforms such as an allowance for corporate equity or a cash flow tax.

• For states, inefficient stamp duties could be swapped for land taxes over time, along the lines of the ACT government’s gradual phase-in or Victoria’s switch for commercial and industrial property.

• In transport, distance-based congestion charges that vary by location and time of day would be a more efficient replacement for the declining fuel tax base.

• Finally, to aid the climate transition, the government could substantially expand and strengthen the safeguard mechanism, while eliminating many higher-cost interventions to reduce emissions, such as the fringe benefits tax exemption for electric vehicles. The package would deliver both faster and lower-cost emissions reduction.

But while packages make a lot of sense, would‑be tax reformers can’t be too purist. Incremental changes in the right direction are still an improvement on the status quo, and in some cases these more incremental steps can ultimately take us towards more comprehensive packages.

Step 3: Embrace the “vomit principle”

The next step is making a compelling case for change. Complicated reforms that can’t be explained are unlikely to win support, and are more vulnerable to scare campaigns. We saw this in 2019 with the confusion about franking credits — irredeemably branded a “retirement tax” — and in 1993, when John Hewson’s tortured explanation of the effect of a GST on the price of a birthday cake helped turn the tide of popular opinion against the new tax.

Convincing the public of both the necessity of change and the proposed solution takes time and political capital. Howard and Costello spent two years and a lot of political energy highlighting the structural problems with Australia’s tax base prior to releasing their reform package in 1998.

While no one likes to pay extra tax for the fun of it, many are more inclined to agree when higher taxes are linked to better services. The proportion of Australians favouring “less tax ” has declined since the late 1980s, according to the Australian Election Study, and the proportion preferring “more spending on social services” has risen. At the time of the 2022 election, 39 per cent indicated they would prefer less tax, 31 per cent more social spending and the remainder said “it depends” — presumably on the nature of both the tax and the spending increases.

My reading is that when our political leaders do the work of tilling the ground and explaining changes and why they are needed, then hearts and minds can shift.

A more recent example, albeit one contrary to received wisdom, was the then‑Labor opposition’s 2016 policy to wind back negative gearing and reduce the capital gains tax discount. We have already discussed some of the public challenges that reform faced, but it is also worth remembering that negative gearing had formerly been viewed as a “political untouchable.”

Indeed, since the Hawke government lost its nerve and reversed its decision to wind back negative gearing in 1987, it has been considered the “sacred cow” of Australian politics. When Labor announced it would introduce these changes to improve housing affordability and contribute to the budget bottom line in 2016, just over a third of Australians supported removing or limiting negative gearing.

But, over time, as shadow treasurer Chris Bowen and others made the case, support gradually increased. Support for limits on negative gearing climbed almost 10 percentage points, from 34 per cent in March 2016 to 43 per cent in December 2018. By the time of the 2019 election, the Australian Election Study estimated that 57 per cent of Australians supported limiting negative gearing.

To me this is a textbook example of what some political strategists call the “vomit principle ” — repeat something until you feel like you are going to vomit. Only then are you cutting through.

Labor has since dropped the policy, of course, and many reading the media commentary would have gained the impression that the tax reform agenda was deeply unpopular and “to blame” for Labor’s surprise election loss in 2019. The reality was far more complex.

In any case, it’s not just down to politicians to argue for reform. Successful tax reforms need a diverse cheer squad. Historically, academics, premiers, public policy institutions, and community groups have all been important advocates for tax reform. Providing incentives for academics and non-profit organisations to participate in public debate would be a useful step to building these coalitions today.

Step 4: Make it stick

Somewhat dispiritingly, even after these hurdles have been overcome and tax reform has been passed, the job isn’t done. Tax issues tend to linger on the agenda, often for entire parliamentary terms, and reforms sometimes don’t stick. As we’ve just seen, negative gearing reforms were undone after just two years in 1987. The carbon tax and mining tax were repealed. The Perrottet government’s hesitant steps towards stamp duty reform were wound back by the new NSW Labor government.

But in other cases the controversy does die down after reform is enacted. Sometimes social norms change quickly — for example, in Stockholm, congestion charging was much more popular after it had been implemented than before, and many people did not even remember that they once opposed the idea.

In Australia, plenty of tax changes that were controversial at the time — the GST, fringe benefits tax, capital gains tax — are now so entrenched that there is no constituency or any visible public appetite for their removal.

Reforms are more likely to stick if they create positive feedback loops — for example, if they result in institutional shifts, if reform winners can be used as advocates, or if businesses make big investments under the new regime. Taking the GST as an example, the Australian Taxation Office and businesses made significant investments in the infrastructure for administering the new scheme; and the changes to federal financial relations created a key constituency — state governments — who had a strong interest in its continuation.

What are the prospects for tax reform? I, for one, remain optimistic.

First and foremost, I don’t think we have much choice. The slow‑burning platform is still on fire, and over the coming decade the gap between our spending needs and our tax system’s capacity to meet them without ever higher taxes on employment income will be stretched to breaking point.

More and more questions are being raised about the sustainability and intergenerational fairness of our current tax mix. Without action, expect them to get louder and louder over the coming decade. Tax must also come into the conversation if we are going to deliver our policy objectives in other areas, including the green transition.

Second, I am confident that our leaders can make a positive case. While I have focused on the challenges, I am also heartened by the leadership we are seeing on difficult reforms in other areas.

Over the past three months the Commonwealth and state governments have made strong commitments to boost the supply of housing through politically challenging reforms to planning laws. If they can pull it off, this would be a huge economic and social reform, and one that has been in the too-hard basket for many decades.

As a reform proposition, making the case for greater housing density is probably of the same order of difficulty as making the case for major tax changes, and yet we are seeing both levels of government go after it in a big way.

Third, I think there is appetite across a broad swathe of interested parties to shift the dial. Allegra Spender’s tax reform round tables suggest at least a consensus among business, academia and civil society that something needs to change, even if there is not yet broad agreement on the reform priorities. A process to harness this agreement, ideally led and shaped by government, could help move the conversation forward.

Finally, I have confidence in the Australian people to see through the noise. Scare campaigns and a shouty media are one thing, but if state and federal governments can hold their nerve in the rule in/rule out game long enough to make a positive case for change, and keep making it, history shows that people can be brought along.

Tax reform is hard, but it’s not impossible. It’s time we woke up from our slumber and became a little less afraid and a little more Freebairn. •

This is an edited version of this year’s Freebairn Lecture, delivered at the University of Melbourne last week. The full lecture, with charts and footnotes, is here.

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What probably doesn’t come to mind is Cyprus’s leading role in selling passports to members of the global elite. Since the 2008 global financial crisis the island has joined the growing number of small countries that peddle their passports in the growing citizenship-by-investment market.

These countries — often island microstates with British colonial histories — offer citizenship to anyone who can afford prices ranging from around A$200,000 to A$1 million. You don’t necessarily need to visit the country whose citizenship you buy, let alone live there, but you’ll gain much easier access to the countries your new passport opens up for you. A passport for tiny Saint Kitts and Nevis, for example, entitles its holder to ninety-day visa-free access to Britain and the countries of the European Union — not a privilege available to many citizens outside the West.

As sociologist Kristin Surak observes in her new book, The Golden Passport: Global Mobility for Millionaires, citizenship was once an equaliser, neutralising some aspects of class inequality. Now that it’s for sale, it has become another fading feature of the twentieth-century nation-state and its mildly redistributive policies. Hypermobility and growing inequality have created a business that, while still very small, threatens to replace our current sense of citizenship and nationalism with a more elastic variety of belonging based on class.

Some of the island microstates that figure prominently in the citizenship-by-investment market have also used their sovereignty to attract offshore banking. But this is not what motivates people to buy a passport, says Surak: wealthy countries like Britain and Switzerland have more than enough tax loopholes to go around.

Rather, non-Western elites are driven by the disjuncture between their economic status and their national belonging. They are mostly the wealthy, but not uber-rich, of the Middle East, Central Asia, Russia and China. They have enough funds for a business class ticket but are hassled at passport control. They have places to go and people to see and are sick of waiting weeks for visas to the European Union, the United States or Australia.

Increasingly, these wealthy individuals buy citizenship in places like Saint Kitts, Antigua, Dominica and Saint Lucia in the Caribbean; Cyprus and Malta in Mediterranean Europe; Vanuatu in the Pacific; and, surprisingly, Turkey. Of course, they could invest for citizenship in the United States, Canada, Britain or Australia, but those countries’ programs cost US$1 million or more and require residency.

The citizenship-by-investment industry emerged in the Caribbean in the 1990s but was largely kept in check by American concerns about money laundering. It started to pick up steam with the return of Hong Kong to China in 1997, when a plethora of citizenship-by-investment stores with names like “Emergency Exit Company” sprang up in Kowloon. After the 2008 financial crisis, Spain and Portugal also launched popular residency-by-investment programs, which are more like regular immigration.

The Hong Kong example reveals another built-in attraction of these programs: many people want an extra passport as insurance. Hong Kong’s political future was uncertain in the 1990s, but it also had a roaring economy fuelled by mainland China’s free-market reforms; wealthy Hong Kongers, with their extra passport, could continue to make money while having a concrete exit plan.

The same goes for Russians, Kazakhs, Vietnamese and many other elites today. Doing business in a place without democratic institutions can be lucrative, but being able to leave — when there is a coup, mass imprisonment of those charged with corruption (sometimes by the very governments that cooperated with them), or a war — is prudent. That’s why Jho Low, a Malaysian business figure who stole US$4 billion from his government with the connivance of former prime minister Najib Razak, became a Cypriot in 2015. His new passport has allowed him to evade capture despite an Interpol warrant.

The programs that most interest Surak are those that involve a simple exchange of passports for cash. The European Union reluctantly allowed Cyprus and Malta to go ahead with their programs because migration is controlled by individual member countries despite local citizenship giving passport holders access to the Schengen zone. You can organise a flat in Malta (for the property rental requirement of its citizenship-by-investment program) but actually live in Paris. Similarly, investors in Caribbean countries might be taking a first step to using their new passports for investor-residence permits to the United States and Britain under their E-2 and Tier 1 visa programs respectively. Thus, citizenship in an island country is a backdoor to residency and investment in a global superpower.

As Surak shows, the leading citizenship-by-investment countries are accommodating elites despite growing anger among their own populations. In Malta the program was shut down after corruption allegations and the fatal car bombing of investigative journalist Daphne Caruana Galizia, who had reported on cash-for-passports. In Cyprus, a sting report by Al Jazeera showed someone posing as a Chinese citizen-investor being cleared by government officials after announcing he had a criminal conviction.

Cyprus and Malta responded to the economic challenges brought on by Europe’s 2009–10 sovereign debt crisis by setting up their lucrative schemes. In the Caribbean islands the schemes have been even more successful: they are the biggest export product in Saint Kitts, where citizenship-by-investment made up about 40 per cent of the economy before Covid-19 struck, and in Dominica.

Although lawyers, accountants and property developers get a good cut (the leading global citizenship-by-investment firm, Henley & Partners, makes €32,000, or about A$54,000, on each Malta deal), governments get the majority, and the evidence shows that the more formalised the scheme, the less likely the money goes into officials’ pockets.

It costs a family of four €975,000 for Maltese papers and the government gets €700,000 of that for social and infrastructure programs. In the five years of the ironically named “Identity Malta” program, the country made €1.4 billion, or 2.1 per cent of GDP. This is why resistance, although present, isn’t strong.

Many former colonies have complex attitudes towards immigration after having governments thrust upon them by foreign powers. Rather than opposing newcomers, locals often feel that if people want to stay — and some citizen-investors do stay — then they can pay. In Cyprus, even the communist AKEL party supports citizenship-by-investment. As Surak points out, “Microstates in particular are diaspora societies. Their small size means that, by nature, bigger and more diverse opportunities are available only abroad.” These schemes add income to economies driven by remittances and bring people to places that are ageing and depopulating.

Yet the practice of selling citizenship is taking on extra poignancy as conflicts spread across the world. The biggest new player is Turkey, which is growing so quickly it may forever alter the market, particularly because it is a major regional power with NATO membership and a huge military. While its passport sales are probably driven by the collapse of the Turkish lira, they appeal to wealthy displaced people (as do the citizenship-by-investment programs in Egypt and Jordan). Syrians, Palestinians, Lebanese, Iranians and many others may use this industry not as a backup plan but as an immediate means of escape. Some are also being encouraged to “buy in” to societies where they are already refugees.

The Golden Passport opens with an account of a citizenship-by-investment conference in Montenegro where Robert De Niro and Wyclef Jean were guests. Drawing on his own background in the Armenian diaspora, the founder of the Global Citizen Forum, investor Armand Arton, declares that “migration needs a new brand.”

Surak is adept at showing how the citizenship-by-investment sector often exploits the language of human rights and freedom of movement while commodifying citizenship and stripping it of its former values. She lays out the contours of this surprising industry very well, though I would have liked to hear more from the buyers themselves, whose voices only appear in one small chapter. What drives them to invest? How does it affect their feelings of nationalism? Do they think it is fair that they can buy their way into better mobility at the very moment of multiple migration crises?

There are wider questions too. Citizenship-by-investment only accounts for 50,000 naturalisations a year, but what if it were to grow? Other writers, most notably the journalist Atossa Araxia Abrahamian, have shown how Gulf states bought thousands of Comoros Island passports in order to give their Bidoon populations mobility while simultaneously depriving them of state benefits. Others have warned that these schemes could be adopted to forcibly remove citizenship from political dissenters or ethnic minorities.

Citizen-investors mostly want to get a new passport to move somewhere else. Yet, given that most of these places are islands highly susceptible to climate change, there is a grave irony in this flexible sense of citizenship. Funds from the programs have been used to build apartments and infrastructure, but often in places ill-suited to more people.

Dominica, for instance, constructed a world-class eco-resort with citizenship-by-investment money, only to see it levelled by a hurricane. Vanuatu hopes to build an entire new city with Chinese funds, some from citizenship-by-investment, but it is one of the countries most vulnerable to climate change (and some have even raised the possibility that the entire population may need to relocate to Australia during this century).

Looking at this phenomenon more critically, we can see programs run by small countries that have often been denied sovereignty in the past and now also face an uncertain future. This disconnect between the bright skies and sandy beaches of brochures and the pessimism of those actually living on the islands that pioneered these schemes can be startling. What will new citizens do for their new countries besides opening their wallets? And will their incomplete sense of national community catch on more widely? •

The Golden Passport: Global Mobility for Millionaires
By Kristin Surak | Harvard University Press | US$35 | 336 pages

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She didn’t repeat that call in front of 1300 delegates at the National Housing Conference in Brisbane, but she came close, saying it should be possible to have a grown-up conversation about tax. She said Australia’s taxes encouraged property investors to focus on capital gains rather than a steady income from rents. A “healthy” housing market, she said, would prioritise “homes not assets.”

Lloyd-Hurwitz now chairs the interim National Housing Supply and Affordability Council, set up at the start of the year to advise the federal government on housing policy. In wide-ranging comments, she spoke passionately about the need to build a better and more secure rental sector, pointing out that more than 200,000 poor households hand over at least half their income to their landlords. She described housing as essential infrastructure akin to schools and hospitals, something that can’t be left to the private sector to sort out.

Yet a major thrust of the federal government’s response to the housing crisis does just that. In the updated National Housing Accord accepted by national cabinet, Labor wants the private sector to build 1.2 million “well-located” homes in five years, in the expectation that those new dwellings will bring down prices and make finding an affordable home easier.

Meeting this ambitious target would require an unprecedented rate of building: 60,000 new dwellings every quarter for five years straight. Steven Rowley from Curtin University told the conference that Australia has never achieved that level of residential construction, and only briefly approached it in early 2017. Currently, at just over 40,000 new homes a quarter, the industry is falling well short.

The federal government sees more efficient planning as the key to unlocking the residential construction boom required to meet its target. A blueprint adopted by national cabinet and supported by $500 million in competitive grants aims to streamline approvals, boost local decision-making capacity and fund essential infrastructure. Canberra is also holding out $3 billion worth of incentives to get the states and territories to improve planning systems. The money will flow as bonus payments once a threshold level of new dwellings is passed.

Rowley doubts such measures will be enough. While people love to blame the planning system for a lack of housing supply, he said, it’s market conditions that determine construction levels. And market conditions “just aren’t right.” “The last three years have seen unprecedented cost growth,” he added, “and that means development is unlikely outside the highest return areas.”

Tanya Steinbeck, chief executive of the Urban Development Institute of Australia WA, spoke about the situation in Perth, where construction costs render medium- and high-density residential projects unviable unless the underlying land values are already high. In other words, only upmarket developments in wealthy suburbs are likely to proceed.

According to Rowley, the only way we’ll get 1.2 million new homes is by dramatically rebalancing developers’ costs and the prices they can command. Construction stimulated by a sharp increase in property prices and rents would defeat the purpose of a scheme that aims to make housing more affordable.

Falling costs offer a more hopeful way forward, but Rowley believes costs have been driven up by factors that are largely beyond government control — labour shortages and the rising price of building materials, for example, and more expensive finance. Governments don’t set interest rates and have little influence over the cost of timber, bricks and steel. And while they can, over time, train more tradespeople, governments can’t stop qualified workers defecting to get better wages in the mining sector.

Even if costs moderate and supply chains flow more smoothly, it will take time for industry to respond to improved conditions. The construction tap can be turned off swiftly, said Rowley, but turning it on again is much slower.

Innovation holds out some promise. “We can do things faster without compromising quality,” said Lloyd-Hurwitz, describing an experiment carried out by Mirvac. Twelve terrace houses were built using traditional methods and twelve using a modular approach, with components of the houses made in factories and assembled on site. The modular homes were completed more quickly, with less waste and less neighbourhood disruption.

More generally, prefabrication is growing rapidly. It can help overcome skills shortages and the difficulty of getting workers and materials into remote locations like western Queensland.

But possible savings from innovation may be offset by other factors that make building more expensive. After all, we don’t just need more houses, we need better houses. From the floor of the conference, delegates called for homes that people with a disability can live in easily and homes that allow residents to “age in place.” Updated design standards often increase costs in the short term, even if prices come down again once economies of scale are achieved.

Extreme weather events, meanwhile, are prompting tighter planning controls over where homes can be located, and more stringent building codes in areas at risk from floods and fires. Energy-efficient homes are needed in greater numbers, built from materials with lower embodied emissions, but governments are dragging their feet.

In 2022, after years of negotiation, the states and territories agreed to making seven-star energy efficiency mandatory under the National Construction Code, with the changes to take effect in May this year. After industry lobbying, most states have delayed implementation, saying builders need more time to prepare. The result is grim: no improvement in housing efficiency standards since 2009. Ralph Horne from RMIT told the conference that if higher standards eventually take effect, they will only match ratings for new homes achieved twenty years ago in comparable nations.

The qualifier “well-located” poses another challenge to building 1.2 million homes. It’s code for increasing urban density in established suburbs using medium-rise developments to fill in the “missing middle” — a reference to both the lack of new homes in middle-ring suburbs and the lack of mid-rise apartment projects. A break with the pattern of going up in the centre and out at the edges has so far proved elusive.

More than two decades ago, the Victorian government’s Melbourne 2030 plan aimed to locate a “substantial proportion” of new housing in sites that had good access to services and transport, and to set “clear limits to metropolitan Melbourne’s outward development.” The aim has been partially met by high-rise inner-city towers sprouting up in the CBD, but greenfield estates on the urban fringe continue to accommodate most of Melbourne’s population growth. Some “transit oriented” residential development has sprung up around train stations — Box Hill is a notable example — but new housing in middle-ring suburbs is otherwise limited.

As Lloyd-Hurwitz pointed out, the average dwelling density of middle-ring suburbs is typically around 750 homes per square kilometre, whereas new greenfield estates now achieve densities of 2000 homes (thanks in part to smaller block sizes). Tanya Steinbeck said that while Perth’s established suburbs are dominated by freestanding houses with three to five bedrooms, the growing demand is for one-bedroom apartments, leading to massive underutilisation of existing housing stock.

Transformation of the urban landscape could be encouraged, Steinbeck said, by shifting from stamp duty paid on sales to a broad-based property tax, another long-sought policy reform. This would reduce the financial barrier to people “right sizing” their homes as their circumstances change. The ACT has gone done this path, but other states and territories are unlikely to follow unless the federal government plays a coordinating role. So far, it’s shown no inclination to do so.

There was talk of easier permitting for backyard granny flats, hardly a recipe for top-quality urban redevelopment. But Lloyd-Hurwitz also referred to Auckland’s 2016 “upzoning” to enable the conversion of family homes on suburban blocks into mid-rise developments without running the gauntlet of planning objections. This has been credited with precipitating a boom townhouse development that has slowed the increase in Auckland rents and real estate prices relative to other New Zealand cities (although causal link is disputed).

The aim, said Steinbeck, is not just density, but density done well. The risk of liberalising planning rules is that we’ll get what she called “dumb density” — small-scale developers replacing family homes on large blocks with two or three townhouses that lack energy efficiency and don’t make the best use of scarce land. Such piecemeal infill occurs without upgraded infrastructure and amenity to improve the neighbourhood for all residents.

My conversations with delegates during the conference breaks often came back to this challenge. Doing density well is hard because it means assembling fragmented housing blocks into parcels big enough to develop at scale — few developers have pockets deep enough to engage in such activity and there are few explicit incentives in planning schemes.

The National Housing Accord also includes an aspiration for 20,000 of the 1.2 million “well-located” new homes to be “affordable.” To put it kindly, this is a modest ambition, amounting to less than 2 per cent of all new dwellings over the next five years. If we include the 40,000 social and affordable homes that are supposed to be built with money flowing from the newly established Housing Australia Future Fund and the extra billions extracted by the Greens — and an extra 20,000 dwellings completed independently by state governments over the same time frame (a generous estimate) — that still amounts to only 80,000 “affordable” homes or less than 7 per cent of 1.2 million new dwellings.

Affordable is, in any case, a notoriously vague and contentious term. It’s usually taken to mean rents 20 per cent lower than the prevailing rate for a similar dwelling in the same area. But, as Lloyd-Hurwitz remarked, a discount in a high-priced market isn’t necessarily affordable, especially for tenants on low and moderate incomes.

Despite the challenges, the overall mood at the National Housing Conference was upbeat. As AHURI managing director Michael Fotheringham said in his welcoming remarks, housing has never been more prominent in public discussion than it is today. There was palpable excitement, especially among not-for-profit community housing providers, about bidding for a share of the new funds flowing in their direction. They want to get on with building homes for the people who most need them.

Delegates welcomed the federal government’s efforts to coordinate tenancy reforms via national cabinet so renters around the nation get a better deal, and they are encouraged by the new dynamism apparent at the state level. Since May, Queensland has a dedicated housing department for the first time, led by a minister, Meaghan Scanlon, whose parents both grew up in public housing. Rose Jackson, housing minister in the new NSW government, has launched herself into the job with energy and plain speaking, and Victoria has just released its long-anticipated housing statement.

If there was a general view of the five-year target of 1.2 million homes, it was probably that the ambition is welcome even if it’s unrealistic. Meeting the target would increase Australia’s total housing stock by about 2.4 per cent every year. Curtin University’s Steven Rowley said this could have a moderate impact on rents and house prices, but he doesn’t think it will make homes dramatically more affordable.

What’s needed, he thinks, is sustained public investment to build new social housing in perpetuity, allowing us to steadily build the stock of decent homes that are truly affordable for Australians on the lowest rungs of the income ladder. He worries that the current burst of new funding could again be short-lived. Like everyone else at the conference, I hope he’s wrong. •

Peter Mares facilitated a session at the National Housing Conference and AHURI paid for his travel from Melbourne to Brisbane.

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The way we talk about Google has also changed, reflecting a wider reassessment of the costs and benefits of our connected lives. In its earlier days, Google Search was enthusiastically embraced as an ingenious tool that democratised knowledge and saved human labour. Today, Google’s many services are more popular than ever, though Google Search is the subject of a major antitrust case in the United States, and governments around the world want to regulate digital services and AI.

In Power and Progress, Daron Acemoglu and Simon Johnson take the project of critical reappraisal further. Their survey of the thousand-year entanglement of technology and power is a tour de force, sketching technology’s political economy across a broad historical canvas. They chart the causes and symptoms of our contemporary digital malaise, drawing on a growing volume of journalism and scholarship, political economy’s long tradition of analysing “the machine question,” and the work of extraordinary earlier American technologists, notably the cyberneticist Norbert Wiener, the network visionary J.C.R. Licklider, and the engineer Douglas Engelbart.

If, as Acemoglu and Johnson argue, our digital economy is characterised by mass surveillance, increasing inequality and destructive floods of misinformation, then the signal moments from the past will inevitably look different. From this angle, the great significance of Google Search was its integration with online advertising, opening up the path to Facebook and a panoply of greater evils.

The strengths of Power and Progress lie in the connections it makes between the deficiencies of current technology and the longer story of innovation and economic inequality. History offers many opportunities to debunk our nineteenth-century optimism in technology as a solution, and to puncture our overconfidence in the judgement of technology leaders.

A particular target is the idea that successful innovations produce economy-wide benefits by making workers more productive, leading to increased wages and higher living standards generally. The theory fails to capture a good deal of historical experience. The impact of new agricultural technologies during the Middle Ages provides a telling example. Between 1000 and 1300, a series of innovations in water mills, windmills, ploughs and fertiliser roughly doubled yields in England per hectare. But rather than leading to higher incomes for most people, living standards appear to have declined, with increases in taxation and working hours, widespread malnutrition, a series of famines and then the Black Death. Average life expectancy may have declined to just twenty-five years at birth.

The cities grew, but most of the surplus generated by improved agriculture was captured by the church and its extensive hierarchy. A religious building boom proceeded on spectacular lines. Vast amounts were spent on hugely expensive cathedrals and tax-exempt monasteries: the same places, as Acemoglu and Johnson note, that tourists now cherish for their devotion to learning and production of fine beer. The fact that better technology didn’t lead to higher wages reflects the institutional context: a coercive labour market combined with control of the mills enabled landowners to increase working hours, leaving labourers with less time to raise their own crops, and therefore reduced incomes.

If medieval cathedrals give rise to scepticism about the benefits of tech, it follows that we should think more carefully about the kinds of technologies we want. Without that attention, what the authors call “so-so automation” proliferates, reducing employment while creating no great benefit to consumers. The self-checkout systems in our supermarkets today are a case in point: these machines simply shift the work of scanning items from cashiers to customers. Fewer cashiers are employed, but without any productivity gain. The machines frequently fail, requiring frequent human intervention. Food doesn’t get any cheaper.

The issue then is not how or whether any given technology generates economic growth, but which conditions make possible innovations that create shared prosperity. The recent past provides examples of societies managing large-scale technological change reasonably well. The postwar period of sustained high growth and “good jobs” (for some but not all) had three important features: the powers of employers were sometimes matched by unions; the new industrial technologies of mass production automated tasks in ways that also created jobs; and progressive taxation enabled governments to build social security, education and health systems that improved overall living standards.

For technology to work for everyone, the forces that can temper the powers of corporations — effective regulators, labour and consumer organisations, a robust and independent media — play an essential role. The media are especially important in shaping narratives of innovation and technical possibility. Our most visible technology heroes need not always be move-fast-and-break-things entrepreneurs.

Finally, public policy can help redirect innovation efforts away from a focus on automation, data collection and job displacement towards applications that productively expand human skills. Technologies are often malleable: they can frequently be used for many purposes.

Acemoglu and Johnson would like us to divert all that frothy attention on AI to what they call machine usefulness, focused on improving human productivity, giving people better information on which to base decisions, supporting new kinds of work, and enabling the creation of new platforms for cooperation and coordination: a course they see as far preferable to a universal basic income.

Kenya’s famous M-PESA, introduced in 2007, is one of many examples, offering cheap and convenient banking using basic mobile phones. On a larger scale, the web is also a human-oriented technology because its application of hypertext is ultimately a tool for expanding access to information and knowledge. Acemoglu and Johnson concede that the idea at the heart of Google Search can also be understood in this way: a mechanism that works well for humans because it is constantly reconfiguring itself in response to human queries.

The authors’ ideas for positive policy interventions can usefully be read alongside those of the Australian economists Joshua Gans and Andrew Leigh, whose 2019 book Innovation + Equality remains less used than it should be.

One way to read Power and Progress is as a historically informed guidebook for the conflicts of our time — in the courts, where Lina Khan’s Federal Trade Commission has launched far-reaching cases against Google and Amazon, in the new regulatory systems emerging in the European Union, Canada and elsewhere, and in the wave of industrial actions taken by screen industry writers and auto workers in the United States.

In Australia, we are also at a point where governments will soon make decisions about the kinds of technology we want to support or constrain. We can have no certainty about the outcomes of any of this, but Acemoglu and Johnson argue that such conflicts are both necessary and potentially productive. They diverge here from one of the main currents of liberal technology critique: where writers like Carl Benedikt Frey, whose The Technology Trap (2019) covers some of the same terrain, see redistributive policies as necessary for managing the consequences of automation, Acemoglu and Johnson point to the positive potential of political and industrial conflict for reordering technological agendas. They want to place more emphasis on our capacity to choose the directions technology may take.

The recently concluded Hollywood writers’ strike offers an intriguing example. The key point is that the screen writers didn’t oppose the use of generative AIs such as ChatGTP in screenwriting. Instead they secured an agreement that such AIs can’t be recognised as writers and that a studio may not require the use of an AI. If a studio uses an AI to generate a draft script that it then provides to a writer, the credit or payment to the writer will be the same as if the writer had produced the draft entirely themselves; and a writer may use an AI with the permission of the studio without reducing their credit or payment.

The settlement clearly foreshadows the extensive use of generative AIs in the screen industries while offering a share of the benefits to writers. The critical point, as some reports have noted, may be that the revenue-sharing deal with writers preserves the intellectual property interests of the studios, since works created by an AI may not be copyrightable.

Meanwhile, AI raises other important issues about automation, quite apart from the focus on work. When we are relying on machines to make or inform decisions, we are also moving into the domain of institutions, with the obvious risk that existing technology-specific laws, procedures and controls can be bypassed, intentionally or otherwise. This, after all, was what robodebt did with a very simple automated system. In the absence of wide-ranging institutional adaptation and innovation, more complex modes of automation will pose greater risks.

More generally, the authors’ framing of the “AI illusion” appears to be premature. Power and Progress was clearly substantially completed before the appearance of the most recent versions of ChatGPT. Accustomed as we are to AI’s many failures to match its promises, we should now be considering the surprising capabilities and broad implications of large language models. As Acemoglu and Johnson would insist, if generative AI does turn out to be as powerful as many believe, then it will necessarily be capable of far more than “so-so” automation. •

Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity
By Daron Acemoglu and Simon Johnson | Basic Books | $34.99 | 546 pages

The post Machine questions appeared first on Inside Story.

In return for an extra $1 billion in social housing investment, the Greens dropped their demand that the bill include a two-year rent freeze, although housing spokesperson Max Chandler-Mather says the party is still committed to rent control and clearly sees this as a winning strategy in inner-urban seats.

“For us this fight has just started,” he told ABC Radio National Breakfast. “Nine months ago, no one cared about renters in the media and political establishment. Now they are a national news story.” The Greens had forced national cabinet to meet and discuss national renters’ rights, he said, referring to an August agreement by the states and territories to move towards a nationally consistent policy on tenancy laws.

National cabinet’s agreed measures would prevent landlords from terminating a lease without reasonable grounds or from raising rents more than once a year. They would also “phase in” minimum standards for rental properties — though the limp language doesn’t inspire great confidence that the lives of tenants will materially improve, especially given that the examples of “minimum standards” cited in the national cabinet communiqué are “stovetop in good working order, hot and cold running water.”

As well as setting up the HAFF, other bills before the Senate will create an independent body to provide housing research and advice to the federal government. The National Housing Supply and Affordability Council will fill an important gap created when the Abbott government abolished a similar body a decade ago.

Community housing activists have told me the Greens shouldn’t get all the credit for the progress, since the sector has also been lobbying hard, as has Labor for Housing and other ALP ginger groups. Other members of the Senate crossbench have been influential too.

Still, if the Greens hadn’t blocked the HAFF bill it’s hard to imagine that the government would have found an extra $3 billion to build homes for low-income Australians — the June commitment of a $2 billion social housing accelerator, and the additional $1 billion just announced. This new money will bolster the National Housing Infrastructure Facility and can be used to build new social and affordable homes or to pay for critical infrastructure needed to support them. The facility is administered by NHFIC, the National Housing Finance and Investment Corporation, which will become Housing Australia.

Under the original HAFF bill, the government set an annual cap of $500 million on disbursements from the fund to finance new homes. The Greens and other crossbench senators convinced the government to convert this ceiling into a floor — $500 million is now the minimum spend from the HAFF each year, rather than the maximum.

And independent senator David Pocock was also instrumental in getting these annual payouts indexed, which means their real value will be maintained over time rather than eroded by inflation.

The breakthrough on the HAFF is welcome news to not-for-profit housing providers. According to Wendy Hayhurst, chief executive of the Community Housing Industry Association, it will give the sector confidence to plan and deliver new homes.

Despite its designation as a “future fund,” though, the HAFF only offers five years of certainty. After that, there is no guarantee that more public funds will be available.

This isn’t the impression the government wants to give. In its issues paper promoting discussion of a new National Housing and Homelessness Plan it says the HAFF will “build 30,000 new social and affordable houses in its first five years” (my emphasis). Together with the name, this gives the impression that another 30,000 houses could be built in each of the subsequent five-year periods.

Housing minister Julie Collins has allowed this misapprehension to take hold by saying, for example, that “we’re talking about… a fund that in perpetuity each and every year would be delivering at least $500 million into social and affordable rental homes in Australia.”

At first glance, you might think that $500 million will be spent on new homes in every year of the fund’s twenty-five-year life. But that’s not how it works. Proceeds from the fund won’t provide up-front capital to finance new construction but will instead cover providers’ recurrent costs after the housing is built.

This is sometimes referred to as an “availability payment.” It’s essentially a subsidy to not-for-profit housing providers to bridge the gap between the cost of building and operating new homes and the low rents paid by social housing tenants. As a guaranteed future income flow it enables community housing organisations to raise commercial finance to build new dwellings. After five years almost all proceeds from the HAFF will be fully committed to covering the gap between housing providers’ costs and their rental income (at least until 2050).

The benefit of the model is that the HAFF leverages a modest amount of public money into larger sums of private capital. And once the funds are committed, it will be hard for the scheme to be undone by an incoming Coalition government: abolishing the scheme would mean interfering with commercial contracts.

But the HAFF is a complex way to fund housing. As business journalist Michael West writes, the biggest winners could be whoever manages the government’s investment. There’s a simpler alternative: as an analysis for the Australian Housing and Urban Research Institute concluded, “the cheapest and most efficient way to fund new social housing is direct public investment.” That’s why the Greens are crowing about directing an extra $3 billion from the government — six times the amount the HAFF will generate annually — straight into building new homes.

It’s certainly a good time to get money out the door. With the volatile construction sector heading for a downturn, this counter-cyclical release of new investment will help keep workers employed and firms afloat.

But all the extra investment will barely make a dent in the lack of rental homes for households on very low incomes. What is still sorely needed is a bipartisan commitment to financing new social housing for decades into the future.

The chances of that happening are slim. Shadow housing minister Michael Sukkar accused the government of waving the white flag on the great Australian dream because the HAFF does nothing for Australians who want to buy a home. In refusing to countenance support for the government’s social housing initiatives or engage with the struggles of renters, the opposition has dealt itself out of any role in tackling one of the nation’s most urgent challenges.

This leaves the Greens with a powerful hand in negotiations over other looming housing bills, including federal and state legislation to underpin Labor’s Help to Buy shared equity scheme, which is designed to help people into home ownership with a 2 per cent deposit.

The Greens demonstrated a tough pragmatism in the HAFF negotiations. As Chandler-Mather says, the media, the community housing sector and their fellow crossbenchers pressured the Greens for months to pass the bill without seeking further concessions. “We were told when we started this, that we were absurd and crazy, for pushing for more funding for public housing,” he said. “And look how far the debate has shifted.”

But it’s hard to see the party’s demand for a “rent freeze” gaining traction. The phrase promotes a binary understanding of rent control as a switch that is either on or off, rather than a dial that can be calibrated. It mobilises well-founded opposition based on evidence that blunt controls of this kind have unintended consequences.

As a report from the Centre for Equitable Housing notes, “hard” rent freezes, or “first generation” rent controls, have had negative effects elsewhere, deterring new housing investment and discouraging landlords from spending on maintenance. The report adds that a national one-size-fits-all rent freeze doesn’t account for regional differences and could drive some investors to switch their properties out of long-term rental and into short stays instead.

A range of more nuanced measures — what the report calls “second and third generation rent stabilisation” — could be used to moderate rent increases. These approaches, widely used in Europe, are more focussed on limiting rapid spikes than on bringing rents down overall. They may allow landlords to increase rents between tenancies, for example, or offer allowances for spending on maintenance.

The centre concludes that it is possible to develop rent stabilisation policies that allow the market “to play the defining role in setting rent prices but in a moderated and predictable fashion.”

The next test for Labor and the Greens will be whether they can move beyond the rent-freeze stand-off and begin a nuanced discussion about how to develop a more stable and affordable private rental market. That will require compromise on both sides. •

The post Two cheers for the HAFF appeared first on Inside Story.

The facilitator says she’s sorry there’s no tea and coffee in the room because the urn is fixed to the wall in the kitchen out the back, but she encourages us to duck out and help ourselves to a cuppa. She apologises that the staff from the Department of Social Security will be late because their plane was delayed by Canberra fog.

This modest Monday afternoon gathering in a suburban hall in East Geelong is the first of twenty public consultations — or “community conversation forums” — to help the federal government draft a national housing and homelessness plan.

There is a lot riding on the process. As Chris Martin from the City Futures Research Centre at UNSW has pointed out, Australia has never really had a national housing strategy. What we have had, he told a recent online forum organised by National Shelter, is a series Commonwealth–State agreements regulating how much housing money flows to the states and what Canberra expects in return. Starting in 1945, those multi-year agreements have focused solely on social housing and homelessness; a bigger vision of how housing fits into the economic and social life of the nation has always been lacking.

Martin hopes the new national plan will be more ambitious in scope and help to end the fragmentation of policy within and between different levels of government. He wants to see housing integrated with other policy areas, including employment, welfare, immigration, urban development, climate change, disability and closing the gap.

But the issues paper designed to kick off our “conversation forum” in Geelong is not a promising start. Like many earlier housing inquiries, it seems to assume that Australia’s complex housing challenge has a simple answer — just build more dwellings. It foresees a happy land where homes are available, and affordable, for all. All that’s blocking the way is restrictive zoning, onerous planning processes, cumbersome building regulations and constraints on the release of land. Cut through that thicket of regulation and our destination is within reach.

This popular supply-side explanation to our housing problems was evident at August’s national cabinet meeting, where the states and territories agreed to build 1.2 million new homes over five years from 2024. That’s 200,000 more than the target announced just ten months earlier under the National Housing Accord.

As an incentive to meet this stretch target, Canberra pledged an extra $3 billion to fund $15,000 bonus payments to the states for each additional dwelling. Another $500 million was set aside to “kick-start housing supply in well-located areas” by delivering public services and amenities or bolstering planning capacity. State and local governments will vie for this money under a competitive funding program.

Anthony Albanese calls it “the most comprehensive housing strategy that we’ve seen for a generation.” Even if that’s true, it’s hardly a big claim. With a limited exception during the Rudd years, when Tanya Plibersek was minister, federal governments have dodged responsibility for housing for decades.

Still, the Grattan Institute reckons the prime minister is right to talk up the new deal. It calculates an extra 200,000 homes could make rents 4 per cent lower than they would be otherwise. Its researchers argue that “state and local governments… restrict medium- and high-density developments, largely to appease existing residents in established suburbs.”

Denita Wawn from Master Builders Australia agrees. Welcoming the national cabinet announcements, she said Australia needs to reform planning, zoning, and building approvals to ensure that we’re “not just going out in the suburbs, but up as well.”

In the hope of slicing through the red tape strangling our housing dreams, national cabinet also agreed to a National Planning Reform Blueprint to promote “medium and high-density housing in well-located areas close to existing public transport connections, amenities and employment.”

Rather than a blueprint, though, this is a vague grab bag of sometimes conflicting proposals. While it aims for more timely development approvals, for instance, it also wants to rectify “gaps in housing design guidance and building certification to ensure the quality of new builds.” And while it wants stronger “call-in powers” for state planning ministers it also favours better “community consultation processes.”

Victorian premier Daniel Andrews has already committed Victoria to reducing the role of local councils in significant planning decisions. Yet his government’s record inspires little confidence that this will dramatically boost supply. There’s been little action on a 2017 plan to devote surplus government land to new housing, and the state government can be just as sensitive to resident opposition as local councils are.

Examples can be found in electorally significant sandbelt seats in Melbourne’s southeast. After Kingston Council refused in 2018 to rezone a disused golf course to allow Australian Super to build more than 800 dwellings, the state government intervened and commissioned an independent inquiry. Two years after it reported, its recommendations are still under consideration.

Then there’s what locals call the Great Wall of Frankston. Developers proposed two apartment buildings side by side overlooking Frankston beach — one fourteen storeys high and the other sixteen. The council approved a development overlay that would have allowed twelve storeys. The matter was before the Victorian Civil and Administrative Appeals Tribunal when planning minister Sonya Kilkenny intervened and imposed interim controls to reset the height limit to just three storeys.

National cabinet’s blueprint also calls for states to “consider” the “phased introduction” of inclusionary zoning, which would force developers to incorporate social and affordable housing in any major project — a common practice overseas. The caveat is that this should be done “in ways that do not add to construction costs.”

It’s hard to see such a limply worded proposal generating much change. In 2022, Victoria sought a similar outcome by requiring developers building three or more dwellings to contribute to a social housing growth fund. In the face of property industry opposition, and claims this would push up the cost of buying a home, the proposal was scrapped within a fortnight.

The national planning reform blueprint appears to draw inspiration from work by the Productivity Commission, including a 2021 information paper identifying planning and zoning reforms and last year’s review of the National Housing and Homelessness Agreement. Both reports argue that reforms to planning, zoning and land release are crucial to increasing the supply and affordability of housing.

Many of the Productivity Commission’s recommendations make sense. Its call for state and local planning to be more closely aligned is a good example: a state-wide housing target has little point if local councils refuse to accept their share of new builds or greater density. The commission also wants fewer and broader land-use zones, permitting a wider range of activities without explicit council approval or costly variations. This would make it easier to have mixed developments that combine business, retail and housing.

But a close reading of the commission’s work reveals that many proposals in national cabinet’s planning blueprint are already in train. To varying degrees, all jurisdictions have been “streamlining approval pathways,” especially for significant projects, often by replacing council decision-makers with expert panels. State and local governments have also put considerable energy into removing “barriers to the timely issuing of development approvals.”

In other words, state and territory governments have been reforming planning for a long time without any appreciable effect on housing affordability. As Sydney University planning expert Nicole Gurran points out, more than 90 per cent of multi-unit development applications in New South Wales are approved and decisions issued within about three months.

Nor is there great evidence of planning and zoning being a significant brake on development. Australian Bureau of Statistics data show that more than a million dwellings were completed between December 2017 and December 2022. So, the government’s original Housing Accord target of one million new homes over five years only seeks to match what went before.

An anticipated decline in prospective construction activity has less to do with planning, zoning and land release than with the cyclical nature of the property industry. As this chart shows, the industry is characterised by peaks and troughs. What is more, dwelling completions lag, but rarely match, dwelling approvals. Considerably more housing gets approved than gets built, which points to factors other than planning influencing the supply of housing.

Dwelling approvals and completions 1984–2022

Source: ABS, 8731.0 Building Approvals, Australia and 8752.0 Building Activity, Australia

Among the factors currently dampening activity are higher interest rates, subdued consumer sentiment, weather problems, labour shortages, increased construction costs, bottlenecks in the supply of building materials and construction firms going bust. On top of all that, the Covid-era stimulus brought forward construction that would otherwise have occurred later. None of these adverse factors will be fixed by planning and zoning reform.

Even in a blue-sky world of light-touch regulation, devoid of constraints on labour and materials, a rational developer would avoid bringing so much housing to market that prices would fall, cutting their profit margins.

When I was researching my book about housing in 2018, I visited the 1000-lot Madora Bay development in the growth region of Mandurah south of Perth and chatted to a bored estate agent flogging house-and-land packages. He told me he would get in strife if he clocked up too many sales. His instructions were to sell a certain number of blocks each year, and no more, to keep a floor under prices.

A recent study suggests Madora Bay is not an isolated case. Prosper Australia examined the sales history of nine master-planned communities in three states and found a striking pattern. Sales peak in the early years when a greenfield development is just getting off the ground. But as the project matures, the sales rate slows, even though there is still plenty of land available and demand for new housing has not diminished.

Take the example of Woodlea, a 711-hectare estate twenty-nine kilometres northwest of the Melbourne CBD that will eventually be home to about 20,000 people. When the first of its 6500 lots were released in 2015, sales were brisk, and over the next two years about 14 per cent of the total development was sold — an average of forty-five properties each month. But then sales slowed substantially, even though land prices were still climbing fast. Over the next three years, only about 6.5 per cent of the total lots were sold — an average of just thirteen properties a month.

“Supply effectively reduced from February 2017 all the way through to January 2020, despite rising prices,” writes Prosper economist Karl Fitzgerald. He infers that Woodlea’s developers needed to wind back supply “for fear of price reductions.”

The property industry is one of the loudest voices calling for more land releases and looser planning and zoning rules, arguing that this will enable them to increase supply and reduce the price of housing. But Fitzgerald says this isn’t how property markets operate and it’s illogical to expect private developers to bring on excess supply and, in effect, undercut their own product.

It isn’t just on the suburban fringe that approved residential developments are slow to manifest as dwellings for sale or rent. In July 2015 developer Sterling Global bought the Australian Federal Police building on La Trobe Street in central Melbourne for $70.7 million. Plans were approved in November 2016 for a 70-storey tower including a hotel and 488 apartments. But Sterling Global instead sold the site to Mirvac for $122 million dollars (booking a 73 per cent capital gain in three years) in 2018. In June 2021, the City of Melbourne endorsed new plans for a 31-storey office complex. Construction was due to commence in 2022 but there is no sign of work. The AFP has moved out and the existing five-storey building now sits empty.

UNSW housing expert Professor Hal Pawson advises scepticism about housing strategies based solely on the belief that regulations are limiting building activity. “In reality,” he writes, “the prime consideration for private developers and their financial backers is expected market conditions when constructed homes are saleable.”

The Planning Institute of Australia also points out that planning “doesn’t control the speed with which housing is developed — nor affect powerful drivers for investment in housing.”

“It is simply wrong to say that planning is what is holding back our housing supply,” urban planner Marcus Spiller told National Shelter’s online forum. Yet he says this is the “intellectual architecture” underpinning the government’s approach to a national plan.

The founding partner of SGS Economics and Planning and former national president of the Planning Institute of Australia, Spiller is a veteran of Australian housing debates and has served on numerous state and federal boards and advisory committees. In his view, it is fanciful to assume that we can deregulate planning and then rely on competitive markets to meet the housing needs of low- and middle-income Australians. There is no trickle-down solution to the housing crisis, he says, and government and public policy must play a much stronger role.

If governments had kept building social housing at the same average rate as between 1955 and 1985, Spiller calculates, then Australia would now have 330,000 more homes for low-income earners. Instead, we shifted to providing rent assistance so tenants could find the housing that best suits them in the private market. The theory was that they would become masters of their own destiny. “It’s a compelling economic proposition that we have been pursuing for thirty or forty years,” says Spiller. “And I think it’s time to ask the question, has it worked?”

Clearly, it has not. Barely one in a hundred rentals is affordable for essential workers in full-time jobs, hundreds of thousands of households are forking out more than half their income on rent, and vacancy rates are at record lows. But the conventional supply-side wisdom can never be disproven. If there’s not enough housing or if housing is too expensive, then that must mean we have not yet deregulated enough, and must deregulate more.

In May this year former Reserve Bank economist Tony Richards published a long article in the Australian Financial Review describing how to solve Australia’s housing crisis. Despite the Financial Review’s simplistic spruiking — “1.3 Million Missing Homes Blamed on Councils and NIMBYs” — it is a complex and thoughtful examination of the issues. Richards recognises the need to build more social housing and acknowledges that we could use the tax system to moderate demand. But I was struck by what Richards does and doesn’t say about one of the local governments he picked out as anti-development.

Like all Sydney councils, Hunters Hill must develop a local housing strategy. Astonishingly, though, the council projects that this relatively low-density area just six kilometres from the GPO will lose population between now and 2036. Richards concludes that getting more medium-density housing in such a well-located area may mean taking powers away from local councils, so decisions are not just based on “the preferences of current residents, including NIMBYs,” but also encompass “the needs of the broader city and of future generations of potential residents.”

Richards commends the work of economist Peter Tulip from the Centre for Independent Studies, who has made a detailed analysis of apartment development in local government areas in Sydney and concludes that units are not being built where they are most wanted. Parramatta, for example, is increasing in density much more rapidly than Randwick.

Tulip says we should “build more housing where people want to live, as judged by their willingness to pay for a location.” Mosman is more expensive than Penrith, therefore also more desirable, and so that’s where we should build more apartments — and if we did, this would bring down prices there.

I have very little argument with this line of reasoning, and I think Tulip’s suggestion of a carrot-and-stick approach requiring councils to meet predetermined housing targets is worth pursuing — though Boris Johnson’s efforts to impose mandatory building targets in Britain quickly shattered when worried backbench MPs rebelled against forcing new developments on their wealthy constituents.

And this is what I think is missing from the Richards–Tulip analysis. It fails to draw the connection between housing and wealth. Tulip recognises that “planning restrictions reflect a desire for social exclusion” — that is, rich people want to live near other rich people and not near poor people — but he fails to consider that planning restrictions may also reflect the political power that wealth brings. Perhaps a more progressive income tax would generate a more egalitarian planning regime.

Or perhaps planning is not the issue. Analysing census data in the United States, Seth Ackerman finds a much stronger correlation between housing costs and household incomes than between housing costs and planning restrictions: “Rents and land values in a particular location are determined by the income and wealth of the people and businesses in and around that location. Put plainly, it’s the presence of rich people that makes rents expensive: they can pay more.”

Nor does a conventional supply-side approach concern itself with the fact that rich people generally consume more housing. As British housing economist Geoff Meen observes, housing demand comes “not just from newly forming households, but also existing households as incomes rise.” We need to consider the distribution of housing as well as supply.

“What happens when you build and you have no plan to distribute the housing to people who need it is wealthy people use more housing,” says Maiy Azize from the Everybody’s Home campaign. “They live in smaller households and they buy second homes.”

Excess consumption of housing by the rich pushes up prices for all, but this demand side of the housing equation is rarely mentioned. If we want to promote more efficient use of housing — like people living in apartments instead of freestanding homes with empty bedrooms — then changing how we tax housing and land could make a real difference.

Of course, planning and zoning matter in housing, but not necessarily as barriers — at least not in the way they are normally presented. They can also help overcome systemic problems.

When the Albanese government emphasises the need to build “well-located homes” or Denita Wawn from Master Builders talks about going up in the suburbs as well as out, they are responding to a major problem, often summarised as the “missing middle,” something Richards also identifies in his piece for the Financial Review.

The “missing middle” is primarily a reference to the lack of medium-density apartment dwellings of three or four storeys — the midpoint between high-rise towers and detached family homes. But it can also be applied spatially, to designate the lack of significant new construction in middle-ring suburbs.

A quick summary of where new housing has been built in Melbourne in the past decade illustrates the issue. Between the 2011 and 2021 censuses, dwelling supply in Melbourne’s nine inner-city councils — members of the M9 alliance — increased by about a third. In the City of Melbourne, housing supply almost doubled in that time, from 53,000 to 103,000 dwellings, as new high-rise residential towers sprouted up across the Hoddle grid, Southbank and Docklands.

The supply of housing on the urban fringe rose by more than 50 per cent over the decade, mostly in the form of detached housing in residential developments on former farmland. But the supply of housing in Melbourne’s middle- and outer-ring suburbs grew by just 13 per cent. These are the “well-located” suburbs that the government is targeting for newer denser housing because they have good access to public transport, services, jobs and amenities.

Percentage of dwellings added in Melbourne local government areas 2011–21

Author’s calculations based on ABS Census data

These suburbs might have the most restrictive planning regulations and the most vociferous and well-heeled resident action groups. But I suspect something else is at work.

Unlike central Melbourne, these suburbs don’t have brownfield sites — disused docklands or railyards that can be home to high-rise residential towers. Unlike inner-city Fitzroy, Brunswick or Footscray, they have few warehouses or workshops that can be redeveloped into medium-density apartment blocks. And unlike the city’s outer-urban growth areas, no greenfield sites are available to be transformed into housing estates.

Melbourne’s middle- and outer-ring suburbs are sometimes called “greyfields.” They are, characteristically, residential neighbourhoods dominated by detached homes on separate blocks, with little in the way of industry. That makes urban regeneration challenging, even as buildings age and are due for replacement. Without strategic planning, redevelopment generally takes the form of piecemeal infill — a single family home is demolished to make way for two or perhaps three townhouses. Gardens and trees give way to garages and driveways. Density is increased but the amenity of suburban life is diminished with little planning for the extra demand on services, roads and public transport. No wonder existing residents object to new developments.

More than a decade ago, researchers Shane Murray and Peter Newton identified more than a quarter of a million middle-suburban properties in Melbourne with “high potential for regeneration, in localities where residential building stock is failing and infrastructure is in need of upgrade.” But the historical pattern of residential development based on freestanding houses on separate titles makes it very hard to assemble parcels of land big enough to carry substantial redevelopment projects — the “missing middle” of European-style medium-density housing. This challenge will be even greater in future decades, when current growth areas with smaller lot sizes are ripe for redevelopment.

The Planning Institute of Australia puts its finger on the problem: “many of the easiest candidate sites for housing development are already spent.” It calls for governments to take a leading role in land markets to overcome the inefficiencies caused by fragmented ownership. What’s required to address the “missing middle” is not for governments to get out of the way but for them to intervene more to assist private capital to carry out high-quality, precinct-level redevelopment.

Melbourne, says Marcus Spiller, needs to add one extra dwelling for every existing 1.3 dwellings over the next thirty years, all within the existing urban footprint, “a level of transformation that is difficult to wrap your head around even as a professional planner.” We won’t achieve that with the “hunt and catch, opportunistic, fragmented approach that we’ve had until now,” he says. “The real issues with housing supply lie in land withholding, land assembly, insufficient infrastructure and land fragmentation, all of which require concerted policy effort and public intervention.”

Chris Martin agrees. In a report for the Australian Housing and Urban Research Institute, Martin and his co-authors call for a mission-oriented approach to the national housing strategy. Drawing on the thinking of leading economist Mariana Mazzucato, they argue that the state must play a larger role in “innovation and value creation” and “actively create and shape markets.” Rather than a level playing field in which market can compete, Mazzucato says the state should tilt the playing field towards achieving publicly chosen goals.

The mission, says Martin, can be plainly stated: everyone in Australia needs adequate housing.

We reach a similar conclusion in the community hall in East Geelong. The first session is focused on social housing and homelessness, and our initial task is to share three words to describe what a new national housing plan should achieve. An app collates our responses and projects a word cloud dominated by concepts like affordability, safety and security.

Many of my fellow participants work in public and community housing. They are deeply knowledgeable, their comments detailed and passionate. They talk about renters in the private market needing help to hold on to tenancies — it’s better to support someone in housing than see them slip into homelessness. Yet so many services only kick in after someone is in crisis.

They talk about the lack of emergency housing, about mouldy homes, and about extending Victoria’s approach to domestic violence to the rest of the country — it is the only state that has a policy of removing the perpetrator from the home, regardless of who holds the lease. And they talk about the burgeoning number of applications on the priority list for social housing — 7000 in the Barwon region alone.

After ninety minutes, the top half of our sheet of butcher’s paper is a cluttered jumble of coloured sticky notes. This is where we’ve been asked to identify challenges in addressing homelessness and improving access to social housing. The lower half — where we’ve been asked to identify what is working well — is more thinly populated.

Afternoon has turned into evening and it’s time for a break. Fresh fruit and an abundant supply of traditional baked goods compensate for soggy sandwiches. I load my paper plate with lemon slice and hedgehog and buckle down for another ninety minutes of discussion, this time on housing markets. Our numbers have shrunk from twenty-one to ten.

I am the first to speak and express my dismay that the government’s issues paper makes only passing references to tax, most of them referring to recent changes to promote the build-to-rent sector. The paper ignores debates about the relative merits of stamp duty and broad-based property taxes, and makes no mention of negative gearing, the capital gains tax discount or the exemption of the primary residence from the pension assets test — generous tax concessions that encourage property speculation and over-investment in housing.

The facilitator writes notes and thanks me for my contribution. A few others in the room offer supportive comments. But when we eventually disperse I wonder whether our views, falling outside the parameters of the “issues” offered for discussion, will make any impression on the final consultation paper developed from all these community forums. •

The post Flawed foundations appeared first on Inside Story.

Years ago, David Gonski and his panel also visited schools as part of their deliberations. But something got lost when their recommendations were translated into spending by state and federal governments. Will it be different this time around for the schools visited by the latest panel, and the 24,000 people who recently completed the review’s survey? Will the review, as its title suggests, create a better and fairer future?

Looking at the schools Gonski visited in 2011 might help answer those questions. Are they any better off, or do they still exhibit the contrasts and inequalities that have dogged schools for so long?

The Gonski panellists certainly witnessed contrasts. Gonski himself saw them firsthand in two little schools, one public and the other private, in western Sydney. The principal of the public school spoke to him about the struggle to get all the kids to school. His counterpart in the Catholic school had a solution: “If we have truancy, I tell the parents to take their kids away.” He had witnessed Australia’s unlevel school playing field in action.

Between them, members of Gonski’s panel visited thirty-nine public and private schools in urban, regional and remote settings. While those schools may not have been representative in any statistical sense, they certainly influenced the deliberations of panel members.

Ample information is available on thirty-two of those “Gonski schools,” information that suggests where they ended up a decade later. To enable a closer look, the schools can be grouped according to the socioeconomic (or in the case of schools, socio-educational) slice of Australia they served, then and now.

A school’s place in the sun can hinge on many things: location, leadership, the quality of teaching, the diversity and appeal of its programs. Changes in policy and practices are important, as are changes in the neighbourhood population, school openings, closures and amalgamations, and increases or decreases in resources.

My School data, especially covering who goes to which school, provide consistent clues to the profile, image and progress of schools. My School tells us that the top half of all schools, according to the Index of Community Socio-Educational Advantage, were 10 per cent bigger on average in 2018 than in 2012, and the bottom half almost 6 per cent smaller. Government schools, especially, enrolled an increasing proportion of the most disadvantaged students.

What about funding? Total funding (from government and fees) generally went up during this time, but not in ways that reflected differences in student need. On average, annual funding per student increased about 28 per cent — but less for government schools (25 per cent) and more for independent (32 per cent) and Catholic (38 per cent) schools. Capital funding per student favoured independent, Catholic and government schools in that order.

Income from fees lies at the core of Australia’s divided system of schooling, and largely explains what it does, and doesn’t, deliver. Many Australians value our apparent diversity of schools and school choice, but that choice usually comes with a price tag. Fees shape the whole system.

They also shape our impressions of school quality. Surprisingly, when schools with similar student demographics — public and private — are compared, school achievement doesn’t vary greatly. But different students increasingly go to different schools, and the differences in their achievement have increasingly been associated with the socioeconomic status of their peers and their school. Who goes to which schools matters: students themselves are a key and very unequal resource for the schools they attend.

What happened to the Gonski schools, and do they reflect these trends?

First, those on top stayed on top. When the Gonski schools are grouped by the socioeconomic status of their enrolments, a group of nine at the top stands out from the rest. My School shows that they increasingly serve the most advantaged students and families. They also started — and finished — the post-Gonski era with the highest levels of funding from fees and government, now averaging more than $27,000 per student.

Importantly, while most of this group are large and wealthy independent schools, their public funding increased as much as it did for the schools down the school ladder. Most importantly, the average fee — the price tag for entry into these nine schools — is now around $18,000.

These Gonski schools include Geelong Grammar School in Victoria and four in Sydney: Moriah College, Santa Sabina College, SCEGGS Darlinghurst and St Andrews Cathedral School. Girton Grammar School in Bendigo joined this group, shedding some of its disadvantaged students and gaining more of the most advantaged. The two public schools in this group, Narrabundah College in Canberra and Adelaide High School, formed a second tier in terms of the socioeconomic status of their enrolments. Interestingly, the NAPLAN scores of most of these schools remained largely unchanged over the post-Gonski years.

In the middle and more diverse group of Gonski schools ranked by socioeconomic advantage are eleven mainly private schools. Contrasting with the first group, these schools grew, and their total income per student, averaging around $17,000, was much lower. Their NAPLAN scores also varied, with a tendency to dip.

Some of these schools ended up with a more disadvantaged overall enrolment: for instance, Ashdale Primary School and Living Waters Lutheran College in Western Australia, Al Amanah College in Sydney and Bendigo South East Secondary College in Victoria. School enrolments shifted towards the advantaged end, meanwhile, in Holy Cross College in suburban Perth, and Caroline Chisholm Catholic College and Ilim College, both in suburban Melbourne.

A closer look at one locality reveals some of the dynamics at play. Since 2012, enrolments at the independent Ilim College have grown dramatically, but disadvantaged students make up a falling share. As is commonly the case, many of the latter students ended up at the nearby Hume Central Secondary College — as have certain students from other nearby government schools. Hume Central has also grown, but with a significantly less advantaged enrolment (though its NAPLAN scores compare favourably with those of nearby schools). This story plays out in many communities: no school is an island.

The average price tag for entry into this middle group of schools is just over $3000 per student, not as much as for the first group but enough to admit some students and screen others.

While the experience of schools in the “middle” varied, the dozen lowest-socioeconomic status schools — five Catholic and seven public — reveal a more consistent story. At both the beginning and the end of the post-Gonski decade, most of these schools enrolled among the most disadvantaged students in Australia.

Most had also stopped growing or had lost enrolments. Half, both public and Catholic, increased their enrolment of the strugglers. Among them, in the main, the schools with improving NAPLAN results were those that managed to hold their portion of advantaged students. There were exceptions. One school, Roseworth Primary School in Girrawheen, Western Australia, lost some advantaged students but still managed an improvement in NAPLAN. Results at Bradshaw Primary School in Alice Springs also improved, as did those at St James Catholic College in Tasmania.

Did funding make enough difference? On average, the increasingly disadvantaged schools were funded at around $22,000 per student — mostly public funding, regardless of sector. The remainder averaged close to $18,000, again mostly public funding. It is easy to argue that the difference is nowhere near enough to lift the former. What also stands out is that the changing composition of school enrolments, as much as the dollars going into the schools, appears to have most affected student prospects and school achievement.

These schools serve families and communities at the struggling end, which is well illustrated by their average price tag of just $890 a year, and often much less.

Gonski warned that the increasing concentration of disadvantaged students had a significant impact on educational outcomes. The message still resonates, arguably more so.

A majority of the most disadvantaged Gonski schools enrol an increasing concentration of low socioeconomic status students. Many advantaged students in those schools seem to have fled and taken their higher scores with them. The schools they have left behind have stopped growing — and, in relative terms, many of them have also stopped achieving. The contrasts between the Gonski schools at the top and those at the bottom have become even more evident. The families in the “top” schools can pay the entry fee, the ones at the bottom cannot.

Some commentators seem to believe the blame lies inside the school gate and behind the classroom door, as if the lower-achieving of the Gonski schools have collectively decided to underperform. Hence, we need more data, more targets and school reforms, fewer teachers leaving the system, and schools and systems made more accountable.

Those kinds of reform are always needed, but they don’t deal with the fundamental problem. As Gonski found, public funding arrangements need to reflect the nature of the educational challenges faced by a system or school. That is now widely accepted, but it is only after a decade that all sectors and governments agree.

Money does matter, but the trajectory of the Gonski schools suggests that certain students can be just as important a resource for schools — that the collective impact of peers on learning can make or break a school’s reputation. Small wonder that the schools towards the top of the pile compete to get the “best” students while those towards the bottom struggle to lift those left behind.

This is what the system does, and indeed seems designed to do. The consultation paper issued by the current review has bravely warned that the education system needs to be careful not to introduce additional forms of disadvantage through the design of the schooling system itself. That warning needs to morph into long-overdue structural reform of our framework of schools.

Gonski’s review was A Review of Funding for Schooling. A decade later, the current review is A Review to Inform a Better and Fairer Education System. We can’t wait for another decade for A Review to Rebuild Australia’s Framework of Schools, yet it is clear this must be done as part of a process of school reform.

We need to start by confronting the regressive impact of current policies and practices. The challenge is to strip the education system of the discriminators, including price, that have become firmly entrenched, endemic and destructive.

No one should be surprised by proposals that include abolishing fees and fully funding all schools, regardless of sector, that commit to inclusivity and a public purpose. We need big solutions and considerable structural change, starting now.

The story of the Gonski schools is evidence enough that a class system of schools does nothing for fairness and comes at a considerable cost in money, opportunities and school achievement.

The talented team supporting the current review has a chance to embrace a more global view of school reform. It can identify the drivers of segregation in our school framework, explain the links between this and our mediocre national achievement, and recommend that work start now to reverse the current trends. Without this, what happened to the Gonski schools will increasingly become Australia’s future. •

The post What happened to Gonski’s schools? appeared first on Inside Story.

Research, Politics, Social Change is a collection of Connell’s writing spanning five decades. It is not a Greatest Hits, as she assures readers in the first sentence of her introduction, for “how do we know what’s the greatest or the best?” Neither is it a “life history,” for though Connell reflects on the personal and social contexts of her selected articles, her account of these matters is rendered only with a broad brush. Rather, the book is conceived as a kind of portrait of Connell’s research trajectory, methods of work and place in the world. She calls it, with modesty and detachment, a “case study”: “a collection of the changing work of one researcher.”

What are the principles that guided her selection? The collection is drawn from articles written for journals, making the sampled writings relatively self-contained. It focuses on “specific pathways” of research pursued over a number of years. She identifies five: the making of masculinities; theories of gender; examinations of class structure; social issues in education; and the global economy of knowledge.

Each of the five sections contains two papers: an “early” article that usually captures one of Connell’s first interventions in a field of knowledge and a “late” article (usually published twenty or more years after the first) that registers the changing nature of this field and its context, as well as Connell’s creative responses to these transformations. Papers are prefaced by new introductions in which Connell recounts the precise context of composition and reception, and sometimes muses on the weaknesses and limitations of the earlier work.

The exception to this elegant mode of organisation is a sixth area: “fieldwork.” Connell’s scholarship is identifiable for its blending of empirical research — often based on interviews and especially “life histories” — with theoretical writing. In order to better capture this aspect of her approach, she includes in a dedicated chapter extracts from three fieldwork-based projects. The selections all date from research published in the first decade of the twenty-first century: a study of gender in organisational life (2006), another of managers as business intellectuals (2010), and a third of a gender transition (2010, though based on an interview undertaken in the later 1980s). These pieces ensure a representative sampling of Connell’s scholarship and a rounded insight into the methods behind her theoretical creativity.

Connell’s contributions to the study of gender, class, education and knowledge are already widely available. In the age of digital scholarship, her research — including the papers collected together in Research, Politics, Social Change — is within reach from any desktop with subscription access to major research databases. As I sit down to compose this review, Google Scholar informs me that she has been cited more than 128,000 times and also provides links to the chains of discussion she has helped to elicit. What, then, is the value of a collection of papers that likely readers might access by other means?

The digital revolution that provides easier access to scholarship also decontextualises each contribution: it is simply a blue link on a white background. The risk of such decontextualisation is heightened with Connell’s research, for she crosses the boundaries of disciplinary and sub-disciplinary specialism. Few scholars dedicated to the study of “class” followed her analysis of “gender” so closely; admirers of her examination of the global sociology of knowledge, published over the past twenty years, are mostly unaware of her still influential studies of a class structure in Australian history, pursued from the early 1970s.

Research, Politics, Social Change brings these varied contributions together. It thereby empowers a consideration of the central features of Connell’s scholarship: the elements that typify the “Connell case.” This is research committed in its aims; practice-oriented; propelled by theoretical insight; democratic in method; and accessible in presentation. The combination is rare. A pleasure and a value of this text is to observe these impulses at work in writings on otherwise disparate topics, spread out across many decades.

Connell explains in her opening pages that her undergraduate training was in an empiricist-minded history department, detached from social problems, and that she turned to the newer social sciences as a means of producing knowledge “relevant to social justice.” The problems she has tackled have consistently grown out of struggles for social betterment, especially struggles against inequalities of class, gender and empire. She has sought not only to analyse social structure, but also to consider how it might be transformed.

In the pursuit of these aims, Connell rejects the customary division between “applied” and “basic” research, and pursues a form of social science that is attuned to practice but also distinguished by a theoretical ambition. Her focus is invariably on “things actually done” in specific situations, whether that be the work of the teacher, the ways in which men interact with each other, or the activities of the business entrepreneur. This means that her social research does not seek to sketch out static categories — what she calls the “geometry” of social life — but rather to focus on its “fluid dynamics.” For Connell, like the historian E.P. Thompson, a “structure” in social life, like class or gender, is not a “machine”; it is rather “the way the machine works.”

Connell’s respect for history and for the import of time in social process is clearly evident, but she offers much more than a close description of reality-in-movement, for she also proclaims that “theory matters.”

How? The answer reflects her understanding of “theory.” Connell presents the activity of theorisation as an attempt to build bridges between “different contemporary realities” and between “present reality” and “future possibility.” The theorist moves “beyond the given” in some way, especially through processes of conceptualisation, and through the development of new research methods and paradigms of explanation.

It is through a theoretically informed examination of practice that the analyst of social structure is able to discern “internal pressures” and “tensions,” to identify “potentials for change” and even to formulate new versions of “political strategy.” Theory matters, because it helps us to better comprehend our social world, and thereby to change it.

The approach is thrillingly vindicated in Connell’s pathbreaking analyses collected across this volume. In her theorising of class and gender, Connell rejected the 1970s static accounts of “class structure” and “sex roles” for dynamic studies of how social relations of dominance are made and remade over time. In her studies of education, she showed how a focus on a “disadvantaged” fragment of the school community made this fragment into a “problem” and obscured the operation of power across the school and the curriculum. In her examinations of the production of knowledge, she uncovered the making and remaking of intellectual dominance through processes of elevation and exclusion.

These insights offered new possibilities of change, even if these were not always pursued, highlighting especially the opportunity for radical alliances and network-building that transcended the quest for technical reforms.

For many, “theory” can imply over-abstraction, self-indulgence and self-importance. But Connell has a much more democratic understanding of the act of theorisation and of the creation of knowledge. She demonstrates across this volume a democratic faith in the capacity of humans outside the ivory tower to think about their world with subtlety and insight.

Her early works of gender analysis draw from the activist knowledge of women’s liberation and gay liberation. Her examination of education and inequality foregrounds the knowledge that teachers produce. She draws from fiction in an effort to understand gender (citing Chinua Achebe and Patrick White, among others). And, especially in her later work concerned with “Southern Theory,” she emphasises the valuable knowledge produced by the subjects of colonialism on the periphery but systematically excluded by the intellectual authorities of the metropole. Such a democratic faith is evident even in her research methods. The method of life-history interviews, central to her scholarship, is distinguished by the space it grants to participants to provide their own, detailed accounts of events and experiences.

It is an extension of a democratic faith and a commitment to political change that Connell seeks to write in a clear and accessible manner. She announces in the introduction that “I think of writing as a craft” and she deliberately cultivates a “clear” and “unpretentious” style. The nature of a problem is stated directly, key terms are defined, evidence is provided, arguments are sustained. Connell claims to have learned her style “mainly from the historians I admire.” But there are distinctive touches: a heightened awareness of the reader (“Don’t worry folks, we’re nearly home,” she writes towards the end of one long theoretical elaboration); a sometimes conversational tone (“I am half joking…”); an unusual fondness for the exclamation point (!). This insistence on clear writing helps readers to understand Connell’s theorisation of social process. It has also helped her to win a wide audience and to enjoy an influence outside the corridors of the academy.

Connell’s introductions to particular papers are marked by self-criticism: “Looking back, it is easy to see its limitations”; “I made some mistakes”; “I fear some misunderstandings.” The self-criticism is most persistent with regard to an alleged inattention to colonialism and its implications for knowledge.

This is not performative breast-beating, for it underpins one of her major preoccupations over the past thirty years: a consideration of the ways in which the unequal relations between metropole and periphery have shaped social science, and an attempt to initiate the discipline’s decolonisation. Connell has pursued this process through a critique of “classical” social theory, by revaluating Southern Theory, and by analysing and promoting sites and networks of knowledge production outside of the Global North.

The project is incomplete, of course, but Connell’s attempts to help formulate an account of what she calls the “global economy of knowledge” are both exciting and important. As with her earlier work on class and gender, they also combine theoretical and historical exploration with practical attempts to forge connections outside of the universities, and to build alliances for change.

Reflection on the “Connell case” will certainly incite admiration among readers concerned with social justice, hopeful that social science might contribute to its achievement. To my eyes it is remarkable how consistently Connell has maintained her approach to politically engaged social research, and how fruitful the results have been.

In its collection and presentation of this scholarship, Research, Politics, Social Change not only shares this research, it also more fully discloses the methods and approaches that have made it possible. This service to readers will also inspire those who share a desire to use social science in the quest for a more just and equal world. •

Research, Politics, Social Change
By Raewyn Connell | Melbourne University Press | $40 | 256 pages

The post How the machine works appeared first on Inside Story.

Then, unlike many schools confronted by a similar fate, Albert Park College was given a second chance. A well-connected community campaign created the opportunity for a completely fresh start, with new buildings, new staff and new students. And that’s where Cook entered the story, hired as employee #1 to direct the design and construction of an entirely new school and serve as its inaugural principal.

Today Albert Park College is tightly zoned with more than 1500 students, more than 200 staff and a series of campuses with names like “Studio 120” and “APC Lakeside” peppered throughout the suburb. Students produce their own plays, organise literary festivals with big-name writers, speak at major climate rallies and conferences, and light up school functions with dance performances (before going on to secure jobs at places like the Moulin Rouge, Cook tells us). In 2021 Albert Park College was voted Australian School of the Year.

In his new book, From the Ground Up, Cook sets out not only to document this remarkable story of rebirth but also to provide fellow principals and budding school leaders with a how-to manual, a manifesto designed to spark a revolution from below. “The educational theorists and policymakers have had their chance,” Cook claims. “Now it’s time for schools to lead the way, with actions, rather than words.”

Cook believes that attempts to change the system from the top down are futile, counterproductive even. But he has a recipe for success that principals across the country can use to improve their schools, thus transforming Australia’s education system from the ground up. “Where must this change come from? Schools, not bureaucracies,” Cook proclaims. “How can it be done? This book provides the answers.”

On the face of it, this is an improbable claim, one that requires the reader to believe that what works in a place like Albert Park can work all across Australia. When Cook fleetingly attends to this objection he protests that his community has “lots of public and social housing mixed in with renovated terraces” and “many people who rely on social security benefits and lower-wage jobs.” But only 6 per cent of students at the school come from the most disadvantaged quarter of the Australian population. This is more than at the nearby public selective school (3 per cent) or independent school (1 per cent), and it’s a wonderful thing that around a hundred students from very disadvantaged backgrounds are able to attend a flourishing school like Albert Park College. But it’s another thing entirely to imagine that the strategies that work in this context can be readily applied by principals of schools where 26 per cent or 46 per cent or 66 per cent of students are highly disadvantaged.

Cook’s own account makes it clear why this is so. He describes, for instance, the vital difference the significant voluntary levy makes in funding the “annual literary festival, music festival, cabaret, musical, plays, dance performances, science competitions, debating program, senior school formal and graduation evenings, as well as underpinning our top-class ICT.” Then he points to the importance of elaborate fundraising. Cook recalls that when an extra million dollars was needed to build a “Liberal Arts Hub” with cafe, library and open fireplace, he launched a “1000 Club” — “a thousand people willing to give up a $1000 to make it happen. We thought it was crazily ambitious but we raised $670,000 this way.”

And then there is the parent body in an affluent inner-city community like this: “natural change agents — strong-willed, politically connected, media savvy, used to getting things done,” people willing to volunteer “professional expertise in the most valuable skills you can imagine — business, architecture, property management, politics, communications and other fields.”

It’s fine to reflect, as Cook does, that “for a local principal, it doesn’t really get any better.” But it’s a bit rich to turn around to other principals, many of whom face a whole different set of problems (which doesn’t include making the 1000 Club work), and proclaim that “this is the story of how we did it — and how you can do it too.”

And then there is a deeper problem still with Cook’s theory of change, one that goes to fundamental questions about how schools and school systems improve. When we think about any stirring story of school transformation, it’s natural to imagine a sequence in which quality is enhanced — great teachers are hired, innovative learning strategies employed, a strong culture created — and then enrolments expand in response. With this picture in our minds, we wonder how the first part was achieved, and take the second part as its validation and vindication.

But as Cook himself makes clear, things aren’t so simple. Increased enrolments are the cause as much as the consequence of improvements in quality: economies of scale help fund better buildings and a richer, more diverse curriculum; a preponderance of able and motivated students aids immensely in promoting student engagement and a positive learning culture. And, as we have already seen, the depth of the parent community’s pockets, not to mention their reserves of social and cultural capital, is vitally important.

Complicating matters further, Cook describes how in choosing a school parents often employ shortcuts to evaluate their quality, like the look and tone of the uniform, buildings and grounds, or the choices made by their friends and neighbours. All of this means that you can build a great school and they will come; but it’s also possible that if you divine the secret of building enrolments you might end up with a great school.

As it turns out, Cook is frustratingly elusive when it comes to the story of what happens behind the school gates and inside classrooms, and it is only when he shifts his attention to the interface between school and community that he moves into gear, laying bare the realities of how schools compete for the “right” students. But the thing about this aspect of his strategy, in which enrolment growth drives improved quality, is that it’s inherently a zero-sum game. The schools that can attract more, and more able and affluent, students inevitably do so at the expense of other schools whose ever-shrinking student populations are increasingly made up of students from disadvantaged families. This is not a recipe for a revolution; it’s the sorry recent history of Australian schooling in a nutshell. So the candid story Cook tells ultimately undercuts his larger argument that Albert Park College provides a formula for revolutionising Australian schooling.

As far as teaching and learning go, Cook mentions many seemingly impressive initiatives and activities, but the discussion is rarely more than newsletter-deep. Instead of sharing a rich account of how these programs work in practice, Cook presents his accumulated wisdom largely unmoored from the particulars. Uprooted from their specific context and denuded of detail, sentiments offered as insights often arrive as platitudes. “Everything we do is pointless if the students aren’t listening. We must find ways of making school appealing, stimulating and even fun,” Cook avers, surely surprising no one. “In the world outside the school, technology is everywhere,” he explains for the benefit of readers who may have gone out on Millennium Eve and only just woken up. “Students communicate endlessly using social media and watch television almost totally on digital devices.”

Teachers playing professional development bingo will surely need a drink when they hear this one: “Given that we live in a world of constant innovation, students will need to learn to think creatively to invent new technologies and products and to solve problems.” Or: “Not having academic attainment as your goal is like a political party not aiming to win elections to implement its program; a football team not aiming to win the grand final; a racing team not striving to win the grand prix; an army not trying to win the war.” Indeed.

Largely absent is a detailed account of how the school got from A to B, leaving school leaders hoping to learn from the experience empty-handed. For instance, Cook breezily recalls that “when we discovered disappointing Maths results in 2019, we threw significant resources at the problem and managed to improve results dramatically.” That’s it. No elaboration on the exact nature of the problem; the lessons learned; how the resources were used; or why the reform apparently worked so well. All the reader gets is the part they probably already knew, that additional resources may help.

While Cook briefly alludes to his school’s NAPLAN scores in maths, he skips over the fact that in recent years its year 9 NAPLAN scores in writing and spelling have also sometimes been below average compared with students of similar backgrounds. There is a case to be made that these indicators are relatively unimportant. Or that there is a trade-off between the basics, measured by NAPLAN, and creativity — and ultimately the latter is more important. But surely, in a book that proclaims to offer a prototype for the transformation of Australian schooling, the issue had to be acknowledged and the argument made.

So much of the complexity of managing schools lies in the challenge of balancing conflicting interests and imperatives. As an educator with many decades’ experience, Cook undoubtedly knows this very well. At one point in From the Ground Up he declares: “Your true aim is to get students performing strongly because they have a love of learning for learning’s sake.” Noble enough, if hardly revelatory. But elsewhere he insists on the necessity of fostering competition between students: “When competitive requirements are removed, effort tends to cease and not much work is done.” With fifty pages separating these two proclamations, Cook doesn’t explain how intrinsic motivation and external reward might be reconciled or balanced, or even acknowledge the potential tension between the two. And yet it is in that space, in between, that the most interesting and important dilemmas reside.

Likewise, it’s one thing to criticise schools, as Cook does, for “policing student technology use… when in the workforce they will be challenged endlessly to become more proficient and creative in their technology use.” But doing so is dangerously simplistic if you don’t acknowledge the evidence of an association between technology use and declines in reading ability and learning in general, or the negative impact of screen time on mental health, or the association with disorders like ADHD, or just the perpetual cycle of edtech hype and disappointment. Cook doesn’t even explain how his school’s Bring Your Own Mac policy works in cases where families struggle with affordability, or disengaged students don’t bother to bring their device to class.

This is not to claim that some very worthwhile things aren’t going on at APC (it seems like they are), but only that Cook’s account appears not to do them justice. A book that also included contributions from students, teachers and parents might have shed more light on what the school has achieved. As it is, for much of From the Ground Up the reader is left guessing what really explains the school’s dramatic transformation between 2006 and 2023.

Eventually, finally, a partial answer does begin to suggest itself when Cook turns to the story of how an increase in enrolments can itself help create a successful school (as much as vice versa). The old Albert Park College’s fundamental problem, according to Cook, was that its few remaining students were mostly from the area’s more disadvantaged families. That only compounded the challenge of turning the school around and arresting further enrolment decline. “To put it bluntly,” says Cook, describing the equation that greeted him when he arrived on the scene, “only by attracting middle-class families that place a high premium on education could we get ourselves in a position to lift up those from poorer backgrounds whose need for a good education was even greater.”

Looking backwards, Cook could see the wreckage of the old Albert Park school deserted by its own community, abandoned by parents “voting with their SUVs.” Looking forwards, the new iteration of the school still faced the same cutthroat competition from its well-resourced near neighbours. Cook had to persuade the good burghers of Albert Park to park their SUVs at the local public school, and there was no guarantee he would succeed. “Our early intakes were on average from relatively low socio-economic backgrounds and we had to work hard to convince the whole community that APC was for them,” he explains.

At this point marketing really mattered, and on this topic Cook leans in and whispers plenty of frank advice to peers and protégés alike. “The importance of good communications is something that cannot be underestimated,” Cook explains. “Schools should spend money on education, not communications, some might say. But good communications are essential.” If you don’t believe him, check out APC’s website. As soon as the video starts rolling, with its images of solar panels, school ties and student-led learning, the message is crystal clear. Progressive, environmentally conscious, but affluent and oh so successful, if a teal independent were a school this would be it. APC promises to be just like a private school but without the stuffy traditions — the perfect pitch for an area that is thoroughly gentrified but retains its artsy inner-city aura.

Then there is what the marketing gurus call “physical evidence,” the tangible signs of a product’s quality. “One of the best features of APC is the building design,” Cook explains. “This is because we put lots of thinking time and resources into the way our school looks.” The emphasis here is not so much on how the buildings can enhance teaching and learning — no discussion of the problematic acoustics of open-plan learning environments, for instance, or the challenges of managing the distractions from students passing by. It’s all about how physical infrastructure works as a marketing tool. “This shouldn’t be considered a luxury,” Cook insists. “It is essential to your school’s future success, in part because the schools that are competing for enrolments, especially non-government schools, take the look of their campuses very seriously indeed.”

In a similar vein, uniform-clad students constitute a critical marketing channel, effectively acting as brand ambassadors and social influencers in their local community. Cook describes how he engaged design and branding experts to create a “colour palette that provides a consistent and professional aesthetic” for the campuses, uniform and “other touchpoints.” The school’s high-end (and expensive) uniforms, featuring a big A on the pocket, make it clear that Albert Park College is conceding nothing to the prestigious private schools it is competing with.

The idea of school principal as marketing manager may seem unsavoury, but Cook is unapologetic. “While many education policymakers think parents choose schools for their children based on the school’s standing in academic league tables, in reality it isn’t so straightforward,” he confides. “Experienced educators know that parents tend to form judgements according to common sense, often on first impressions.” If first impressions can be decisive, then the website, the uniform, the polish of a school’s reception, the view from the road, or the look and feel of facilities on open night can determine whether a child is enrolled at your school or the one down the road.

Of course, spin alone is not enough. Good marketers have to get the product and the delivery right as well. And we know that peers, parents and scale help mightily in creating a good product. So if the enrolment battle can be won, a virtuous cycle will likely ensue. Cook’s marketing savvy has evidently enabled Albert Park College to achieve just this kind of momentum, with entirely happy consequences.

Cook might claim that he has shown how the Davids can take on the Goliaths and win. And it is a striking fact that Albert Park College has achieved its dramatic reversal of fortune with only half the funding per student of the high-profile private schools it has to compete with. Doesn’t this show that it’s possible to defy the odds, to kick goals even when the playing field is tilted against you? It’s impressive, for sure. But, no, it doesn’t alter the basic structural equation. For every school that increases its intake of the advantaged and the able, another has to take on greater responsibility for educating the marginalised and disengaged.

Highly sought-after and successful public schools are widespread in the affluent suburbs of Australia’s capital cities. Their locations provide them with a decisive advantage in terms of motivated and privileged student populations, accompanied by educated and affluent parent communities (as Cook’s narrative richly illustrates). These human resources — peers and parents — and the social and cultural capital they bring can be as important as a school’s income. But not only does this fact fail to make life easier for schools in less well-heeled areas, it actually makes their task harder.

In recording how he won at the game of school choice, Cook provides a revealing glimpse of the incentives and imperatives school principals face as they compete for enrolments, and the methods with which they inevitably respond. His candour on the subject makes for a valuable account. But his claim that struggling schools can pull themselves up by the bootstraps by applying the solutions he has discovered in Albert Park (and that all bureaucrats need do is “stop meddling”) is not only flawed but dangerous. Such a conclusion discounts entirely the structural obstacle: the zero-sum competition for student enrolments that is at the heart of Australia’s educational woes — and which much of Cook’s story incidentally lays bare. •

From the Ground Up: How a Community with a Vision and a Principal with a Purpose Created a Thriving State School
By Steven Cook | Black Inc. | $29.99 | 256 pages

The post Good story, bad theory appeared first on Inside Story.

The HAFF is supposed to deliver 30,000 social and affordable homes over five years. It would be the first significant federal investment in rental homes for low-income earners since the Rudd government’s social housing initiative a decade and a half ago. That $5.6 billion scheme in response to the global financial crisis built almost 20,000 new dwellings and repaired another 12,000, some of which had become uninhabitable.

After that sugar hit, though, it was back to the usual lean years for not-for-profit housing providers, who once again had to cobble together funds from a range of sources to complete one-off projects, always uncertain where the next bucket of money or parcel of land would come from.

The result: Australia’s share of social housing, where rent is fixed at no more than 30 per cent of tenant income, continued its long-term decline to fall from just over 5 per cent of all dwellings in 2001 to 3.8 per cent at the last census.

Given the rarity of substantial public funding, many in the community housing sector are keen to see the HAFF proceed. Yet few could deny that the Greens’ critique is correct — Labor’s scheme is a meagre response to the scale of the problem.

More than 163,000 households are waiting for social housing. Since many of those households are couples and families with children, the number of people stuck in the queue is well over 300,000 and their wait could be longer than ten years. Four in ten households are classified as “greatest need” — in other words, they’re not just struggling to keep a roof over their heads but may be homeless or at risk of homelessness, fleeing family violence, or living in housing that makes them sick.

In its latest State of the Nation’s Housing Report, the National Housing Finance and Investment Corporation estimates that 331,000 low-income households are in rental stress, spending more than 30 per cent of their income in rent and unable to afford other essentials such as food, heating and transport. But, as the corporation acknowledges, this estimate is conservative. Other recent analysis puts unmet housing need at 640,000 households. The Greens are right to say that the 30,000 homes promised under the HAFF will barely touch the sides of Australia’s housing crisis.

Another strand to the Greens’ critique is that it will take too long for any homes to get built. In the interim, thousands of low-income tenants are at risk of being forced out of their current homes as they are removed from the expiring National Rental Affordability Scheme (another Rudd initiative).

The $10 billion for the HAFF will be invested rather than spent directly on housing. Only its returns, at least a year away, will fund construction. And, as the Greens also point out, Australia’s existing Future Fund lost money last financial year, so it could be several years before proceeds are available to invest.

The government says that up to $500 million from the HAFF could be invested in housing each year but it hasn’t specified a minimum annual spend.

Even assuming immediate positive returns, money from the fund won’t provide up-front grants to build dwellings. Instead, they will be used to bridge the gap between the rents low-income tenants can afford to pay and the costs of building, maintaining and operating housing. The idea is to give not-for-profit housing providers revenue certainty so that they can borrow from other sources. In this way, modest sums of public money are used to leverage large amounts of private capital for a positive social purpose.

At least that’s the theory. Analysis for the Australian Housing and Urban Research Institute concluded that “no amount of ‘innovative’ procurement or financing will yield a government ‘free lunch.’” The researchers found that the cheapest and most efficient way to fund new social housing is direct public investment — which is what the Greens are pushing for.

“Our point to the government is that you would not fund schools or hospitals via an uncertain gamble on the stock market,” housing spokesperson Max Chandler-Mather told the Conversation’s Michelle Grattan. “We’re much better off investing money directly in building public and affordable housing every year.”

Like Rudd’s GFC stimulus package, the HAFF will soon be fully committed. New builds will grind to a halt and we’ll be back to square one.

The Greens want the government to commit $5 billion in social housing funding annually. They say the money could come from reining in negative gearing and the capital gains concessions to property investors, or repealing the stage three tax cuts.

They are also calling for a two-year rent freeze. This sounds like a pitch to voters in the urban seats they hope to pinch from Labor at the next election, and it may well strike a chord in electorates with a high proportion of renters, like Macnamara in Melbourne, where Labor narrowly defeated the Greens on preferences in 2022. But it is a very blunt instrument likely to deter new private investment and have other unintended consequences.

A better approach could involve adapting sophisticated European models of rent regulation. Germany, where 58 per cent of households rent, has a system of reference rents for similar-quality dwellings in the same city or region. Landlords can’t raise rents more than 15 or 20 per cent above this level in any three-year period. Rents can rise in response to cost increases and wage increases, but only in a predictable and gradual manner. As economics writer Peter Martin has pointed out, the ACT limits rent increases to CPI and “Canberra landlords don’t seem to have withdrawn from the market.”

The government regards rent and tenancy laws as a matter for the states and territories. The Greens counter by pointing to the role Canberra played in preventing evictions during Covid. And Labor has undermined its own argument by making efforts to strengthen national renters’ rights a key priority at the most recent meeting of national cabinet.

The government could also use the National Housing and Homelessness Plan, which it is developing at the moment, and the next National Housing and Homelessness Agreement to develop measures with the states and territories to moderate rent rises and improve tenant security by getting rid of no-cause evictions and lease terminations.

The Greens’ overall critique of the HAFF is in many respects well founded. But are they letting the perfect be the enemy of the good by blocking the legislation?

The current stoush is reminiscent of the stand-off over Kevin Rudd’s carbon pollution reduction scheme, which the Greens refused to back in 2009, arguing that it would not reduce carbon pollution for at least twenty-five years. The following year they backed Julia Gillard’s carbon price instead. The outcome was a better policy.

Yet the Greens continue to wear opprobrium for that decision, not least because Gillard was so weakened by the broken “carbon tax” promise that her government and its carbon price were thrown out at the next election, ushering in a decade of inaction on climate.

Would it therefore be wise for the Greens to back the HAFF, despite all its shortcomings, and use it as a building block for better policy?

That’s certainly the view of their crossbench colleague senator Jacqui Lambie, who has labelled the Greens’ opposition “disgusting.” “For goodness sake, just tick off on it,” she said earlier this month. “Let’s get these homes built.”

Labor’s Penny Wong, leader of the government in the Senate, is similarly impatient. She has accused Chandler-Mather of prioritising media attention and his own ego “over housing for women and kids fleeing domestic violence.”

But Labor may be underestimating its opponent. A self-declared “massive housing nerd,” Chandler-Mather has a firm grasp of the policy issues and has a demonstrated capacity to get his message across to key audiences, especially younger voters. After all, that’s how he won the Brisbane seat of Griffith from Labor’s shadow environment minister, Terri Butler, at the federal election.

Labor leaders may also be misjudging the political moment. Many of its own members think the party’s housing policy is too weak and have put negative gearing reforms on the agenda for debate at Labor’s national conference in August. While prime minister Anthony Albanese dismissed such moves, the mood may be shifting.

A long-term trend is shifting households away from home ownership towards renting, and it isn’t only young people who are affected. Growing numbers of families with children are renting, and an increasing cohort of older long-term renters face the prospect of their precarious housing circumstances extending into old age as they leave the workforce and their incomes fall.

Late last year the government appointed Susan Lloyd-Hurwitz as the interim head of its National Housing Supply and Affordability Council “to deliver independent advice to Government on ways to increase housing supply and affordability.” As the former head of Mirvac Property and a former president of the Property Council, Lloyd-Hurwitz is not a usual suspect when it comes to debates about tax breaks for property investors. Last week she told the Financial Review that she thinks that concessions like negative gearing and the capital gains tax discount drive up prices and should be reined in.

Chandler-Mather says the Greens’ demands are “a public starting position” and “they’d like to meet the government half way.” If Labor wants to get the HAFF over the line, then it could offer more. It could, for example, go beyond the treasurer’s oblique hints that there will be more money and pledge that the HAFF will be only the first tranche of a pipeline of investment. It could also indicate more clearly how it might work with the states and territories to improve conditions for tenants in the private rental market.

Affordable housing policy consultant Jennifer Kulas recommends that the government tweak the scheme to provide greater certainty that much-needed funding will be made consistently available to the sector over time. She says it could remove the $500 million cap on annual disbursements and formally guarantee a minimum yearly amount from the HAFF instead. Those funds could be indexed in line with construction costs, which rose almost 12 per cent last year. The government could also promise to increase the HAFF’s base capital each year so that the fund continues to grow and fund new housing beyond its current five-year horizon.

By pushing the HAFF to the brink, Albanese appears to be wagering that Labor can see off the Greens’ challenge at the next election by arguing that they stopped any new homes from getting built. But given the way the debate about housing in Australia is developing, that may not be the safest bet. •

On Tuesday 23 May, Peter Mares will be facilitating a free online forum on Australia’s housing crisis for La Trobe University’s Ideas and Society Program.

The post The perfect versus the good appeared first on Inside Story.

And yet, when you toggle to the “students with similar backgrounds” rating, things change dramatically. The aquas and greens start being replaced by a series of pink and red cells. Compared with schools that enrol a similarly privileged clientele, Girton’s scores are often below, or even well below, average. As far as NAPLAN results can be relied on, the most that can truthfully be said is that students who are already on the road to success tend to start Year 7 at Girton Grammar. The school’s claims about its role in their progress seem to reverse cause and effect.

It’s not just Girton. Any school that recruits lots of already high-achieving students will almost inevitably star in NAPLAN league tables and end-of-school awards lists. And those top-line results will help greatly in generating more demand for enrolment places. This gives schools a systematic incentive to focus on marketing their flashy buildings and state-of-the-art facilities rather than the harder, more complicated and more important work of taking students from whatever point they start at and helping them realise their full potential.

Girton Grammar is the kind of school that Melbourne University’s John Hattie, the apostle of educational effectiveness, has termed a “cruiser school.” It clearly succeeds at enrolling already high-achieving and socially advantaged students (56 per cent of them from the top quarter of the Australian population) and excluding children from disadvantaged backgrounds (just 4 per cent from the bottom quarter). But in terms of adding value, and materially enhancing the trajectory its students are already on, the available evidence shows few signs of success.

Cruiser schools, says Hattie, are “a major contributor to Australia’s declining educational performance,” a view endorsed by the second Gonski report on achieving educational excellence. In particular, cruiser schools are responsible for significant declines in achievement among Australia’s most advantaged and high-performing students. In the OECD’s PISA tests, for example, maths literacy among high-achieving students declined by around thirty-five points between 2003 and 2018, equivalent to a year and a quarter of learning. That was an even sharper decline than among low-achieving students. A successful strategy of attracting high-SES students at the individual school level, applied over and over again throughout the country, has been a recipe for national failure.

Cruiser schools are mostly, though by no means only, private schools, simply because we have decided that these schools should be exempt from the obligations imposed on most public schools. The elaborate enrolment application process for Girton Grammar, for instance, makes it clear that admission, as well as expulsion, is entirely at the discretion of the head. Then there are the tuition fees, which range between $12,000 and $15,000 a year, and that’s before you add in the non-refundable application fee, the capital fee and the curriculum levy.

Girton Grammar principal Emma O’Rielly insists that “Girton enrols students from a wide range of backgrounds, from families where parents have made substantial sacrifices from their after-tax income to educate their children in a school that matches their needs.” The school, she told me, “offers a range of means-tested scholarships for students whose parents would not ordinarily be able to access a Girton education due to their financial circumstances.”

And yet the impact of the various barriers to entry is palpable. Ten minutes away at the government secondary school, Weeroona College, 55 per cent of students come from the most disadvantaged quarter of Australian families, a strikingly higher figure than Girton’s 4 per cent.

Across Australia private schools use their resource advantage to attract students from better-off families yet fail to add significantly to their students’ overall educational achievements. Study after study after study has concluded that even though non-government schools have more income per student than public schools, their contribution to student achievement (adjusted for the socioeconomic profiles of students) is no higher. Despite much greater financial resources, non-government schools only manage to produce the same results as less well-resourced public schools.

Jenny Chesters, a researcher at the Melbourne Graduate School of Education, has gone further. Using data from the Longitudinal Survey of Australian Youth project, she found that there is “no statistically significant association between type of school attended and employment status, occupation or earnings at age twenty-four.”

Why do non-government schools need more resources — building, grounds, staff and marketing budgets — to produce the same output, in academic terms at least, as their public counterparts? And why, more generally, is Australia bedevilled by the problem of cruiser schools?

In a perceptive paper on designing successful school systems, the OECD singled out the harmful effects of allowing schools to pursue success, or the appearance of it, by cherrypicking already high-achieving students. “The international evidence suggests that schools that are selective in their admissions tend to attract students with greater ability and higher socioeconomic status, regardless of the quality of the education they provide,” say the paper’s authors. They continue:

Given that high-ability students can be less costly to educate and their presence can make a school more attractive to parents, schools that can control their intake wind up with a competitive advantage. Allowing private schools to select their students thus gives these schools an incentive to compete on the basis of exclusiveness rather than on their intrinsic quality. That, in turn, can undermine the positive effects of competition.

That sounds embarrassingly like what we do in Australia. While all schools receive taxpayer funding, some are allowed to pick and choose the students they enrol (and keep) and charge admission fees as they please. Taxpayer funding, meanwhile, gives the exclusive schools the significant resource advantage that helps them attract those who can afford the ever-increasing fees. Australia’s “cruiser schools” don’t exist in spite of public policy but because of it.

Critical to this dynamic is the fact that ever-increasing public subsidies have abjectly failed to improve the affordability and accessibility of private schools. The most recent research pointing to this reality came from the Blueprint Institute, a pro-market think tank with former Liberal ministers Bruce Baird and Robert Hill on its board. The institute’s Ensuring Choice report revealed that “the average independent school has raised its fees by 50 per cent over the last decade ending in 2020 — far outstripping wage growth (29 per cent) and inflation (22 per cent) over the same period.”

The result: “middle-income families are priced out of contention for enrolment spots.” The institute could have added that the pattern of the last decade was a perfect replica of the ten years before that, or that Catholic leaders long ago publicly acknowledged that their schools now largely exclude the poor.

Australia has one of the most socially segregated school systems in the OECD. Students from underprivileged families face the “double disadvantage” of their socioeconomic background combined with attendance at schools where they are surrounded by similarly disadvantaged peers. An abundance of evidence indicates that concentrating disadvantaged children in the same schools only further stacks the odds against them.

Students from more privileged families, conversely, might be expected to benefit from the “double advantage” of high family socioeconomic status and a cohort of similarly privileged peers. But, as we have seen, this is not how it plays out in practice. Instead, these students are falling further and further behind their international counterparts, floundering in schools more focused on intake than output. Allowing and even encouraging some schools to cherrypick their students has succeeded only in undermining both equity and overall achievement.

All of the above might plausibly have provoked a series of questions among Productivity Commission staff as they wrote their recent report on the National School Reform Agreement, the four-year funding deal that defines how Australian schools are resourced, on what terms and to which ends. Why, for instance, does intense competition between Australian schools fail to generate the productivity gains economists might expect? Why has a huge increase in government funding to private schools yielded no discernible return in terms of either affordability or student achievement?

And then there is an even more fundamental question that goes beyond outcomes, effectiveness and productivity to the role of schools in the cultural formation of citizens. This question returns us to those two schools in Bendigo, ten minutes apart, that serve young people from completely different social worlds — a dynamic that repeats itself in towns and suburbs across the country in a pattern of segregation that inevitably includes a racial as well as a class dimension. What is the hidden curriculum embedded in these arrangements? What are the lessons contained in this organisation of learning and learners?

To the Productivity Commission’s credit, its report acknowledged some dimensions of the problem. It reported evidence that “students from priority equity cohorts demonstrated, on average, less learning growth… if they attended a school with higher concentrations of students experiencing disadvantage.” It also recognised that these schools “tend to have less experienced teachers on average and are more likely to struggle with staff shortages and classroom management.”

But the commission didn’t examine how concentrations of disadvantage and privilege have resulted from the way we resource and regulate our schools. Notwithstanding its broader preoccupation with competition, there was little attention to how it works in Australia’s school sector.

In ignoring these matters, the Productivity Commission’s work reflects a myopia that dates back at least as far as the governments of John Howard and Julia Gillard, whose respective policies are primarily responsible for the shape of our school system today. This narrow orthodoxy either takes Australian-style school competition for granted, as though there is no alternative, or assumes that all competition is good without contemplating the unlevel playing field on which it occurs. A similar silence descends when it comes to the failure of ever-increasing public spending to achieve its ostensible purpose of expanding school choice.

Outside this Australian orthodoxy, alternatives exist. Numerous comparable countries, including Canada, New Zealand, the Netherlands and Scotland, have arrangements in which all schools, government and non-government alike, are fully publicly funded on a common basis and universally prohibited from charging admission fees or applying selective enrolment policies, other than those strictly defined to support their special ethos.

As Chris Bonnor and I argue in our new report, Choice and Fairness: A Common Framework for All Australian Schools, it would now be surprisingly affordable to adopt similar arrangements in Australia — largely because so many private schools in this country already receive at least as much taxpayer funding as comparable public schools.

A framework in which all schools are eligible for full public funding, and are free to the user, would tackle the problem the Productivity Commission — along with many others — has not. It would minimise social segregation, reduce the outsized impact of negative peer effects on student achievement, and ensure that schools compete not on their ability to attract additional resources and the “right” students but on their capacity to help each child achieve a full year of learning, every year, and to realise their full potential.

All schools receiving public funding would be open to children of all abilities and prohibited from excluding children on the basis of entrance tests and other similar discriminators. Non-government schools could continue to apply enrolment and other policies necessary to promote their specific religious or educational ethos, but if they are unwilling to accept funding obligations, they would forfeit their public funding.

The obvious objection is that a proposal like this is politically unthinkable. But there is a circularity in such an objection. The question is: why is it unthinkable to challenge the basic assumptions underlying Australia’s unique — and uniquely bad — dual system of taxpayer-funded schools?

This complex question has many answers, but here is one. Advocates for public education typically frame their argument in exclusively egalitarian terms, either ignoring the case for choice and competition or regarding it with active hostility. This approach accepts that there is an inescapable trade-off between choice and equity, and then vigorously argues that the latter should trump the former.

In political terms, this is a losing strategy, as a half-century of failed attempts to implement needs-based funding attests. There is just too large a constituency who like choice, either because they prefer something other than a secular, government-owned and -operated school, or because they place a premium on the capacity to opt out.

In embracing the choice-versus-equity dichotomy, champions of public education have failed to point out that we currently enjoy neither. Instead of offering meaningful choice, existing policies have created non-government schools that openly acknowledge they price out the poor. Instead of putting downward pressure on fees, public subsidies have enhanced the market power of exclusive schools. Instead of creating the competition that engenders diversity, dynamism and innovation, public policy has succeeded only in producing cruiser schools.

Rather than continuing the false debate between choice and equity, it is time to affirm the value of both and explore how each could be realised more effectively than at present. The first step is for critics of the status quo to engage in the task of reimagining how choice and competition could be shaped to advance the common good. If we think the choice for Australian schooling is between the unthinkable and the indefensible, it is time we thought harder. •

The post Reimagining choice and competition in schools appeared first on Inside Story.

The report included sensible discussion of a wide range of options for promoting productivity, none of which were likely to provoke violent controversy. But, like Sherlock Holmes’s dog that didn’t bark, the absence of controversy is notable and revealing.

The trajectory of the Productivity Commission is a microcosm of the history of neoliberalism (often described in Australia as “economic rationalism” and “microeconomic reform”). During the fifty years since the early 1970s, neoliberalism has gone from being an economic policy revolution (or counter-revolution) to being a dominant ideology, before finally fading to near irrelevance.

The Productivity Commission dates back to the beginning of that period, in 1973, when it replaced the old Tariff Board. In those early days it was called the Industries Assistance Commission, or IAC, and it was part of the first bout of microeconomic reform in Australia.

Prime minister Gough Whitlam had recently taken power, and his government — despite its big spending program — was the first to promote economic rationalism. It cut tariffs across the board by 25 per cent and abolished the superphosphate fertiliser bounty paid to farmers, repudiating the policy of “protection all round” promoted most strongly by Country Party leader John “Black Jack” McEwen.

“Protection all round” combined import tariffs, which raised costs for farmers, with subsidies (like the superphosphate bounty), which lowered them. Struck by the difficulty of working out the net effect of these policies, one of Australia’s great economists, Max Corden, developed the concept of “effective protection.”

Decisions to cut industry assistance were unpopular, to put it mildly, in the sectors directly affected. The IAC’s job was to analyse the impact of such policies on the economy as a whole. It took on a task that had previously been split between the Tariff Board, which advised on protection for manufacturing, and the Department of Primary Industry, which dealt with assistance to agriculture.

While the Tariff Board had moved towards a more critical perspective on protection under its final chairman, Alf Rattigan, the new IAC (also chaired by Rattigan) was unabashedly ideological. Its primary objective was to “improve the efficiency with which the community’s productive resources are used.” While ordinary Australians might have understood this to refer to the efficiency of production, or “productivity,” the IAC interpreted it in the technical sense dominant in economics, which implied the need to remove all “distortions,” such as tariffs and subsidies. The paradox of an IAC rigidly opposed to assisting industries eventually led to a shortening of its name to the Industries Commission.

Disputes over tariffs dominated the work of the IAC and the IC over the 1970s and 1980s. The cause of free trade lost ground under the Fraser government before triumphing under the Hawke–Keating government and its successors. Today there is virtually nothing left of “protection all round,” or of the manufacturing sector it protected. What remains of Australian manufacturing is dominated by simple products like meat, bread and wine, along with limited processing of minerals and a handful of niche producers of high-tech equipment.

As the importance of manufacturing declined, the scope of microeconomic reform expanded. National competition policy, privatisation and public–private partnerships were all on the agenda. From a relatively limited program of “getting prices right” in the 1970s, the advocates of neoliberalism had shifted their focus to comprehensively reversing the growth of government during the twentieth century.

The glory days of the Productivity Commission were the 1990s. (The name was adopted in 1996 when the IC swallowed its main institutional rivals, the Economic Planning Advisory Council and the Bureau of Industry Economics.) Using measures newly developed by the Australian Bureau of Statistics, the PC announced that Australia was experiencing a “productivity miracle.” More precisely, this marvellous performance was not so much miraculous as “the ‘predictable’ outcome of policy reforms designed to raise Australia’s productivity performance.”

By the time the PC released an account of its first thirty years in 2003, the glow of the productivity miracle was beginning to fade. But there were still grounds for confidence that the program of reform would continue, delivering improved living standards for all Australians.

As it turned out, the process of microeconomic reform was pretty much over. National competition policy had run its course. The tide was beginning to turn against privatisation. The one major attempt at continued reform, John Howard’s WorkChoices, was a political disaster largely reversed under the Rudd–Gillard government.

Moreover, the productivity miracle fizzled out completely. Dispute remains over whether it was a statistical illusion or an unsustainable blip. But, as the latest five-year report shows, the reforms of the late twentieth century didn’t deliver a boost in productivity. Over the period since 1990 (which includes the “miracle” years), annual labour productivity growth has averaged 1.6 per cent, lower than the 2.4 per cent recorded in the 1960s and 1970s.

There are many reasons for this decline, but the most important is the transformation of the economy from one based on producing, transporting and distributing physical goods to one based on human services and information. To the extent that they were ever relevant, the policy prescriptions of twentieth-century neoliberalism have nothing to offer here. On the other hand, we have yet to see the emergence of a coherent alternative.

To its credit, the PC has responded by focusing on more relevant policy issues. The central themes of last week’s report are improving education and managing energy transition. The recommendations are sensible, with little if any ideological content.

Privatisation, once the signature policy of neoliberalism, gets only a single, negative mention, in a discussion of the impact of the privatisation of building surveyors in the 1990s. It seems likely that privatisation’s last gasp, the sale of state land titles offices, will be similarly disastrous.

The “good fight” against tariffs gets a brief run, with the argument that tariffs are now so low that compliance costs outweigh any revenue benefits. The PC’s view that they should be reduced to zero is hard to disagree with.

As has been true throughout its fifty-year existence, the Productivity Commission has produced another piece of well-written and professional analysis. But whether it is worth extending the life of a body so thoroughly tied to the era of neoliberalism is an open question. •

The post Neoliberalism’s child appeared first on Inside Story.

This is the Boundary Estate, a public housing scheme that has provided quality homes to working-class Londoners since 1900. It was Britain’s first council housing project and one of the earliest examples anywhere of public investment in affordable homes.

The rise of the estate’s circular garden is reminiscent of an Anglo-Saxon burial mound — and it is a burial place of sorts, interring the rubble of Old Nichol, a notorious East End slum demolished in the 1890s. Described by the Illustrated London News as a “painful and monotonous round of vice, filth and poverty,” Old Nichol was a place of disease and deprivation. Thousands of families crowded into dwellings of just one or two rooms, the walls held together by cheap “billy-sweet,” a mortar that never dried out. Babies born in the slum had a one-in-four chance of dying before their first birthday.

For about eighty years after the Boundary Estate opened, almost all public housing in Britain was “council housing,” built and operated by local authorities. In Australia, state governments took the lead. In both cases public investment dried up in the closing decades of the twentieth century, ushering in a period of decline in the quantity and quality — and the reputation — of public housing.

In both places, housing construction and management increasingly shifted away from governments, local or state, to not-for-profit housing providers, although this process is further advanced in Britain than Australia. What was once known as council or public housing is now generally covered by the broader banner of “social housing.”

My guide through the Boundary Estate is social historian John Boughton, and I’ve drawn liberally on the opening chapter of his book Municipal Dreams, a chronicle of the rise and fall of council housing in Britain, in describing its history. The book grew out of his blog of the same name, launched a decade ago as a retirement project after he left his job teaching history to senior high school students.

“It was completely normal”: the Boundary Estate today. Peter Mares

For Boughton — whose long-term Labour Party membership included what he calls a brief, unremarkable stint as an elected local government official — the neglected subject of council housing chimed with existing political and academic interests. It deserved greater attention, he thought, but he never expected his blog to prove so popular.

“It just took off,” he says. “It caught a moment.” Boughton thinks the contemporary housing crisis has spurred interest in his writing by exposing the limitations of a neoliberal reliance on private capital and free markets to address complex social challenges. “People are starting to look with more sympathetic eyes on the role of the state, in housing in particular.”

Perhaps, too, the blog hit a chord with a generation shaped by council housing. Many of Boughton’s relatives lived on council estates, as did friends and acquaintances. “It was completely normal,” he says. One in three Britons lived in a council home in 1981, and it was often the best housing they had ever experienced.

Today, though, council housing suffers from an image problem almost as bad as Old Nichol’s in the nineteenth century.

I met Boughton soon after the final episode of the hugely popular Happy Valley screened on the BBC. As in many British crime series, part of the action took place on a council estate — in this case in Yorkshire, where a troubled woman was exploited by an unscrupulous criminal duo.

The image of crime- and poverty-ridden housing estates, reinforced time after time in fictional series and news coverage, has stuck. “The tendency to associate council housing with criminality has exaggerated and denigrated the experiences of millions of people currently and in the past,” says Boughton. “That is not to deny problems and missteps along the way. But it is a negative stereotype, and it is self-reinforcing.”

Where problems do arise on particular estates at particular times, they are always shaped by larger forces, he says, and especially the profound effect of demographics.

He cites the Pepys Estate, just south of the Thames in the Borough of Lewisham, which was very popular when it opened in 1973. Built on the site of a former naval dockyard and accommodating 5000 people in 1500 homes, it was one of the Greater London Council’s largest and most prestigious projects. Design innovations included basement garages to separate pedestrians from cars and elevated walkways between blocks to encourage neighbourly interaction. In TV dramas, these same locations are now likely to feature as hangouts for loitering gangs and escape routes for villains.

High-rise flats have become particularly reviled for facilitating antisocial behaviour, as if the fault resides in the very fabric of the buildings. Boughton insists the architecture isn’t to blame. “A great variety of estates have suffered problems,” he says. “Low-rise estates too, not just tower blocks.”

The roots of such ills lie elsewhere. In the decade from 1978, Lewisham lost 10,000 jobs and unemployment trebled. By the mid 1980s more than half the borough’s residents aged sixteen to twenty-nine were jobless. The Pepys Estate was hit hard, and an alternative economy sprang up based on drugs and crime. Racism was rife. Rather than fighting to get into a flat, people were begging to be transferred out.

Boughton tells a similar story abou the Park Hill Estate, a 996-flat scheme that replaced some of the worst slums in Sheffield. Completed in 1961, it also had “streets in the sky” — elevated walkways wide enough for children to play on, which enabled neighbours to chat without the noise and disruption of passing traffic. It had shops, pubs, schools, clinics, community centres and, in the words of one resident, other unaccustomed luxuries: “Three bedrooms, hot water, always warm. And the view. It’s lovely, especially at night when it’s all lit up.”

By the early 1980s, though, Park Hill was another towering symbol of council housing failure, its celebrated brutalist architecture blamed for criminality and vandalism. What rarely gets mentioned is that in the intervening decade Sheffield had lost a massive 40,000 jobs.

“Council housing does not exist in a vacuum. It exists in a social and economic context,” says Boughton. “What is happening to these communities is the product of policy and political choices.”

Attitudes towards council housing also changed as Britain became more affluent. “Into the 1960s, it was the best housing most working-class people could aspire to,” says Boughton. “But as owner-occupation became more widespread, council housing was seen as less desirable for sure. There was a psychological shift.”

As the economy declined in the wake of the oil shock and stagflation in the 1970s, public spending fell too. Repair and maintenance were neglected. Labour, which had once believed council housing should meet “general needs,” moved closer to the Conservatives’ view that it was better seen as a welfare safety net reserved for the vulnerable.

At one level, the shift (which was mirrored in Australia) makes sense: the fairest way to manage limited public resources is to prioritise the neediest. Over time, though, social housing was transformed into housing of last resort — an ambulance service that picks people up from the bottom of the cliff rather than a fence preventing anyone from falling.

Forty years later, social housing in both Britain and Australia accommodates an increasingly narrow stratum of society — the very poorest and those experiencing the most layers of disadvantage. This “residualisation” makes it easier, in turn, to stigmatise residents as “troubled” and point to “failed estates” as evidence that public investment in decent housing is a fundamentally flawed ideal.

Residualisation was compounded in 1980s Britain by the hammer blow of Thatcherism. The national government cut investment in council housing and stopped new construction in its tracks. In the year Conservative prime minister Margaret Thatcher took office, building commenced on nearly 80,000 new council homes in England and Wales. Within a decade, annual new starts had fallen to just 400. But when councils stopped building in England — the green band on the chart below — the private sector failed to pick up the slack. The overall supply of new housing dropped precipitously and has never recovered.

Source: Live table 213, Department for Levelling Up, Housing and Communities and Ministry of Housing, Communities & Local Government

Determined to convert Britain into a nation of homeowners, Thatcher also introduced the right-to-buy scheme. By the time the Conservatives lost office in 1997, one-in-four council homes had been sold, with prices discounted by between a third and a half of market value (up to a ceiling of £50,000). It amounted to a massive, highly subsidised transfer of public assets into private hands, and most of the receipts went straight to Treasury to retire debt.

Tenants with means were supported to become owner-occupiers; those without got less assistance than before as public investment in council housing dried up. “Typically, the best, most desirable homes got sold and the less desirable units got left,” says Boughton. “It was another form of residualisation.”

For many, this brought windfall profits. Boughton gives the example of a security guard living on a council estate in Camden who bought his flat for £39,000 under the scheme. It was valued at £70,000 at the time. Three decades later, his home was worth £600,000. Not surprisingly, he thought the scheme was “perfect.”

“The irony is that generally the first generation of former tenants who became owner-occupiers then sold off those homes,” Boughton says. Forty per cent of homes bought by their tenants are now back on the private rental market, though in poorer condition and with higher rents than the council houses next door.

“If you walk onto a suburban council estate, the well-maintained and modernised houses are council owned, while those sold under the right-to-buy scheme are least well maintained and equipped,” says Boughton. “The market does not do a very good job.”

About 40 per cent of the homes in the Boundary Estate are now in private hands, and those that are rented out are seen as desirable properties. At the “guide price” of £450 per week, a one-bedroom flat would eat up the entire pay packet of a full-time worker earning the London Living Wage.

The rest of the estate’s residents remain tenants of Tower Hamlets, the local authority. In 2006, the tenants vetoed a plan to transfer the estate from the council to the not-for-profit Southern Housing Group, even though the housing association had promised to redecorate the flats and install new kitchens, bathrooms and boilers.

In hundreds of other estates, tenants have voted to switch from the local authority to a housing association. Back in 2001, two-thirds of all social housing in England was owned and operated by local governments and one-third by registered housing providers. Today, those figures are almost reversed, and fewer than four in ten homes remain in council hands.

For the Conservatives, the shift from local authorities to housing providers was — like the right-to-buy scheme — ideological. Boughton says the Tory government genuinely believed that council housing was “the state at its worst, bureaucratic, distant and inefficient.”

While acknowledging that an era of austerity made it difficult for councils to maintain the quality of housing, he says there was some justification for the Thatcherite critique. “It varied from council to council, but some took their eyes off the ball, neglecting maintenance and repair,” he says. “Ongoing expenses were not always budgeted for.” The results weren’t all bad, he adds: local governments responded by decentralising decision-making and devolving management.

The shift to not-for-profit housing associations continued after Labour took government in 1997. Smaller and locally based, housing associations were seen as more agile than councils, more attentive to tenants’ needs and better aligned with Tony Blair’s “Third Way.”

These arguments are familiar in Australia, where the not-for-profit, or “community,” sector is also growing. The Community Housing Industry Association’s chief executive, Wendy Hayhurst, recently urged the Albanese government to direct all the proceeds from its $10 billion Housing Australia Future Fund to her sector rather than do the “easy thing” and divvy the money up among community, state and private providers.

Hayhurst argued that community housing scores better on ratings of quality and resident satisfaction, a claim supported by the Productivity Commission’s most recent Report on Government Services. With its charitable status, the community sector is exempt from GST, land tax and stamp duty, which Hayhurst says enables it to build more houses for any given amount of money than state governments or businesses can.

Duncan Maclennan, a housing expert at the University of Glasgow with extensive experience in Australia, argues that not-for-profits provide better management than state authorities and better integration with other services. He says they are more effective at using their housing assets to secure low-cost private capital for additional investment. “There is a strong case to see much stronger policies of transferring public stock to non-profits,” he concludes.

Though not as advanced as in Britain, the shift from state governments to community providers is already under way in Australia. Over the past five years, more than 21,000 homes have been transferred from public sector to registered housing providers, two-thirds of them in New South Wales. Around 70 per cent remain in state hands, but this is down from 85 per cent in 2008.

The trend is clear, yet the British experience gives pause for thought. Or at least the English experience — thanks to devolution, policies differ in Scotland and Wales.

Take the Juniper Crescent estate, for instance, which won architectural awards after it was completed by inner-north London’s Camden Council in 1996. Across the road from the estate, near some once-hip but now-tawdry markets, builders are hammering away at a £1 billion development, Camden Goods Yards. What was once a commercial site is being transformed into a mixed-use neighbourhood with 644 homes, Grade A office space, a supermarket, a rooftop farm and “landscaped open space for the whole community to explore.”

Thanks to inclusionary zoning requirements, the developers are supposed to include some affordable housing as well — as they are in all new housing projects in England. As a planning requirement, an agreement on the quantity and price range is generally negotiated between developers and local governments, though John Boughton says developers sometimes wriggle out of these commitments and, besides, “affordable is a pretty loose term.”

Sound from the construction site at Camden Goods Yard is audible from Juniper Crescent, which is now run by One Housing, one of London’s largest housing associations. Juniper Crescent might need some upgrades, but it is far from past its use-by date. Yet these 120 terrace homes in stylish yellow brick will soon be demolished as part of a redevelopment more in line with the high-end condominiums being built across the way.

The knockdown rebuild plan required the consent of Juniper Crescent residents, but in a 2020 ballot they voted the proposal down. One Housing’s response was to engage “with residents further about the regeneration proposals in order to understand the ballot results more fully.” In other words, keep trying until the residents gave the right answer. After consultations fuelled by glossy brochures, free pizza and live music, residents voting narrowly in favour of demolition.

One Housing has promised that all current residents will be able to return to the redeveloped estate. Residents will have more open space than before, it says, and their new better-quality homes will be just as spacious as their present dwellings. Each household will receive a £7800 “home loss payment” to compensate for years of disruption.

The demolition of an estate built less than thirty years ago reflects the way markets are structured, says Boughton. Little incentive exists to refurbish and upgrade existing council housing. The financial imperative is for developers to demolish and rebuild, tapping in to profits from new homes for sale and private rental. Projects are justified, with some plausibility, because they bring densification.

The soon-to-be-demolished Juniper Crescent estate. Peter Mares

Redeveloping Juniper Crescent will create about three times as many homes as the estate has now, adding much-needed supply to London’s over-taxed housing market. What remains unclear, though, is how many of these additional homes will be truly affordable for low-income tenants. As even its supporters acknowledge, One Housing’s motivation in this partnership with a private developer is as much financial as social: it needs to generate income from commercial projects to fund its broader operations.

For Boughton, this attempts to turn necessity into a virtue. Housing associations cross-subsidise their social mission by building housing for private sale or market rents. A touted benefit is the creation of “mixed communities,” where rich and poor, renters and owner-occupiers, live side by side and share facilities. Boughton welcomes this aim, noting that this is what all council estates originally were. But he adds, wryly, that no one seems to worry about the lack of social mix in middle-class suburbia, let alone in the exclusive neighbourhoods favoured by plutocrats.

Yet Boughton also fears that housing associations increasingly look and behave like property developers. Even when they separate their commercial and social operations in different divisions, they risk letting the for-profit tail wag the housing-association dog.

“I’m not criticising good housing associations with local roots and a strong grasp of social purpose,” says Boughton. “I’ve got plenty of time for those. But now they have consolidated and got bigger, many are suffering from some of the same evils once attributed to councils.”

There is a compelling argument that Australia’s nascent community housing sector must also grow, professionalise, and consolidate into fewer larger organisations if it is to operate efficiently through economies of scale and a deep well of corporate knowledge. Yet in England, signs suggest that some of the biggest housing associations are losing touch with their residents and becoming disconnected from their social purpose.

CEOs now command impressive salaries and privately lobby government to let them charge tenants higher rents. One Housing is accused of leaving some of its elderly tenants without heating or hot water through winter after bungling boiler repair work. Another big provider, L&Q, was recently rapped on the knuckles by the Housing Ombudsman with two severe maladministration findings over its treatment of a tenant with physical and mental vulnerabilities.

In one chilling case, the Peabody Group apologised after one of its tenants was left dead in her flat for more than two years. Neighbours had complained about a foul stench and Peabody had cut off the woman’s gas because of unpaid bills yet failed to check on her welfare.

Anecdotes are not proof of system failure, nor evidence that things would have been better if councils had remained in control. The G15 alliance of London’s biggest housing associations provides homes for around one-in-ten Londoners: in a sector so large things will always go wrong. Yet the potential for social purpose to be eroded remains real, especially when the sector remains starved of public funds.

This is apparent in the types of housing that are now getting built. Rather than “social rent housing” — that is, homes for people on the bottom rungs of the income ladder — housing associations in England are increasingly building other types of “affordable” housing, including properties rented for as much as 80 per cent of the local market rate — which, whether in London, Melbourne or Sydney, is often still very expensive. One “affordable” property currently listed by Australian social venture HomeGround Real Estate is a two-bedroom apartment at $1100 per week.

Affordable housing is often portrayed as “key worker” housing. It is intended to enable teachers, nurses, childcare workers, police officers, hospitality staff and sales assistants to live closer to their jobs. These are tenants that private developers would welcome in joint ventures like the Juniper Crescent rebuild — if they can afford it. Social renters, who often rely on government benefits, don’t fit so comfortably in marketing brochures.

Boughton warns that social rent housing will always come second under a cross-subsidy model. “You will never have the amount of social rent housing that is truly affordable being built. It will always be neglected.”

The statistics seem to bear him out. In 2021–22, about 60,000 homes were added to England’s “affordable housing” stock, almost half of them resulting from inclusionary zoning agreements. But only about 13 per cent of the total — or 7500 dwellings — were designated as social rent. That proportion has been steady for about ten years.

In the previous decade, though, social rent housing made up 50 to 60 per cent of new dwellings. In the decade before that, it was 70 to 80 per cent. When sales and demolitions are taken into account, Shelter England calculates that England has lost more than 165,000 social rent homes in the past decade.

Today, London south of the Thames is more affluent and desirable than it was in the 1970s, and the Pepys Estate has been rehabilitated. “The Pepys Estate was famous, then it was infamous, now it just looks and feels like a pretty decent place to live,” writes Boughton in a blog post.

After Lewisham Council transferred the estate to a housing association, it underwent an award-winning redevelopment during which many original buildings were demolished, especially those closest to the river. In what Boughton describes as “pure and unabashed gentrification,” a twenty-four-storey tower block with 144 flats was sold to Berkeley Homes, which stacked an additional five floors with fourteen penthouses on top and flogged off all the apartments at a premium.

In this case, the tower block design didn’t seem to be an automatic generator of crime and dysfunction, though the tower did get a new entrance to avoid any taint of council estate. As Boughton explains on his blog, this was another example of financial considerations determining social outcomes:

Lewisham Council claimed to have run out of money and it’s true enough that the rules of the game were — and are — designed to curtail the ability of local councils to improve and expand their housing stock. But it suited, too, a gentrifying agenda which sees some London councils only too keen to bring the middle-class and their money into their boroughs.

For those with municipal dreams, providing decent housing that caters for all, including people with the fewest resources, has been a challenge right from the start. When Old Nichol was cleared to make room for the Boundary Estate, only eleven residents from the original slum made it into the new apartments. Housing generally went to the members of the artisan working class, skilled tradespeople with reliable incomes who today might be described as “key workers.”

Whether housing is built and run by councils, by state governments, by not-for-profits or indeed by private enterprise, it will only provide decent homes for all, including the most disadvantaged, if it receives substantial and ongoing public investment. One persistent hope in Australia is that superannuation funds will invest in social housing, but as the Community Housing Industry Association’s Wendy Hayhurst and Matt Linden from Industry Super Australia write, this can only work if there is consistent and long-term government subsidy to generate the returns institutional investors require for their members.

As Australian housing policy expert Vivienne Milligan warns, only governments can fill the gap between the rent poor tenants can afford to pay and what it costs to build, run and maintain their homes, let alone generate a profit. A reliance on inclusionary zoning and cross-subsidies from commercial projects is just not going to cut it.

Boughton has an abiding sympathy for old-style council housing but is far from dogmatic about whether it should be in local government hands or run by not-for-profits. “Anything that provides genuinely affordable housing and looks after buildings and tenants is welcome,” he says. “A significant share of the population will never own their own home, and housing association, or local authority housing, should and can cater for a broader range of the population.”

But, he adds, “I do advocate for local authority house building as a cost-effective and affordable means of providing housing, as demonstrated from the 1890s to the 1970s.” Between 1945 and 1979, councils built an average of 126,000 dwellings each year. “Local authorities were able to borrow from the national government and use rents to repay loans. They had the resources, organisation, financial clout, and political will to build at scale. That’s what we’ve lost.”

Local authorities also build to a higher standard than commercial developers, says Boughton. “No one is looking to Barratt for best practice,” he says, referring to one of Britain’s biggest mass home builders. “But the very best council housing is something to aspire to.”

Boughton’s new book, A History of Council Housing in 100 Estates, concludes with a profile of Goldsmith Street, a Norwich City Council project of around a hundred highly energy-efficient homes. Awarding it the 2019 Stirling Prize, judges from the Royal Institute of British Architects called the project “a modest masterpiece.”

“Not everywhere can be like that,” says Boughton, “but it’s not a pipe dream to think that local authorities can play that role.” •

Funding for this article from the Copyright Agency’s Cultural Fund is gratefully acknowledged.

The post The elusive quest for decent homes appeared first on Inside Story.

Mind Medicine Australia, an advocacy group, was earlier knocked back when it sought to have the two substances legalised. On my reading, its bid had serious deficiencies: in particular, it cherrypicked studies rather than conducting a systematic review of all the evidence. In light of those problems, the TGA commissioned its own review of the evidence. The findings appear to have convinced the decision-makers that allowing limited access to the two substances is justified. In effect, the TGA took this decision on its own motion, offering an interesting case study of delegated authority.

The decision removes therapeutic uses of psilocybin and MDMA from Schedule 9 of the Poisons Standard, which includes heroin, crystal meth and other illicit drugs, and places them on Schedule 8, alongside medicines — opioid pain relief and ADHD treatments, for instance — to which access is heavily restricted. Australia has an inconsistent patchwork of state and territory laws governing illicit drugs, but they all refer to the Poisons Standard, which is administered by the TGA. This puts the TGA in an unusual position: at a stroke, a committee of clinicians and bureaucrats was able to rewrite drug laws across Australia. But it also means the decision was based on clinical and scientific evidence rather than the feverish law-and-order politics that dominates “the drugs debate.”

Some degree of backlash was inevitable. In an opinion piece for the Age, psychiatrist Patrick McGorry and two academic colleagues shared their concern that the benefits of these treatments haven’t been shown to outweigh the risks. Trials to date, they point out, have excluded participants with psychosis, eating disorders, substance use issues and other medical conditions, limiting them to people with the smallest possible risk profile. This means that we can’t extrapolate the likely effect of these substances in real-world practice. McGorry and his colleagues also note the lack of evidence on the long-term effects of the two substances’ use.

But the TGA’s decision is more limited than many commentators realise. It has approved the therapeutic use of these drugs without approving specific products containing them — and the pathway for accessing unapproved products is tortuous. A psychiatrist must apply to a Human Research Ethics Committee for permission to use an unapproved drug with human patients. Permission is only given for serious or life-threatening illness where no approved medicine can do the job. We are talking about severely unwell patients who have already tried everything in the medicine cabinet without any relief.

The psychiatrist must also provide evidence that the potential benefits outweigh the risks, and outline how they will manage any harms. In short, using psilocybin and MDMA in clinical practice faces exactly the same checks and safeguards as McGorry and colleagues must meet in their own clinical trials on psychedelic-assisted psychotherapy.

Most people with severe illness are going to fall at the first of those hurdles. Finding a psychiatrist is extremely difficult; demand far outstrips supply, and the cost of private care is eye-watering. It is going to be even more difficult to find a psychiatrist willing to apply to become an authorised prescriber of otherwise-illicit drugs. Psychiatry is a conservative profession, and it primarily views recreational drugs as a risk factor for mental illness rather than a potential therapy.

A psychiatrist who does become an authorised prescriber must then find a “sponsor” — a pharmacist willing to synthesise psilocybin or MDMA. Given Australia’s patchwork of drug laws, this is not entirely risk-free for the sponsor, even when the drug is intended for therapeutic use. Medical researcher Stephen Bright estimates the cost of experimental treatment with these substances at $20,000 per participant, accounting for study costs (including expert personnel), the substances themselves, and inpatient treatment. Faced with these barriers, many people with PTSD or severe depressive illness might contemplate accessing psilocybin or MDMA informally — outside of an experimental trial or the psychiatric pathway.

The criticism I’ve seen from psychologists is that the TGA has acted on data from phase two studies, which investigate the safety of a substance in human subjects, without waiting for more data from phase three studies, which estimate its efficacy against a given condition. There are two separate issues here: risk and uncertainty. We know the substances are, broadly speaking, safe to use under controlled conditions, but there remains uncertainty about how effective they might be. Experience teaches us to be cautious on that front: promising treatments like ketamine infusion have turned out to have profound but relatively short-lived effects on severe depression, giving people hope that was yanked away when experimental trials ceased.

That said, the TGA decision is consistent with the principles outlined for the unapproved products pathway. These state that the requirement for evidence is lowest when the need is greatest. In case that sounds counterintuitive, think of a patient facing death from an aggressive illness; beneficence suggests letting them consent to an experimental treatment, even if all it offers is hope. The TGA has recognised that people currently suffering with severe and untreatable mental illness are in a comparable situation. Hope is thin on the ground, and the potential benefit outweighs the relatively well-known risks of harm.

Much of our knowledge of these substances comes from informal use rather than experimental studies and clinical trials. This is knowledge that circulates via the “cultures of care” — a term coined by Australian HIV researcher Michael Hurley — that surround recreational use of these substances. Drug users have developed and actively share information and practices intended to minimise the risk of drug-related harms, including judgements about safe doses and titration, creating a safe environment, guiding a person through a “trip,” watching for overdose, and maintaining a safe pattern of use.

Psychiatrists and counsellors may find themselves working with depression and PTSD patients who are exploring informal use of these substances. Both groups may need to familiarise themselves with harm-reduction principles and strategies.

The TGA decision highlights something important for people interested in the debate over how to legalise or decriminalise the use of an illicit drug. Medicalising their use is one possible strategy. When the TGA proposed banning “poppers” — small bottles containing volatile alkyl nitrites for inhalation — I led an advocacy campaign arguing these products were the only way for many men and other queer people to have safe and comfortable anal intercourse. The TGA listened to our arguments and left the most common ingredient in poppers on Schedule 4, available for prescription by doctors.

In doing so, the TGA demonstrated a willingness to listen to communities speaking from expertise gained from decades of informal use of the substances in question — a willingness that may have played a role in its subsequent decisions on psilocybin and MDMA.

In most cases, though, securing legal permission for therapeutic use only benefits people with the resources to access specialist medical care. We have seen this with medicinal cannabis in Australia: people using approved products are paying hundreds of dollars each month for the privilege. People who can’t afford this treatment continue to use cannabis products from informal suppliers and remain vulnerable to policing and prosecution if they are caught. Medicalising illicit drugs reproduces what medical researcher Julian Tudor Hart called “inverse care law,” where medical care is hardest to access for those who need it the most. •

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A reporter from the Times had gone undercover in a firm contracted by British Gas to collect overdue energy payments. In a return to the days of putting a penny in the slot to heat the bathwater, his team had the job of installing devices that force customers to pay for gas before they use it. The meters serve two purposes: when consumers add money to their account, British Gas takes a share as part repayment of outstanding bills; and the pay-as-you-go system prevents customers from racking up even bigger debts.

The break-ins are authorised by court orders and intended as a measure of last resort. But of the 367,140 applications for warrants last year — that’s 1000 a day — only fifty-six were refused. The warrants are often “waved through” in bulk, with cash-strapped courts earning a fee per case from the arrangement. One magistrate quit when his job became “nothing more than rubber stamping.”

Energy companies are not supposed to force prepayment meters on families with children aged under five, pensioners, people living with a disability, or other vulnerable households. Yet the Times reported teams breaking into the homes of a single father with three young children, a mother with a four-week-old baby, and a woman whose daughter relies on a hoist and an electric wheelchair for her mobility.

In a British winter marked by soaring energy prices and week-long blasts of sub-zero temperatures, these families are condemned to live without heating or hot water whenever they can’t afford to put money on the meter. And when they do buy gas, they are charged a higher rate than customers paying by direct debit.

Not surprisingly, the Times’s exposé prompted outrage and moral condemnation, not least because Centrica, the company that owns British Gas, recently announced that its earnings in 2022 are likely to be more than seven times what they were in 2021.

This is the logic of Britain’s energy market. Centrica wants to derive maximum profit for its shareholders; customers who can’t pay their gas bills are bad for business so it’s happy to cut them loose; debt collectors are paid with a share of the funds they recover for their clients; prepayment meters are an effective mechanism to claw back as much money as possible. The work teams, which are paid a bonus every time they bust into a home and install a device, tend to overlook cuddly toys, Ventolin puffers, walking frames or other signs of household “vulnerability” that should prompt them to abandon the job.

Yet British Gas management, along with the government and regulators, professed to be surprised by the debt-recovery tactics. Centrica boss Chris O’Shea told the BBC that the contractors’ actions were “completely unacceptable.” The secretary of state responsible for energy, Grant Shapps, was horrified by such “abhorrent practices.” The energy regulator, Ofgem, launched “an urgent investigation” and asked energy companies to suspend the forced installation of prepayment meters until it is reassured that they comply with rules on vulnerability.

We hear equivalent surprise and outrage from corporate leaders, ministers and regulators when business scandals erupt in Australia. How could Rio Tinto have blown up those ancient rock shelters and destroyed so much priceless heritage at Juukan Gorge? Who are these rotten labour hire contractors who systematically underpay migrant workers labouring on farms and in meat-processing plants? What a shock it was to learn, at the financial services royal commission, that clients, some long dead, were being charged fees for no service, that a company duped Aboriginal people into buying overpriced funeral insurance, and that major banks knew their customers were being encouraged into unnecessary debt by mortgage brokers.

Yet such behaviours are entirely predictable and — in the narrow sense of allowing market forces to operate — entirely rational. It’s not that everyone working in finance, mining, labour hire or other scandal-prone sectors lacks a moral compass. It’s just that the attraction of bonuses and other incentives can quickly lead the best of us to lose our sense of direction. Human behaviour is shaped by the logic of the systems we inhabit. And, as NAB chair Ken Henry so memorably put it when he was grilled at the royal commission, “The capitalist model is that businesses have no responsibility other than to maximise profits for shareholders.”

Henry was echoing the views of economist Milton Friedman, who famously railed against the idea that corporations owed any kind of responsibility to the community beyond increasing their profits. Some reporting missed the fact that Henry was arguing, contra Friedman, that the banks needed to move away from treating “customers in purely instrumental terms, as a means to an end, rather than the end in itself.”

Treating people as ends in themselves is surely what Jim Chalmers had in mind when he wrote about creating “a better capitalism,” one that is uniquely Australian and “values-based.” It is a welcome prospect, and the treasurer has offered some glimmers of how it might be achieved.

A wellbeing budget that broadens what gets measured beyond the traditional metrics of GDP growth is long overdue. Welcome, too, is Chalmers’s emphasis on “place-based initiatives” in low-income areas like Logan, in his own electorate, to give communities “the genuine input, local leadership, resources and authority to define a new and better future especially for kids.”

Hearteningly, Chalmers draws on the work of leading thinkers like Mariana Mazzucato, who argues that contemporary economics has lost the moral sentiments that framed the Enlightenment ideas of Adam Smith, and now too readily mistakes price for value. Anyone who turns a profit ends up being a “wealth creator,” even when their earnings are derived from products like gaming machines or cigarettes and the social and financial costs are picked up by the community and government.

Chalmers, like Mazzucato, recognises that markets are not a natural phenomenon that sprang fully formed onto the landscape. They are human systems shaped by policies, laws and incentives. This is obvious from mundane examples — local-content quotas to encourage Australian TV production, for example, or building regulations to ensure fire safety in high-rise towers. If our aim is wellbeing, then we must design markets accordingly, and push to the margins the kind of knuckleduster capitalism revealed at the financial services royal commission and in the Times’s reporting.

Alongside the three crises at the heart of his essay — the global financial crisis, the pandemic and the war in Ukraine — Chalmers refers to Australia’s recent catastrophic fires and floods. And he acknowledges the need to “repair” long-neglected policy fields like “skills and training, energy and climate transition, the standard of aged care, women’s participation and economic equality, equal opportunities more broadly, including in regions and disadvantaged communities, and the unsustainable state of the nation’s books.” The government certainly has its work cut out.

But I can’t help feeling that Chalmers is waging his campaign for kinder capitalism with one hand tied behind his back. He makes only one reference to taxation in the essay — and that is to promise more transparent reporting on “tax expenditures” (concessions like negative gearing and private health insurance rebates that mean the government forgoes revenue). He wants “growth that puts equality and equal opportunity at the centre” and writes that “the type of growth matters — and its distribution matters.” Yet the word “redistribution” doesn’t get a look-in, let alone alongside another unmentioned word, “wealth.” Chalmers wants to tackle disadvantage but is silent on privilege.

Talk of equal opportunity without reference to tax and redistribution fails to take us very far beyond Scott Morrison’s empty notion that those who have a go will get a go. Admittedly, Labor is far more committed than the Coalition to education, training, childcare and healthcare — the kind of public investment that can bring such dreams closer. But if we want equality of opportunity then we must also tackle equality of outcomes. Capitalism is competitive, but we don’t all enter the race at the same point. Some of us get a big head start, and it would be only fair to even things up a bit.

Programs to build opportunity also require significant funding, and apart from extra borrowing — another no-go area for Chalmers given the “trillion dollars of debt” he inherited from the Coalition — the only way to raise sufficient money is through the tax system. Tax is not just good for raising revenue, though, it is also a powerful tool for shaping markets and influencing behaviour, as we saw with the Gillard government’s short-lived carbon price. It is also the most effective way to moderate inequality — and if Labor wants greater equality of opportunity, then this is what it must do.

Jim Chalmers starts and ends his essay with the pre-Socratic philosopher Heraclitus. I’m sure he’s also familiar with the more recent thinker John Rawls. In his Theory of Justice as Fairness, Rawls identified several reasons for regulating economic and social inequalities.

First, “it seems wrong that some or much of society should be amply provided for, while many, or even a few, suffer hardship.”

Second, large social and economic inequalities “tend to support political inequality.” We need to address inequality, he says, “to prevent one part of society from dominating the rest.”

Third, inequality shapes our sense of self, encouraging those towards the bottom to feel inferior and those at the top to feel superior. Rawls thought the attitudes engendered by inequality were great vices: “deference and servility on one side and a will to dominate and arrogance on the other.”

Rawls didn’t want to bring everyone down to the same level. He accepted that differences in status and hierarchy would persist, and probably recognised that they were necessary to drive ambition. But he insisted that “a well-moderated inequality is a condition of economic and political justice.” And such moderation cannot be achieved without progressive tax systems to redistribute income and wealth.

Of course, Jim Chalmers doesn’t want to scare the horses or provide conservative media with a new stick with which to bash Labor by hinting that he might follow the advice of most credible commentators (including the International Monetary Fund) and repeal the stage 3 tax cuts. Yet it is hard to see how Labor can fund the necessary services in care, education and environmental protection, balance the books, shape markets and increase opportunity without fundamental tax reform.

If a Labor treasurer in a government riding high in the polls can’t lead from the front by putting these issues on the agenda, then who can? •

The post Building a better capitalism appeared first on Inside Story.

Nothing illustrates this better than our addiction to selective schools. It’s mainly a NSW phenomenon — with almost fifty of them, the state is on a frolic of its own. (Victoria, by contrast, has four.) For years, the claimed benefits of selective schools have been convincingly contested. Yet successive NSW governments and the education bureaucracy have ploughed on regardless. Many of these schools now resemble monocultural refuges for students from well-off families.

The choice of location for new fully and partially selective schools is also a puzzle. They do tend to appear in places where high schools have lost enrolments, but the announcement in 2018 of a new selective school at Leppington appears simply to have been a “captain’s call” by the then premier, Gladys Berejiklian.

The decision to create a new mega-selective school at Westmead, west of Parramatta, illustrates the lack of any real rationale. If the hype is to be believed, it will be a beacon of opportunity for high-achieving students in Sydney’s west. In reality, unless it is radically different from other selective schools, it will have to look elsewhere for students. The pool of high achievers in the comprehensive schools in Sydney’s west and southwest — raided for decades by their neighbouring selective, part-selective and private schools — has all but dried up.

What happens when a new selective school or a selective stream is established? Data from the My School website and the NSW Education Standards Authority make it possible to track the progress of newly formed selective schools and the fate of their neighbours — particularly in the case of part-selective schools, which are more likely to draw students locally or regionally.

In southwest Sydney, where six part-selective schools have been created over the past thirty years, the new schools, together with local private schools, have stripped most of the neighbouring schools of their high-achieving students, increasing the achievement gaps between local schools. The number of what are called “distinguished achievers” in the NSW Higher Education Certificate results has all but collapsed in many of the neighbouring comprehensive schools, and the achievement profile of the selective schools and most private schools has risen.

On the surface, and in the inevitable league tables, the quality of some schools appears to have grown while the quality of others has declined. But it’s not about the quality of the schools — there’s no shortage of stories about school innovation and achievement in Sydney’s west. All we have seen is a shift of academic higher-achievers to schools more able to choose whom they enrol, creating two classes of schools and two classes of kids. In school education, this local story is also the NSW story — and the Australian story. A lot of movement, but no overall improvement.

A closer look at three local areas — Liverpool, Fairfield and Camden — highlights the increasing gap between local secondary schools. In 2006, eighteen government schools accounted for 54 per cent of local distinguished achievers, and seven non-government schools accounted for 41 per cent. By 2021 just four of the government schools, now well-established as partial-selective schools, accounted for 20 per cent of the local distinguished achievers, and the fifteen remaining government schools accounted for just 25 per cent. More than half (53 per cent) of the local distinguished achievers attended a larger number of private schools.

Over the same period, the number of the most advantaged students declined in more than half of the areas’ comprehensive public schools, especially in Liverpool, and those schools have ended up with a much higher proportion of the least advantaged students.

Robert Mulas, a previous principal at Fairfield High School, tells me how, as the number of students declined, “so did the ability to provide a wider range of subjects to those students.” Roger Berry, another principal, relates how his school, Camden High School, struggled to maintain its strong results — “the data showed that our disadvantaged student enrolment was growing” — and how some of the teaching staff “found it difficult to accept demography had changed and as such we as teachers needed to make adjustments.”

Despite the best efforts of principals and teachers, academic results fell in both those schools.

Another school, St Johns Park High, experienced one of the sharpest falls in headline student achievement. Yet the school’s results had been improving outstandingly as recently as 2015, according to the Department of Education’s Centre for Statistics and Evaluation. In that year, more than 90 per cent of St Johns Park students came from a non-English-speaking background, and more than one hundred were refugees. In 2014, according to the then principal Sue French, the school “had five students with ATARs over 99, fifteen over 90, and 146 out of 170 students received a university offer.”

Who goes to which school, and whom they go with, really matters. One of the significant findings of the 2012 Gonski review was that concentrating students from certain socioeconomic groups within different schools has a noticeable impact on the educational outcomes achieved by all students at the school.

This is sometimes called the compositional or peer effect, and at one level it is hardly new: it has long been articulated by teachers who know that the learning culture and academic focus of students can vary from one cohort to another.

A student’s peer group has two impacts on learning. The first is relatively direct and generated by current peer behaviour or outcomes. Teachers know how student engagement and behaviour (and misbehaviour) affects classroom management, time-on-task and the attention that can be given to individual students.

The second impact comes from the wider context. A child’s peer group affects their identity, their post-school aspirations and their motivation to learn. It can also have a powerful effect on the curriculum, in terms of both subjects offered by a school and how lessons are pitched. This effect can make it harder to engender a shared sense of the value of education, and is intensified when resources, including teachers, are in short supply.

Australia is increasingly aggregating strugglers in disadvantaged schools, making it harder for formerly high-profile schools like Roger Berry’s Camden High to maintain their academic success. The prospects of such schools completely restoring their previous academic reputations have simply walked out the door.

Yet the impact of peers on student learning hasn’t filtered through to the policymakers. The final report of the recent Productivity Commission review of the National School Reform Agreement made several references to the peer effects and the impact of concentrated disadvantage on student achievement. But the closest its findings came to discussing this impact was the lame statement that “students from priority equity cohorts can lack access to an inclusive learning setting that supports their learning needs and wellbeing.” In systems distorted by selective schools, students increasingly lack that access.

There is another reason for us to be concerned about the impact of selective schools. In response to the NSW government’s Westmead announcement, the Sydney Morning Herald’s education editor reminded readers of a 2019 government plan to identify genuinely gifted students and extend them outside the selective school system — and “to widen the definition of gifted from purely academic, and acknowledge all sorts of talents.”

This isn’t a new idea. Twenty years ago, Tony Vinson’s inquiry into NSW secondary schooling questioned the definition of giftedness, arguing that selective schools were simply enrolling well-off children of above-average ability. A more recent paper showed that the schools overwhelmingly enrol students from very advantaged backgrounds.

The government and its education bureaucracy need to review the role, scope and impact of selective schools and how they might better reflect what we know now, rather than what we assumed a generation ago. This means going back to the drawing board, to the basics of how to best support all students with particular gifts and talents — and the role of selective schools in any new structures.

In New South Wales, the government shouldn’t wait for the outcome of any such review. It should immediately turn the Westmead proposal into a pilot project, using an entirely different approach to serving gifted and high-potential students — one that will reach out to suitable students, and not just high test-scorers, across west and southwest Sydney. Such a project can draw on existing best practices in innovative schools, including features of the learning design already implemented in Big Picture public schools in New South Wales and other states.

Rather than gather selected students into exclusive settings, the Westmead school could offer special classes for students, mainly in year 11 and 12, who would come from participating public high schools for a designated time each week. (Obviously this requires coordination, but there are already schools that run a four-day week for senior students, creating a full day for them to complete courses in other places.)

Participating students would be chosen by their home school on the basis of their curriculum, their related interests, and their capacity to pursue these in a supportive and partially structured program. Westmead would be a coordinating and administration, as well as teaching, centre. Its staff would include specialist teachers. Together with other professionals and chosen Westmead precinct employees, they would develop mentoring relationships to support participating students. As an additional professional learning bonus, some teachers in the home school could accompany their students and work alongside the Westmead specialists.

Most students would complete the same subject requirements as if they were in their home school, but would also have online time with their Westmead teachers and mentors. Most would choose to meet requirements for the HSC and ATAR, but they would also gain greater access to early and/or portfolio entry to tertiary education, again an increasingly common pattern today.

Schools in western and southwestern Sydney are hardly beginners in establishing links with other providers, including universities. Many have been innovators in this field for decades and have long had links with local businesses. Students in schools like Liverpool Boys High undertake internships in the community. Student research and mentoring form part of the reason for their success.

For decades the discourse about catering for high-potential and gifted students has been about either doing so within every school or shifting selected students to separate schools. This is a false binary, and better pathways can be created with a mix of both.

The mixed model would also create wider access to highly skilled teachers. For understandable reasons, comprehensive schools have a broad curriculum, and many have lost subject specialisations. They won’t easily get them back, and teachers are in short supply. A reshaped Westmead school could potentially revitalise comprehensive schools.

It could also take the heat out of the debate about selective schools. For years, discussion has been closed down out of a fear of what would happen if the schools were, in fact, closed down. Public education would lose its high-profile battleships, students would shift to private schools, disruption would reign. A successful Westmead pilot would open minds to different ways to reach a much larger range and number of high-potential and gifted students. •

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They weren’t offering to build or finance these new houses; they want private developers to do that.

Sitting behind these policies is the commonsense view that the key to bringing down the cost of housing is building more dwellings. This accords with our everyday experience of how markets operate: when something is scarce, prices go up, and the best way to bring prices down is to provide more of it.

When it comes to housing, though, the relationship between price and supply isn’t so clear-cut.

We know this partly because we have an alternative to house prices — rents — as an indicator of housing demand. Rents track demand for housing as a service, whereas real estate prices also reflect demand for housing as an investment.

It turns out that rents have risen far more slowly than house prices over the past twenty years (although now they are rising sharply in England and Australia). And despite low wage growth, the average share of household spending devoted to rent has also remained fairly constant in both places.

That’s not to say that rents are affordable, especially for low-income tenants in expensive cities like London and Sydney. If rents were already excessive twenty years ago, they are still excessive today, reflecting a persistent shortage of housing. The point is that rent increases over time have been relatively modest; if the pace of house building had fallen well behind the growth in demand then we might have expected sharper rises.

We know, too, that factors other than supply can have immediate and dramatic impacts on property prices. As interest rates have gone up in recent months, house and apartment prices have dropped back from their 2022 peaks.

Prices tend to go down when it’s harder to get a loan (which is why regulatory authorities tighten bank lending rules when they want to dampen the market). And prices go up when governments stimulate the market with first homeowner grants or tax concessions. The construction industry is also notoriously volatile, so the supply of new homes fluctuates as the number of dwellings completed rises or falls from year to year. What’s more, new homes make up only a small proportion of overall housing stock and real estate transactions, so the impact of construction on prices is slow and muted.

Over time, such ups and downs should even out, revealing the underlying relationship between housing supply and housing demand. So, what does twenty years of census data tell us about the housing challenge in Australia and Britain? Is the core problem that we don’t build enough houses or are other factors also at play?

Australia’s population grew by 35 per cent between the 2001 and 2021 censuses, and the stock of dwellings grew by 39 per cent. England’s population grew by 15 per cent, and its stock of dwellings 17 per cent. In short, in both countries, population and dwelling supply moved roughly in tandem.

Of course, as with rents, if there was already a housing shortage in 2001 then that shortage would have carried through to 2021, keeping prices high. In principle, if we’d built more housing then prices should have come down. Proportionally, though, the scale of the problem has stayed roughly the same, so again, a lack of building doesn’t appear to account for the rapid escalation in real estate prices over the past two decades.

But a simple comparison between population growth and dwelling growth can be misleading, for a number of reasons.

First, housing demand is driven not by the overall number of people but by the overall number of households. This might seem like splitting hairs: average household size has remained roughly constant in England and Australia over the past twenty years, and so the relationship between household numbers and dwelling numbers held steady.

Here things get complicated, though, because in an ageing society, with more people living alone, household size should fall. This means more households overall and a need for more dwellings to accommodate them. In both Australia and England, average household size was projected to fall to about 2.2 people by 2021, but has remained higher.

One view is that the projections were wrong, because they failed to anticipate social changes such as fluctuations in birth rates, falling divorce rates and a preference by some recent migrants to live with extended family.

But perhaps housing shortages prevented the decline in average household size? A lack of housing can induce adult children to stay in the parental home longer than they’d prefer or force two families to squeeze into the same accommodation. The formation of new households is suppressed, and the demand diverted into “hidden” or “concealed” households. According to one estimate, two million adults could be living in concealed households in England.

Linking population and dwelling numbers over time also disguises regional differences. Greater London, for instance, gained more than 1.6 million new residents between 2001 and 2021, but the population of Sheffield hardly changed and remains below its 1950s peak. Barring a new industrial revolution to bring factory jobs back to Sheffield, the demand for housing there is likely to remain relatively flat.

Dwelling growth in the City of Melbourne has far outstripped population growth over the past twenty years thanks to a boom in high-rise residential towers. On census night 2021, a quarter of all the municipality’s homes were unoccupied. Covid alone is unlikely to account for all those empty apartments. Rental vacancy rates in the CBD are significantly higher than the rest of Melbourne.

The population of the City of Hobart, by contrast, has grown faster than dwelling supply since 2001, and the share of unoccupied dwellings was below the national average at the last census. This might help explain why Hobart is the toughest capital city for tenants, with the fewest vacancies and the highest rents relative to income.

So, is it possible that we may have been building enough houses, but in the wrong places? London School of Economics geographer Paul Cheshire blames planning failures for “actively preventing houses from being built where they are most needed or most wanted — in the leafier and prosperous bits of ex-urban England.”

Does his thesis gain more weight if we drill down to a more local level and can compare two local government areas in the same city and the same labour market?

Tower Hamlets, in London’s inner east, and Camden, in the inner north, are in many ways similar. About a third of their residents live in social housing, but both also have pockets of considerable wealth. In 2001, each of the boroughs had a population of about 200,000 people and a comparable population density.

Since then, however, their paths have diverged. Tower Hamlets has gained more than 100,000 residents, while Camden gained only 12,000 (and its population declined after 2011). Tower Hamlets is now the most densely populated local government area in England, home to 112 people per soccer pitch–sized piece of land (as the Office of National Statistics calculates it). Camden has “only” sixty-nine people per soccer pitch.

What conclusions can we draw from this? Perhaps Tower Hamlets council is more pro-development than Camden, and better planning has enabled more dwellings to be built there to accommodate new residents? Perhaps Tower Hamlets simply had more room to grow, with disused industrial sites like the docklands at Canary Wharf available for redevelopment? Or maybe the residents of Camden, which is home to an older demographic, have begun to consume more housing per head of population than their younger counterparts in Tower Hamlets?

Camden has double the share of residents who own their homes outright and more than double the share of households with at least two spare bedrooms. It also has a higher percentage of vacant dwellings than Tower Hamlets, and its residents are far more likely to own a holiday house.

The contrast between the two boroughs highlights a third objection to simple comparisons between numbers of people and numbers of dwellings: demand for housing is a product not just of population but also of income.

As leading British housing economist Professor Geoff Meen puts it, housing demand comes “not just from newly forming households, but also existing households as incomes rise.” In other words, as people get wealthier, they want bigger, better houses as well as second homes and holiday houses. Cheshire says his research shows that a 10 per cent increase in incomes leads people to spend about 20 per cent more on extra space in houses and gardens.

We could express this differently: as the rich get richer they consume more housing; as the poor get poorer, they consume less, to the point of living in severely overcrowded homes or without a home at all. If we look for the roots of the housing crises in England and Australia through this lens, then we might shift focus from the supply of housing to its distribution.

When we do that, the challenge becomes not just to build more housing but to find ways to make its use fairer and more efficient — by altering how housing and land are taxed, for example. More progressive land taxes or capital gains taxes on housing could both redistribute wealth and help dampen property speculation.

Or we could adopt the German approach to capturing the value of changes in land use. When land is rezoned from, say, agricultural to residential in England and Australia, dramatic increases in land value generally accrue to the landowner. In Germany, much of this “planning gain” goes instead to public authorities and is used to fund infrastructure or social housing.

The complex relationship between housing demand and housing supply suggests there are no simple solutions to the challenges that we face, and we should be wary of claims that the answer is just to build more dwellings. If high prices are the product of a speculative bubble rather than undersupply, then building more houses will cause a different set of problems.

Economist Ian Mulheirn from the Tony Blair Institute for Global Change points out that high real estate prices fuelled residential building booms in Spain, Ireland and parts of the United States in the first decade of the 2000s. When that boom went bust, it contributed to the global financial crisis and left “a large overhang of vacant and decaying ghost estates.”

The “build more” argument often goes with the view that the supply of new houses is held back by planning and zoning “red tape.” It then becomes an argument for scrapping the rules that limit incursions into land set aside for other purposes, such as London’s green belt or Melbourne’s green wedges.

This is contested territory. Once developed, the environmental or agricultural benefits of that land are lost forever. But if green space effectively subsidises elite pursuits like “‘horseyculture’ and golf” then the case for turning some of it over to housing might carry more weight.

Planning has been the subject of persistent reform efforts in many parts of Australia without, as yet, delivering lower house prices. “Of right” approvals have been introduced for code-compliant projects, decision-making powers transferred from elected councils to expert panels, “special purpose” bodies created to deliver urban redevelopment, and ministers given greater powers to override local decisions on major projects.

Strong arguments exist for rules-based planning systems because the alternative of assessing each application individually is time-consuming and costly, especially if decisions are made at a hyperlocal rather than city-wide level. But planning regimes should align with environmental and social goals, including affordability, rather than simply empower developers to respond to a housing “demand” that may be driven by growing inequality.

Treasurer Jim Chalmers says the task ahead is not just to build more homes, but to build more “well-located” homes. Boris Johnson’s one million homes promise was predicated on every local government area having its own mandatory housing target, although councils were very critical of the algorithm used to determine what to build where. Those targets have since been scrapped anyway, following opposition from Conservative MPs who feared a backlash against new developments in their prosperous constituencies.

This is a reminder that building homes where they are most needed — that is, with good access to jobs, transport and services — tends to throw up the biggest challenges.

In cities like Melbourne, this could be done by replacing postwar family homes with smaller, more energy-efficient, medium-density apartments and townhouses to better accommodate today’s smaller households. But it is in exactly these suburbs that not-in-my-backyard opposition tends to be most intense.

It is also in these areas that commercial barriers are greatest. It is easier to build on a rezoned greenfield site on the edge of the city, or in a rezoned brownfield area like a former dockland, than to transform a middle-ring greyfield area, especially if the aim is to retain the benefits of suburban streetscapes like tree canopies and gardens.

In such cases, what is needed is not so much liberalised planning, as consistent and supportive planning to assist developers to consolidate individual house blocks into larger sites, while also responding to community concerns about loss of amenity.

The number of dwellings is clearly important for the affordability and availability of housing, whether to buy or rent. But along with supply we also need to think about distribution, both spatial and economic. The question is not “do we need more houses” but rather “where do we need more houses, and who needs them most?”

To put this another way, is the challenge to keep up with housing demand, or to respond to housing need?

If it is the former, then the market is likely to meet the demand for a new holiday home more quickly than it meets the need of a low-income family to move out of an overcrowded, overpriced and damp apartment. Property developers have no incentive to provide housing for people who cannot pay prevailing rents or prices. Either we need to help those households participate in the market by boosting their incomes, or we need to build homes they can afford.

Another thing that Australia and England have in common is a sustained fall in public investment in social housing. If governments in both countries had continued to subsidise social housing at the rates they did in the postwar decades, then many thousands more affordable houses would be available today.

Prime minister Rishi Sunak’s Conservative government has no chance of delivering Boris Johnson’s 2019 pledge of a million homes before next year’s election. Let’s hope that Jim Chalmers has more success in building a million “well-located” new homes in Australia, and that a decent share of those homes are affordable for the people who need them most. •

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The story came to mind while I was reading Serious Money: Walking Plutocratic London, sociologist Caroline Knowles’s perambulatory new book about how wealth shapes the English capital. Inspired to tread some of the same streets myself, I soon came across one of the spectacles Knowles documents: a “basement conversion” more accurately described as a large-scale excavation to create extra rooms under an elegant Kensington terrace. Sometimes, Knowles tells us, builders find it’s not worth their while to crane a mini-digger out of a multimillion-pound project, leaving “dozens of them… buried in the foundations of houses.”

It sounds like an urban myth, though Knowles says she spoke to builders who confirm it. Either way, the extravagance of efforts to create what have been labelled “iceberg homes” makes the tale credible. On the project I came across, the planning approval posted on the builder’s hoardings said the owners had allowed ninety weeks for construction.

It’s not hard to imagine why. Some excavations go down as many floors as the original house went up, and then extend under rear gardens to create space not just for wine cellars but also for gyms, cinemas, swimming pools and car parks.

Not surprisingly, basement conversions are the source of bitter neighbourhood disputes. Led Zeppelin guitarist Jimmy Page and pop star Robbie Williams engaged in a five-year stoush over Page’s fear that excavations for a pool under Williams’s £17.5 million (A$32 million) Holland Park mansion might weaken the foundations of his own £12.5 million pile next door.

Williams won out in the end, but no mechanical diggers will be buried in the basement of his Woodland House — building approval is conditional on the cavern being hollowed out by hand to minimise vibrations. Avoiding cracks in the stained-glass windows of Page’s French Gothic Tower House will add £1.5 million to Williams’s renovation bill, but this is small change for the singer and his wife, Ayda Field. They recently sold estates in Switzerland and Britain worth more than £30.75 million and splashed out US$50 million on another spread in Los Angeles.

The clash between a 1960s rock star and the lead singer in a 1990s boy band might not qualify as a contest between old and new money, but it could well be an example of the conflict between the “haves” and the “have yachts.” The “haves,” in Knowles’s terminology, are the merely wealthy. The “have yachts” are super-rich. Also known as UHNWIs (ultra-high-net-worth individuals), they can afford to keep fully crewed multimillion-dollar boats moored in Monaco in readiness for the occasional Mediterranean jaunt.

As for yachts, so for cities. In the words of sociologist David Madden and planner Peter Marcuse, when housing enters global investment circuits “its use as a living space barely registers.” The built form becomes “a tangible, visual refection of the organisation of society” and global wealth is “congealed” into bricks and mortar — or indeed underground swimming pools.

As a writer, Knowles places herself in a literary tradition that takes in Virginia Woolf, Walter Benjamin and Teju Cole, figures whose work “exposes politics, like a sediment in the landscape.” As a social researcher, she upends the established focus on poverty and the poor to turn the same “unforgiving framework” of research on the very rich. She walks and talks her way across London, trying to understand how very rich people shape the city, and how they live in it.

She struggles to meet many actual billionaires. Russian oligarchs who use “complex financial instruments provided by London firms” to hide their riches from Moscow prove to be a reclusive bunch. She does meet a lesser billionaire she calls Sturgeon (she gives all her informants pseudonyms), who is investing some of his excess wealth in an “experimental sustainable caviar business” (anaesthetising and milking the fish to harvest the eggs instead of killing them). But Sturgeon is reluctant to discuss the source of his wealth, his compatriots’ lives or any security concerns wealthy Russians may have.

The same goes for the art collector and philanthropist she calls Soviet, who is only a multimillionaire anyway. Middle Eastern oil royalty, British aristocrats and other UHNWIs who moor their wealth in London’s safe financial harbour are no more forthcoming.

Instead, the bulk of Knowles’ insights are gleaned from those who work or live within the gravitational orbit of extreme wealth, like the retired civil servant she calls Officer.

Officer “patrols” the streets of Kensington, keeping an eye on basement conversions and other developments in case the residents’ association can intervene to prevent the worst excesses. Officer himself doesn’t have “serious money” and is disdainful of those who do. He says many of his super-rich neighbours rarely spend much time in the mansions they acquire. That’s if they hang on to them — others buy, renovate and move on.

The super-rich might purchase a terrace house divided into apartments and consolidate it into a single multi-storey home, or knock through the walls of adjoining terraces to create a mansion. As Officer’s friend Historian points out, the next buyer will also have to be super-rich to afford what’s now an even more expensive property, and the neighbourhood will be forever changed.

When Officer’s “ghost neighbours” are in residence, they swim in their private pools, watch films in their private cinemas, work out in their private gyms, and use the vehicle lift to enter and leave their mansions in luxury cars. They don’t frequent neighbourhood cafes or pubs, let alone walk to the corner shop, contributing nothing to the viability of local enterprises or a sense of community. “It spoils things for people who do live their normal lives here,” says Historian’s wife Opera. “Rich people,” Knowles decides, “are poor neighbours.”

Knowles gains further insights into the lives of the rich from Wig, a barrister. One of Wig’s clients wanted advice on whether to seek a divorce in London or go to the considerable expense of shifting his wealth overseas. Advising on the latter course, Wig saved his client tens of millions by avoiding English courts, which are “comparatively generous to partners who are not directly involved in generating the money.”

These manoeuvres don’t always go so well. In another case Wig represented a woman whose husband tried the same trick. Wig stymied the multimillionaire’s claim that he lived offshore by proving that he was still London-based. He had a British shotgun licence, which is only legal if the owner lives at the British address listed on the certificate, and he had a Transport for London seniors card that is only available to residents.

Alerted that divorce proceedings are public documents, Knowles does her own digging. It may be voyeuristic, but it’s also revealing. One divorcee, seeking a settlement that will enable her to live in the manner to which she is accustomed, asks the court for an annual travel budget of £2.1 million, and half as much again for fashion and jewellery — enough to cover a yearly fur coat, fifteen cocktail dresses, fifty-four pairs of shoes, eighteen handbags and much besides.

In this world of extravagant display, domestic staff adorn already elaborate homes. Butler is one of an estimated two million people who work in domestic service in Britain, “the highest number since the Victorian era.” Butler acknowledges that he “looks good in a suit,” which means he can be employed on day shifts and seen by visitors.

He also knows he is easily disposed of. He recounts how a colleague was fired after twenty years’ employment for being “a bit too old.” He witnessed another boss bawl out a valet because he didn’t know how to wind his £250,000 watch, and he saw a team of butlers draw the wrath of their employer at the end of a sixteen-hour day because they failed to serve tea in a Meissen porcelain cup. Money gives the rich the authority “to humiliate those who serve them.”

Money rises early and retires late, and Knowles follows its arc from east to west. Her walks begin amid the glass towers and brash nightclubs of Shoreditch and the City of London, where the finance machine “churns, expands and skims,” redistributing money “into ever fewer hands.” This is where “the building blocks of the plutocratic city” are manufactured, to be reinforced by bespoke advice on estate planning, tax shelters and family trusts.

She moves through Mayfair, Belgravia and St James, where new and imported money mixes with inherited wealth in places that have “the sort of hush which only lots of money can buy.” Hedge funds, private equity firms and family offices hide discreetly behind brass plaques — no names, only numbers.

She examines domestic life in Kensington and Chelsea, discovering that men still mostly go out and make the money while women mostly stay home to manage the household, staff and children who live in a triangle between city residence, country estate and elite boarding school. After hanging out with twenty-year-old Bags and her boyfriend Barbour in Sloane Square, Knowles observes that their lives mimic those of their parents, “heavily prescribed by gender and tradition” with “little room for imagination and manoeuvre.”

Knowles concludes her journey by following the “vortex of extreme wealth” upstream along the Thames to Richmond, home of Kew Gardens, then further west beyond the city fringes to Virginia Water, a London commuter suburb described by the local real estate agent as “the most expensive village in Britain.”

At the heart of Virginia Water is the Wentworth Estate — 1100 large homes built in the 1920s Arts and Crafts style. This is where Chilean dictator Augusto Pinochet endured house arrest in the late 1990s while efforts were made to extradite him to stand trial for genocide and torture. An interior designer tells Knowles that it’s tricky and expensive to find the right materials for building in Wentworth. Bricks, for example, must be “tumbled… so they don’t look new and shiny, or too bling.”

The Wentworth Estate is built around a golf club of the same name, another site of struggle between the haves and the have yachts. After billionaire Chanchai Ruayrungruang bought it in 2014 he doubled the fees and halved membership numbers, pushing out the merely wealthy in favour of a richer, more exclusive clientele. Talk show host Michael Parkinson was among those who offered stiff resistance in the courts.

Knowles finds herself on “sinister and silent streets” where walkers are neither familiar nor welcome. Signs remind her Wentworth is a private estate and members of the public use its roads at the pleasure of the owners. She wonders if driving would be any better and learns that estate managers, with a direct line to Surrey Police, use number plate recognition software to identify vehicles that have no business there.

In other parts of Virginia Water, residents have clubbed together to privatise their streets as well. Road ownership “has spread through the area like a rash,” supported by CCTV cameras, private security guards and signs reading “only residents and guests.” Properties are defended by approach lights, alarms, “tactical landscaping” (fences) and yet more guards.

For Knowles, this is “Johannesburg in Surrey.” While rich white South Africans might fortify themselves “against the imagined depredations of the impoverished black masses,” the source of potential threat in Virginia Water is unclear. A private security consultant tells Knowles that London is a lucrative market because of its lack of actual risks. But if you’d like four black Range Rovers to follow you around, he can arrange it for £10,000 a day.

Like yachts and good-looking butlers, security is another performance of wealth, “an eye-catching display of money that few can afford to stage.”

Art can be spectacle too. On her way to meet “Banker” in the City of London, Knowles admires the paintings in his foyer by Damien Hirst, the British artist best known for putting a Queensland shark in formaldehyde and encrusting a skull with diamonds. In Mayfair alone Knowles counts twenty private galleries: on offer in one of them (in the catalogue’s words) is Hirst’s “delectably fresh” Summer Breeze, sixteen butterflies fluttering against a blue sky, “punctuated by soft formations of luminous white clouds.” The painting subsequently sold for £435,000, about 25 per cent above the gallery’s top estimate.

“As money accumulates,” observes Knowles, “it struts in the clothes of high culture.” But art is not just for display; like property, it is another convenient way to launder money or stash funds in a “safe deposit box.” And if you are prepared to forgo looking at it, you can also avoid Britain’s 20 per cent value added tax by warehousing it offshore.

Culture and finance share the same streets, notes Knowles, and this is true of public art too. Further east, at Canary Wharf, Henry Moore’s Draped Seated Woman is one of three large bronzes gracing a small square. Under a 1960s scheme to place works by leading artists in housing estates, schools and other public places, Moore sold the sculpture to the London City Council at a 25 per cent discount. For three and a half decades, residents of the Stifford Estate in Stepney enjoyed passing by the familiar figure, which they fondly dubbed “Old Flo.”

When the estate was demolished in 1997, Old Flo was loaned to a sculpture park in Yorkshire. Two decades later it was back in its original borough but remained lost to the housing estates of Stepney. Placing the statue in a forest of concrete, steel and glass “constructed on the dispossession of London’s poor” could be described as artwashing — not least because Canary Wharf, like the Wentworth Estate, isn’t a public space.

Here, you’re on private property and “no right of way, public or private, is acknowledged.”* It comes as little comfort to be told that you are also under twenty-four-hour CCTV surveillance for your “safety and security.”

As I traced Knowles’s steps I experience more direct surveillance in Belgravia’s Eaton Square, one of London’s most exclusives addresses. With its Georgian townhouses straight out of a BBC period drama, this is “a world coated in fine aggregate render [and] painted in off-white magnolia,” with matching columned porticos and black wrought-iron fences. In the late afternoon gloom, I watch a resident emerge from her taxi to be ushered inside by a doorman in bowler hat, coat and tie. Then I realise I am being observed too, by a burly figure with a military stance standing watch further along the footpath.

Eaton Square’s heritage-listed terraces surround a series of six rectangular parks accessible only to residents. All the land belongs to the Duke of Westminster: “these streets are his, the squares and the statuary.” Under the rules of primogeniture, the seventh duke, otherwise known as Hugh Grosvenor, inherited the £9 billion estate at the age of twenty-seven despite having two elder sisters.

In one of the most powerful sections of Serious Money, Knowles walks the increasingly gentrified streets of Notting Hill. Here she interviews residents who chose the area for its vibrant “social mix” but found themselves floundering after “the parallel tramlines of the rich and poor, along which the neighbourhood usually ran, suddenly, dramatically and momentarily crossed.” That was on 14 June 2017, when the shoddily renovated Grenfell Tower exploded into flames, killing seventy-one residents and rendering hundreds more homeless.

Knowles speaks to “Palace” and other well-heeled residents who rushed to help distressed Grenfell neighbours. Their efforts were earnest and genuine, but ultimately served to emphasise the gulf between them and their neighbours. “The chasm between rich and poor narrowed in the immediate aftermath of the fire, as lives entwined; and then reopened as social inequalities as usual were resumed.”

Today Grenfell Tower is shrouded in white cloth, awaiting a decision on whether it will be demolished. Across the top floors a banner with a big green heart reads “Forever in our hearts.” At ground level, the white hoardings blocking access to the site host art works, floral tributes and scribbled texta messages to lost loved ones.

Grenfell sits at the northmost end of the Royal Borough of Kensington and Chelsea, which hosts extremes of wealth and poverty. A quarter of all homes in the borough are social housing, though the Notting Hill Housing Trust, in a sign of the times, now accommodates some of its tenants further east in the Borough of Hackney, where properties are cheaper.

You don’t need to walk far south from Grenfell Tower to enter a different social world. The plaque on a last surviving bottle kiln reminds passers-by of “the nineteenth century, when potteries and brickfields were established here amid some of the poorest housing conditions in London.” Today, the local estate agent lists a one-bedroom “mews house” in Pottery Lane at £700 a week. A worker earning the London living wage of £11.95 an hour would need to work a fifty-eight-hour week just to make rent.

Among the property’s selling points are “the green open spaces of Holland Park” just to the south, which boasts an Opera House, an elegant Japanese garden and a statue of its namesake, Henry Richard Vassall-Fox, Third Baron of Holland. In 2020, activists daubed the statue’s plinth with red handprints and placed a cardboard sign in the statue’s arms reading “I owned 401 slaves.” Then as now, London’s wealth is found “in bricks, stones, bodies and bones.”

Southwest of Holland Park is Cromwell Road, where three lanes of rush-hour traffic pass more rows of white stucco, the terraces broken by the occasional squat supermarket or multi-storey hotel, including the old Holiday Inn, an ugly example of 1970s brutalism. Now empty, it’s the site of another protracted planning dispute. In 2018, when developers proposed demolition to build a larger, more contemporary hotel, the Royal Borough received 750 objections arguing that the project would “replace one ‘out-of-place monstrosity’ with an even bigger one.” Approval was denied, but two years later, London mayor Sadiq Khan intervened to give the project the green light. His price was a little bit of additional housing — the developers will build sixty-two units (up from forty-six) for residents on low incomes under the mayor’s affordable homes program.

It is a perhaps-inevitable irony that the architectural splendours we admire in London are the product of violence and exploitation. As Knowles writes, “Imperialism’s industrial, artistic and cultural swagger are stamped into the streets.”

But wealth can leave beneficial legacies. On the western side of Hampstead Heath sits a curious structure known as the Pergola. The 245-metre-long walkway, entwined with wisteria, roses and other climbing plants, affords vistas over the heath and its woodlands. It was built in the early twentieth century by Lord Leverhulme, aka William Lever, whose fortune came from the manufacture of soap and other cleaning products.

Lever was a progressive industrialist who supported universal suffrage and built housing for his workers at Port Sunlight, though there is evidence of forced labour and other abuses in his Congo and Solomon Islands operations. As part of Lever’s private estate, the Pergola was designed as a place for Lever to take a solitary walk, have a think, or stroll after lunch with fellow politicians and business figures.

Today, the Pergola is much-prized public space. As cultural geographer Timothy Edensor writes, this “structure for pleasurable walking” serves as an example of how contemporary city planners might better promote “pedestrian pleasures” into urban design.

Will London’s latest “gilded age” bequeath comparable legacies? Knowles’s observations suggest the diggers excavating the city are driven by a “vacuous rapaciousness” that hollows out urban life. A “troubling and secretive presence,” the super-rich have “a profoundly damaging impact,” with their “endless search for new frontiers of luxury” constituting an environmental disaster.

Stringent personal security, she concludes, is merely a way of hiding the indefensible from public scrutiny. And yet for the rich themselves, the money that drives such wasteful, hidden opulence seems to create increasingly isolated, lonely and paranoid lives.

In Virginia Lee Burton’s book, Mike Mulligan and Mary Anne can’t escape the pit they have dug for themselves. But their story nevertheless ends well. At the urging of a young boy who has been watching them work, the new town hall is built around them. Mary Anne is converted into the boiler that keeps the building warm and Mike is invited to be its permanent caretaker. They become the warm heart of the community. For the diggers of London, no such ending is in sight. •

Serious Money: Walking Plutocratic London
By Caroline Knowles | Penguin | $55 | 320 pages

* After this article was published, Inside Story received an email from a senior account executive at the The Academy PR, a public relations firm whose clients include Canary Wharf, to say that “in fact Canary Wharf is a public space, open to the public at all times and free to access.” When I visited Canary Wharf, I read and photographed a sign with the following text:

PRIVATE PROPERTY: CONDITIONS OF ACCESS.
This is private property and no right of way, public or private, is acknowledged over it. Any use of this land is with the permission of the landowner.

Although I wrote that Canary Wharf “isn’t a public space,” it would be more accurate to describe it as a “privately owned public space” in line with the definition used by Greenspace Information for Greater London: “publicly accessible spaces which are provided and maintained by private developers, offices or residential building owners.”

My overall point is not that the residents of Stepney housing estates are no longer free to visit Henry Moore’s “Old Flo”; rather, its relocation to Canary Wharf means it now resides in an entirely different world.

— Peter Mares

The post The plutocratic city appeared first on Inside Story.

While we wouldn’t have used the term, we were acting as YIMBYs — saying “yes” to a development “in my backyard.” But many progressive, middle-class residents of Fitzroy and other well-located suburbs have switched sides since then and are now firmly in the NIMBY camp, particularly when it comes to housing.

NIMBYs have come to oppose not just “social housing” — subsidised homes for people on low incomes — but new construction of any kind. Apartment buildings attract special ire, resisted as “inappropriate” for being too tall, for overshadowing or overlooking, for being out of keeping with “neighbourhood character,” for undermining heritage values, or because they generate those familiar evils: inadequate parking, congestion and noise.

YIMBYs see it differently. They believe that objecting residents are primarily worried about their property values. Places like Fitzroy and its equivalents in other Australian capitals may or may not be home to nineteenth-century terrace houses adorned with ornate cast-iron fretwork, but they are certainly “bucolic hamlets of wealth within the hearts of cities,” as Melbourne-based American sociologist Max Holleran writes in his new book, Yes to the City. And residents generally want to keep them that way by resisting “new housing that would bring more people and, potentially, greater socioeconomic diversity.”

Conflicts over housing are often portrayed as a simple generational divide between “boomers” and “millennials” — “you spend too much on avocado on toast” versus “you got all the breaks.” Holleran brings other fault lines to the fore, including the different interests of homeowners and renters, and the conflict between established residents in desirable suburbs and those who also want to live in places with good access to transport, jobs, schools, coffee and a lively local culture but can’t afford it. Underlying all these tensions are questions of class and wealth.

The story of the YIMBY movement begins in San Francisco with the foundation of BARF — the Bay Area Renters’ Federation. The acronym was chosen not just to inject humour into dour housing debates but also to emphasise that tenants faced a situation so dire that it made them want to throw up.

From 2010 to 2019, as the tech boom helped boost San Francisco’s population by 80,000 people, only 29,000 new homes were built. The city compounded the problem by ruling in 2018 that only one unit of housing could be built for every new 3.45 jobs created. Real estate values skyrocketed, pushing prices six times higher than the US average.

The 1960s radicals who gave us flower power found themselves occupying homes worth millions while well-heeled tech workers forked out monthly rents of US$4000 or more. Those pushed to the margins were the service workers who clean, make coffee, teach, nurse, fight fires and police streets. They were forced either to become “super commuters,” travelling up to three hours from outlying districts to get to their jobs, or to live in ever more expensive and insecure housing.

As real estate values rose, so did homelessness. Holleran describes the spaces beneath San Francisco’s elevated trains as “encampments reminiscent of Latin America’s informal settlements.” Around the headquarters of firms like Uber and Pinterest “the unhoused roam the streets in huge numbers as tech workers skitter to the other side of sidewalks to avoid them.”

BARF activists began showing up at planning meetings “dominated by homeowners saying ‘no, no, no’” and calling out “yes” instead, hoping that at least some new housing projects would get approved. They wanted to shift the debate from “real estate ruins the city” to “controlled growth moderates prices and allows for new residents to contribute to existing communities.”

Aware that in more affordable parts of the city “urban consolidation” is code for redevelopment that forces out low-income residents, BARF committed to pushing for densification only in well-off suburbs, where house prices were already high.

But the coalition that BARF sought to build was unstable and fractious. On the one hand this group of mostly young, educated, white urban professionals sought to make allies of long-term activists dedicated to getting subsidised housing built for those in most need, and so align themselves with poor African-American and Latino residents attempting to defend their neighbourhoods against gentrification. On the other, BARF courted real estate agents and property developers. It is easy to see how these interests might collide.

This tension has riven YIMBY movements everywhere, especially when they have accepted funding from companies, rendering themselves vulnerable to accusations of astroturfing. They also want to reassure existing wealthy homeowners that new development won’t destroy the character or quality of their cherished built environment (or, as a subtext, lower their property values), while at the same time — as Holleran writes — wanting to convince low-income residents that “new housing will not further intensify gentrification and displacement.”

This doesn’t mean the YIMBY argument carries no weight. While housing justice activists see YIMBYism as a poor substitute for increased public investment in social housing, the reasonable YIMBY response is that decades of campaigning have failed to produce tangible results in economies where most housing is, and always will be, created by the private sector. Enabling new apartments to be built in established suburbs increases housing choices for current and future residents and should help to hold prices down overall, and even reduce them in the long term.

Most of Yes to the City focuses on the United States. Holleran recounts the unsettling story of Boulder, Colorado, an affluent “eco-utopia at the foot of the Rocky Mountains” where lifestyles and property values are protected by an environmental greenbelt and limits on density, height and “non-familial co-habitation.” In the land of the free, liberty does not necessarily extend to living in a share house.

He documents the parallel trajectory of Austin, Texas, a university city celebrated for its lively music scene and “cowboy hippie spirit,” summed up in the motto “Keep Austin weird.” These days Austin is only affordable for people who are “economically productive but culturally boring” (namely, “doctors, bankers, and brokers, not poets, painters, and performance artists”).

Despite an acute housing shortage, downtown Austin still has open-air car parks that lend “a sprawling vacant feeling to some parts of the central business district that should be bustling.” Yet higher-density projects face stiff opposition for threatening the city’s acclaimed “weirdness.” As in San Francisco and Boulder, residential development has been pushed to the sprawling edges, condemning service workers to housing insecurity or car dependency and long commutes.

Australia’s planning constraints are generally less extreme than in the North American cities Holleran profiles. Postcode 3000 has transformed Melbourne’s CBD into a forest of residential towers, and urban consolidation is obvious in inner suburbs like Brunswick and Footscray. Over the past ten years, almost twice as many apartments as freestanding homes have been added to the housing stock of Greater Sydney. Yet Hobart, which has the most acute shortage of affordable rental housing of any Australian city, still has downtown areas, like in Austin, devoted to low-value uses like open car parks.

Whether planning rules are solely to blame for this lack of residential construction, or the causes are more multifaceted, is another question though. In Melbourne, for example, realtors are spruiking the CBD site of the Witches in Britches theatre restaurant as “a significant landbank opportunity.” Sometimes it’s not NIMBYs who delay development, but speculators looking to cash in on rising property values.

Yes to the City concludes by looking at how the concept of Yes in My Backyard has gone global. Holleran brings an acute outsider’s eye to observations about Melbourne and Brisbane, and invites Australian readers to consider how emerging YIMBY activism here might inject new life and fresh ideas into debates about housing and urban policy.

While some of our cities may be going up in the centre, they also continue to push outwards at the edges, giving us our own version of Holleran’s “missing middle” — a reference to underdevelopment in ageing middle-ring suburbs (or greyfields) and to the relative paucity of European-style medium-density housing that sits between freestanding homes and high-rise apartments. Stoushes over planning and densification are alive and well.

Holleran provides a useful contribution to Australia’s bitterly contested and often arid discussion about how to improve housing affordability. Opinion has hardened into two rival camps. For one side, the problem is entirely a question of supply — and the answer is to liberalise planning and zoning rules and let development rip. For the other, the problem comes down to demand: lax credit rules, tax concessions and other generous subsidies have turned housing into a speculative asset and driven up prices. On the latter view, the solution lies in tax reforms, more financial regulation and much greater public investment in social housing.

YIMBY movements generally fall into the former supply-side camp, arguing that all development is good development, even at the luxury end of the real estate market, because it adds to the overall stock of housing and eventually “filters” down to benefit all. Active YIMBY groups in Melbourne, Brisbane and Sydney can be contrasted with NIMBY organisations like Save Our Suburbs that oppose “inappropriate development” and “forced rezoning.”

Interestingly, both sides invoke arguments about lifestyle and environment. YIMBYs argue that higher densities bring the benefits of more walking and cycling, a “buzzy city” with outdoor dining and spaces for arts and culture, and rain gardens and trees in place of car parks. Save Our Suburbs wants to protect residents from “overcrowding, traffic congestion, pollution and loss of bushland and heritage resulting from ill-considered planning impositions.”

Avoiding such unhelpful dichotomies, Holleran reveals rifts within each camp. Not all YIMBYs take the build-more-of-everything approach; they are also concerned with price and quality, resilience in the face of a changing climate, and how new developments enhance or diminish the urban fabric by enabling walkability and neighbourliness. At the same time, he recognises that NIMBYs’ objections can be well founded: “Concern about one’s backyard is often a deeply deliberative form of community engagement that addresses the carrying capacity of land with on-the-ground knowledge that is attuned to environmental quality and social cohesion.”

Overall, though, Holleran is sympathetic to the YIMBY view that “building nothing is not an option.” He points out that hyperlocalism can provide cover for “latent racism and an unwillingness to share space and resources with others.” In San Francisco and Austin, planning controls and rising real estate prices have coincided with a rapid decline in the cities’ African-American population. Rather than “devolved decision-making” he would back the YIMBY call for city-, region- or even nationwide planning that de-emphasises the interests of individual homeowners and enables rational infrastructure and a fairer sharing of the costs and benefits of urban growth.

But Holleran also argues that the YIMBY agenda is far from enough to improve housing affordability, contain suburban sprawl, redress socioeconomic and racial segregation, and better prepare cities for climatic events. Greater state action will be needed to override local sensibilities and interests.

Just how contested this territory can become is evident right now in Britain. As part of its “levelling up” policy to “spread opportunity more equally,” Boris Johnson’s government committed to setting mandatory housing targets for every local council. In the competition for the leadership of the Tory party, Liz Truss promised to put an end to such “Whitehall-inspired Stalinist housing targets.” Her successor, Rishi Sunak, was none too keen either, and in any case the proposal has been white-anted by a group of conservative backbenchers concerned about the impact on their leafy constituencies.

This is not a simple left–right divide. In the Times, the director of the centre-right Centre for Policy Studies called their actions “selfish and wicked,” saying they would “enshrine nimbyism as the governing principle of British society… and leave every proposed development at the mercy of the propertied and privileged.” •

Yes to the City: Millennials and the Fight for Affordable Housing
By Max Holleran | Princeton University Press | US$27.95 | 216 pages

The post Building nothing is not an option appeared first on Inside Story.

First, how are the schools going? In reading, writing and numeracy, as tested for Years 3, 5, 7 and 9, NAPLAN reveals some ups and some downs since 2008, but no significant improvement. In science and maths, tested internationally by PISA and TIMSS, Australia is a bit above the middle of the OECD pack, which doesn’t sound too bad until we learn that this represents one in five fifteen-year-olds failing to reach “proficiency” in science, and one in four in maths.

Overall, a quarter of kids leave school without certification of any kind, and the much-discussed “long tail” of attainment persists. Many students don’t reach the minimum standard, and often fail to do so year after year. Kids who start behind typically get further behind. For Indigenous students it’s worse (although things are at least getting better from a very low base). Other sources of “disadvantage” — “geolocational,” disability, language background, and living in out-of-home care — are also of concern.

If school “performance” is a worry, so too is how students feel at and about school. A 2018 survey found that nearly one in three fifteen-year-old students didn’t feel they belonged at school, and more than one in four reported feeling like an outsider. When data of this kind are fed into a Sense of Belonging Index, Australia scores below the 2018 OECD average, and we’ve been sliding since 2003. On the related issue of wellbeing, the commission reports a 2014 survey (the most recent available) as finding that one in five students between the ages of eleven and seventeen had experienced high levels of psychological distress, and one in seven had had an episode of mental illness during the year. The clear implication is that schools aren’t doing enough to help.

Teachers aren’t happy either. They’re shouldering the load, the commission says, and too much of the load isn’t actual teaching. Teachers considering leaving often cite the workload and/or a wish to achieve “a better work–life balance” as reasons. Also cited: “challenges with student behaviour” (26 per cent) and “not enjoying the work” (21 per cent). A mere 2 per cent thought they weren’t suited to teaching.

The second story concerns the National School Reform Agreement, or NSRA. What even is it, as First Dog might say? It is, the commission says, an agreement by nine governments that the pursuit of a “high-quality and equitable education for all students” can be delivered by “three reform directions” and three target outcomes to be “progressed” through “national and state-specific initiatives,” assessed against “seven performance indicators,” and reported to the community in the interests of “transparency” and “confidence.”

So many moving parts! So many devices! So many players! In case the description alone doesn’t make the point, the commission hammers it home: “policy discussions” convened under the NSRA can be “remote” from “the lived experience of teachers and school leaders” (i.e. it’s a talkfest); some initiatives under the agreement have been delivered but others are “stalled”; two of the three “stalled” initiatives — both focused on tracking student progress and tailoring teaching accordingly — “are already thirteen years in the making”; and most of the delivered initiatives are “enablers” rather than rubber on the road.

All in all, the NSRA’s various initiatives are likely to have had “little impact” on student achievement. The next intergovernmental agreement should “focus on a small number of reforms” (i.e. the “reforms” have been all over the shop); initiatives should be limited to those that might benefit from “coordination” and avoid “a one size fits all” approach (i.e. agreements thus far have hindered more than helped); milestones should be clear (i.e. no one knows where we’re up to); and “thorny issues” will need to be “resolved” (i.e. they’ve been ducked).

It is difficult to avoid the conclusion that the NSRA has not just failed to work but, for fundamental, structural reasons, can’t work, and never will.

The problem began with the Commonwealth’s move into schooling in the “state aid” election of 1963. It was compounded by Whitlam and his Karmel Report and then by the Rudd and Gillard governments when they dollied up Canberra’s imperialism as a “national approach” complete with a National School Reform Agreement.

For the whole of this sixty-year period, the funding, regulation and governance of the Australian school system has fallen between two stools, neither national nor local. It can’t move forward and turn into a genuinely national system because neither the Constitution nor the states/territories will let it.

The two levels of government, the state/territory and the federal, work less with each other than against each other. The NSRA is really neither national nor an agreement; it is a federal coercion arising from federal dollars. As Julia Gillard made clear in 2008 when she filled out some of the detail of the beefed-up Commonwealth role, “reporting on performance will be a requirement of any new school funding agreement.” What the Productivity Commission sees as failures of program design and simple fecklessness are better understood as artful foot-dragging by press-ganged sailors on a rudderless ship.

If schooling can never move on to become coherently national then where can it go? There is really only one alternative: back to the future. Schooling will have to be returned whence it came, to the states and territories. If some or all of them want to get together for whatever purpose from time to time, then that would be up to them, not to the only Australian government that doesn’t actually run schools.

Is that the commission’s conclusion, that the feds should get out of schooling? Its way of saying the unsayable? Perhaps, but probably not. For one thing, the commission is itself a part of the Canberra machine. For another, its idea of “reform” is indistinguishable from that pursued by the Commonwealth.

The Productivity Commission says it is taking an interest in schools because it wants them to be more productive. They will then help, in turn, to make the economy more productive.

How to do that? Well, the commission is staffed by economists, so their first recourse is to human capital theory. Developed at the University of Chicago in the late 1950s, human capital theory addressed a puzzle: why was the US economy so much more productive than most? The first answer: because its relatively huge education system generated a copious supply of educated labour, otherwise known as “human capital.” How does education do that? What is the missing link? The answer was found in the labour market, where employers pay more for educated labour because it is more productive.

Human capital theory went global in the early 1960s after it was picked up and promulgated by the Organisation for Economic Co-operation and Development (emphasis added). It arrived in Australia in 1964 via the Martin report on tertiary education — the first few pages of which, by the way, offer a compelling insight into the theory and its impact.

In the almost seventy years since then, human capital theory has been rejected outright by some and revised and refined by many others, none of which seems to have reached the commission. Education, it declares, is the source of no less than a fifth of labour productivity growth in recent years “and will become increasingly important in maintaining future growth.” Moreover, education “benefits both individuals and society” — by boosting earnings, increasing fulfilment, improving health outcomes, reducing crime, and lifting social and economic mobility.

All that talk about “benefits,” as if schooling didn’t do a fair bit of damage to a significant number of kids (and to the social fabric). It’s still correlation assumed to be causation (including the preposterous claim that “one standard deviation increase in the effectiveness of the average teacher would raise average lifetime earnings of the classroom by several hundreds of thousands of dollars each year.”) Education is still a driver of economic growth, not a mere supplier, let alone product. But the main problem is that the theory provides no guidance at all about how education itself can be made more productive, apart from the idea that if education is good then more education is even better. That was plausible in the United States in the 1950s and Australia in the early 1960s, but now?

That leaves the commission looking for help in working out what to say about more productive schools. Unsurprisingly, it turns to “effectiveness” theory, currently the orthodoxy in Australian schooling and, despite its origins in the discipline of psychology, very like economics in its assumptions and methods.

The core finding of the “effectiveness” approach is that there are big differences in the effectiveness of individual teachers and teaching strategies. It follows that the way to boost schooling’s productivity (or “performance”) is to boost the “quality” of teaching by getting “better quality” recruits into the profession, disseminating “best practice,” and driving schools to drive teachers to “perform” via standardised tests and published results.

The commission takes to this idea like a duck to water. Suddenly finding itself with the key to schooling productivity, it comes up with lots of bright ideas — twenty-seven of them by my count.

Consolidated, the list looks like this: schools should identify students who are falling behind and respond with “targeted interventions”; learning for all students should be “personalised” via “untimed syllabuses”; equity groups need an “inclusive” approach; student wellbeing must be brought into focus; “systematic” mechanisms must be used to diffuse “evidence-based practices”; Master Teachers are needed, which means boosting the HALT (Highly Accomplished or Lead Teacher) program; on-the-job-learning through “professional development” is a priority; best practice must become common practice; ongoing professional feedback needs to be systematised, perhaps via Quality Teaching Rounds, as used in Singapore and elsewhere; digital technologies can support teachers, reduce teacher admin loads and enhance learning; support staff should be better deployed; schools should focus on “innovation” and “development”; different “models” of schooling should be trialled and evaluated; we should perhaps follow the examples of the US charter schools and England’s academies (which have “transformed” that country’s school system); school hours might be more flexible and extended.

Just how this miscellany squares with the commission’s insistence on focus and parsimony in the NSRA is not explained. More, as anyone who has been around schooling for a while will attest, the commission’s list is reminiscent of countless whiteboards from conferences, workshops, professional development days and the like. Most items arise from a particular cast of mind but otherwise lack any sense of priority or sequence. Those who run schools and systems would be entitled to be offended by this offer to teach them to suck eggs, and by the simple ignorance of those who would teach them.

For example, “innovation” has been a mantra since the 1960s and official since the Karmel Report and its Innovations Program. So also for “inclusive” approaches to “equity groups” and another Karmel initiative, the Disadvantaged Schools Program and its many derivatives and like programs. Master Teachers perhaps? The commission appears unaware of the Advanced Skills Teacher initiative of the early 1990s and its ignominious end as just another salary increment. As for charter schools and academies, words fail. The commission seems unaware of Western Australia’s independent public schools program or of a national de facto charter school system, the heavily subsidised, fast-growing independent schools.

If we really did contemplate ramping this up somehow, the American charters and the British academies would serve as warnings. Both programs have been surrounded by controversy and conflict since their introduction in the 1990s and the early 2000s respectively. Evidence on the “performance” of the charters and academies is fiercely contested. But the real issue is to do with their impact on school systems and their performance. Far from “transforming” England’s schooling, the academies are better seen as the most recent episode in a long and often bitter class-based struggle between the “comprehensives” and the grammar schools, while in the United States the charter schools and their bête noire, the public systems, are sites of cultural warfare backed by the two main political parties.

How about the commission’s idea of trialling different “models” of schooling? Is it aware of (for example) the Big Picture schools (which really are transformative)? Or Victoria’s publicly funded “community schools”? Or the chequered histories of Preshil (Victoria), Marbury (South Australia), the School Without Walls (ACT), the Nimbin Community School (New South Wales), the Bowden Brompton Community School (South Australia), among many others? The difficulty isn’t in cooking up “alternative models” or even in getting an alternative model off the ground. The problem is in getting the elephant to learn from the ant. Changing heavily defended structures is a very different thing from finding interstices between them.

Beneath the commission’s simple ignorance is incomprehension. Consider the injunction that best-practice teaching should be common practice. There is, of course, plenty of scope for improvement in how teachers do their work. More than three-quarters of classroom talk is typically teacher talk, and when the teacher does ask questions almost all the answers require only “surface” learning (recall of facts and the like). About half the typical class will already know about half the content of the typical lesson. Students spend most of their time listening, or pretending to. They get little feedback on how they are going; most of what they do get comes from other students, and most of that is wrong. Teachers routinely mistake busyness for engagement, activity for learning. Students — the experts on the quality of teaching — mostly report having had only a handful of teachers who made a lasting and positive impact.

Some teachers do manage consistently to transform the recalcitrant class into a harmonious choir, and many don’t, or do so only sometimes, and the extent to which teachers do or don’t does indeed make a big difference to the quality and pace of students’ learning. But “highly effective” teachers are, almost by definition, the exception. How to get, let’s say, 200,000 of those who don’t teach consistently at that level to catch up with the 100,000 who do? And why, after decades of effort in teacher training, in-service education, thousands of studies and years of hot gospelling about “teacher quality,” is it still not happening?

Is the problem in the teacher and the teaching? Or is it in the organisational form, in the inherently low-productivity set-up of class, classroom, timetable, subject, lesson, test, success, failure? Apart from passing references to “experimenting” with different “forms” and to “untimed syllabus,” the commission neither asks nor canvasses this question. Nor does the commission wonder in which schools those 100,000 (or whatever) very effective teachers, and the 200,000 others, might be concentrated. Any teacher knows the answer to that question; many vote with their feet.

The Productivity Commission is of course correct in another of its suggestions, that “equity groups” would benefit from a more “inclusive” approach. But is it aware that Australian schools now have the highest concentrations of “disadvantaged” (and “advantaged”) students of any comparable OECD country? Plus high levels of segregation by religion and ethnicity? That has to do with the housing market, of course, but it also has to do with something the commission ignores: the organisation of schooling at the macro level rather than its conduct at the micro, and in particular its division into sectors, one government, two non-government, one secular, two “faith-based,” all three funded, governed and regulated in their own way, the game as a whole set up in a way that encourages two sectors to suck the most sought-after families (and teachers) out of some schools and into others. Has the commission read the Gonski report, and the excellent analysis that informed it? Is it aware of the dynamics of the sector system and the growth of “diversity” between schools rather than within each, and that this is what presents schools, from top to bottom, with the “inclusiveness” challenge?

Human capital theory in its unreconstructed form owes its longevity more to the enthusiastic support it attracts from a very large and influential education industry (no less than four of the sources on human capital thinking are education lobby groups) than to its explanatory power or usefulness in guiding reform. We can make much more sense of schooling if we see it as a product as well as (or more than) a supplier/driver of prosperity by providing the educational credentials that fuel the ever-increasing competition between individuals and occupational groups for “positional goods.”

That certainly explains a lot more about schooling than does human capital theory, including the explosive growth in education numbers, often far outstripping economic growth; the displacement of much learning and “skill development” from workplaces to front-end, credential-yielding formal education; the increasing organisation of schooling to generate a giant ranking of students, made explicit in Australia by the ATAR; and the secular demographic shift in the school system noted a moment ago. That in turn goes a long way towards explaining why schools and school systems have struggled with so little success to reduce inequality and the “long tail” of attainment, or to help kids who start behind to catch up.

The commission first collapses this heresy into the confines of economics in the form of “signalling theory” (“does a qualification make you smarter or just signal that you are smarter?”) and then briskly dismisses it as not standing up to empirical scrutiny. That understanding “credentialism” might require some sociology, history and political science as well as economics seems not to have occurred.

The commission is on a similarly sticky wicket when it turns to the effectiveness approach to explain schooling. Developed mainly in the United States in the 1970s as a response to the radical and disruptive ideas about schooling widespread in the previous decade, it is deeply conservative in adhering to the received “grammar” of schooling: the class, classroom, timetable, subject, lesson, test, success, failure. Like human capital theory, the effectiveness idea was quickly adopted by the OECD and disseminated around the world by its program of standardised testing. Like economics, it ends up thinking that change is something achieved by technical management, and that is perhaps what appealed to the Rudd and Gillard governments and their goal of “Top Five [in OECD league tables] by ’25.”

Substantial and consequential differences in the “effectiveness” of teachers and teaching strategies undoubtedly exist. Nor can it be doubted that the effectiveness movement has brought some empirical discipline to the waffle endemic in and about schooling. The account of the realities of the classroom given above, for example, is gleaned from a guide to “effectiveness,” the International Guide to Student Achievement. Effectiveness thinking and evidence has been helpful to teachers and schools in providing answers to the crucial question: what works? That question was indeed the title of a foundational text.

Things begin to go wrong when general findings and guidance are turned into the very precise “effect sizes” popularised by John Hattie. Holding students back? –0.32. Diversity courses: +0.09. Mainstreaming/inclusion? +0.27. Reading Recovery: +0.53. And top of all pops, “conceptual change programs”: +0.99. To speak so clearly and confidently in answering the “what works” question, to do all those intricate calculations of “effect,” the effectiveness approach needs to see schools as the box between “inputs” and “outputs” and then take a drastically simplified view of both.

On the “inputs” side it considers only the most proximate causes of differences: teachers and teaching strategies and “interventions.” That screens out all the things that shape and organise the daily work and workplaces of teachers and students, and the working careers of the latter — the organisation of Australian schools into sectors; the big structures of funding, regulation and governance; and the heavily entrenched “grammar” of schooling.

It is equally reductionist on the “outputs” side. Its fundamental, and sometimes exclusive concern is with “outcomes,” and particularly “outcomes” in science, numeracy and literacy, as revealed by standardised testing. The problem is that that is very much narrower than the span of schooling itself — just a fraction of the cognitive fraction of the formal curriculum, which in turn is the source of only one part of “what is learned in school.”

Schooling, moreover, is not only an individual business, and it isn’t just about outcomes. As can be seen in the social, religious and ethnic segregation noted above, schooling shapes the social order. And its twelve years represent something like a fifth of most working lives. So blinkered in this is the Productivity Commission that when it inspects the indicators used by the NSRA it dwells on their technical quality and says nothing about their scope. What schooling needs is not more highly polished indicators but indicators that represent what it is that schools actually do, and should do.

The effectiveness approach has another thing in common with economics: it is so dominant in its field that it has become a true believer in its own “science.” It regards that “science” as the only source of real “evidence” about schooling, and has even achieved a new national institution, the Australian Education Research Organisation, dedicated to that proposition. It cannot see itself any more than it can see much about schools and schooling because it has no philosophy or history and very little of the social sciences and their many derivatives to see with.

In thinking that schooling is all about teaching, effectiveness research sees students as consumers, and then wonders why so many of them become “disengaged” and why “student agency” is so difficult to provide. In its origins and its contemporary functioning the effectiveness movement is not reformist or even conservative. It is reactionary, shoring up a low-productivity and obsolete mode of schooling, and drawing attention away from the big structures that hold it in place. Often singing the praises of teachers and schools, it is in effect if not intention engaged in a form of victim blaming.

It does all this by starting from the wrong point altogether. Schools are less sites of the delivery of the service of teaching than sites of production where the core workforce, those it calls “students,” labour away as best they can within the frame given by history to produce not just learning but themselves and each other. If the Productivity Commission really wants to make schools more productive, then that is where it should start.

The post Unproductive schooling, counterproductive reform appeared first on Inside Story.

As a result, getting access to social housing, whether it’s public housing provided by state authorities or community housing provided by not-for-profits, is harder than ever. The first tranche of 2021 census data shows that social housing’s share of all dwellings has fallen below 4 per cent Australia-wide, continuing a steady decline over more than two decades.

When Scott Morrison opted instead to subsidise property owners through the HomeBuilder program, the states were forced to go it alone. Victoria set the pace in 2020 with the $5.3 billion Big Housing Build, a plan to construct 12,000 new dwellings and refurbish 23,000 existing social housing properties. Queensland soon came to the party with its $1.8 billion Housing Investment Growth Initiative, promising 6365 new homes over four years, and the WA government committed $2.1 billion to deliver 3300 new homes, adding another $408 million in its 2022 budget.

Labor-run states weren’t alone. The largest per capita investment was Tasmania’s $615 million commitment to construct 3500 new social houses by 2027 (funded in part by senator Jacqui Lambie’s success in negotiating a waiver of the state’s historical Commonwealth housing debt.)

South Australia and New South Wales are building too, though their construction programs will mostly replace old, rundown public housing, producing little gain in dwelling numbers.

The total state effort amounts to about $10 billion. According to housing expert Hal Pawson, the states will build more social housing over the next three years than Australia saw in the previous decade. Presenting an analysis by the UNSW City Futures Research Centre at this month’s Affordable Housing Summit in Melbourne, Pawson said that these programs will add 15,500 homes to Australia’s social housing stock (after accounting for demolitions and replacements).

The scale of these efforts is comparable to the last significant federal investment, the Rudd government’s Social Housing Initiative in response to the global financial crisis — a $5.6 billion program that constructed 19,700 new dwellings and refurbished 12,000 more during 2009–12.

Now the Albanese government is bringing the Commonwealth back in, though rather than investing in social housing via the budget, it is setting up a $10 billion Housing Australia Future Fund. Three states, New South Wales, Queensland and Victoria have already created similar off-budget funds, each capitalised at a little over $1 billion.

Details of the federal scheme are yet to be finalised, but Pawson anticipates it will follow the pattern set by New South Wales, with returns from the fund helping not-for-profit housing providers develop new homes by bridging the gap between their costs and the rent their low-income tenants can afford to pay.

The costs are a mix of operational expenses, maintenance, and debt payments, and will vary depending on location and the characteristics of tenant. (In social housing, most tenants rely on government payments, and their rents are capped at no more than 30 per cent of income. In affordable rental housing, aimed primarily at low- and middle-income workers, rents are discounted to 80 per cent of the market rate.)

In 2018, the City Futures Research Centre estimated, the average annual gap for social housing was $12,000 per annum. On that basis, the Future Fund will need to earn $240 million each year to subsidise the 20,000 new social housing dwellings promised by Labor. If its earnings average 6 per cent each year, or $600 million, the extra income can be put towards Labor’s other promises — 10,000 “affordable” homes for police, nurses, cleaners and other “heroes of the pandemic,” repair and maintenance of existing housing stock, and a cash injection to build new crisis accommodation. And, of course, the government will need to pay interest on the $10 billion borrowed to set up the fund.

It’s important to understand that the proceeds from the Future Fund won’t be used to give not-for-profit housing providers up-front grants to build dwellings. Instead, it will guarantee to fund the gap between rent receipts and costs for twenty-five years, giving housing providers income certainty long into the future. This will enable them to seek the finance they need from private sources — including, potentially, superannuation funds (as is already happening in a limited number of cases). In this way, a relatively modest amount of public money can be leveraged to finance a lot of new housing.

Still, the fund seems a cumbersome workaround. An analysis by Pawson and his colleagues shows that another option, providing up-front development grants to not-for-profits, is the most cost-effective way to build social housing. Pawson also points out another downside of the fund: it will be fully committed after five years. In other words, once the first 20,000 social dwellings are completed and tenanted, all annual returns from the fund will be allocated to bridging the gap between rent those tenants pay and the cost of providing them with housing. Unless the fund is topped up with fresh capital, federally subsidised social housing construction will once again come to halt.

This already happened in New South Wales. All returns from its $1 billion Social and Affordable Housing Fund, set up in 2015, have been allocated to bridging the rental gap on 3400 social and affordable dwellings under contracts lasting twenty-five years. As the fund says on its “frequently asked questions” page, this means there “are no current opportunities to access SAHF funding.”

With sufficient political will, such funds could be replenished or duplicated, to enable more building. The fly in the ointment here is that establishing a new fund or topping up an existing one with billions of dollars could be hostage to the vagaries of the electoral cycle. Incumbent governments would need to do more borrowing, which is one thing the funds are set up to avoid. Or they could find other sources of capital, for example by selling public assets. The capital for Queensland’s $1 billion housing fund was extracted from the Queensland Land Titles Registry. But such choices require courageous governments.

The fact that Canberra is borrowing creative ideas from the states at least suggests that federal relations are turning a corner. Encouragingly, housing and homelessness minister Julie Collins has already met twice with her state and territory counterparts. Their last meeting with her Coalition predecessor was almost five years ago.

But Collins will have her work cut out realising Labor’s campaign promise of a National Housing and Homelessness Plan. Such an aspiration implies much more than simply rejigging the 2018 National Housing and Homelessness Agreement that governs the disbursement of $1.6 billion in federal funding to the states and territories.

A true national housing strategy would integrate the approaches of federal, state and local governments, and address not just how to subsidise homes for low-income earners, but the entire housing system and its interaction with other policies, like tax settings, immigration levels, planning regulations and building codes.

The plan needs to extend beyond the five-year horizon of the Housing Australia Future Fund and secure a pipeline of social housing construction after the current burst of state activity has run its course. Pawson says we can’t expect the states, with their limited revenue- and loan-raising powers, to keep investing at the current rate without federal support. (And as he points out, New South Wales and South Australia aren’t investing much from general funds anyway.) But he says Canberra can use its funding muscle to encourage the states to contribute in other ways, such as by providing land and using their planning powers to facilitate more construction.

A planning power widely used overseas but rarely implemented in Australia is inclusionary zoning, which mandates that new housing developments include an affordable component. Since 2005, South Australia has required that 15 per cent of new dwellings in significant development projects be affordable, with at least 5 per cent set aside for high-needs groups. In the City of Sydney, the developers of urban renewal projects like Green Square must include a small affordable housing component in their plans or pay a levy. Industry groups like the Property Council oppose inclusionary zoning on the basis that it amounts to an unfair tax on some landowners that deters investment.

Can Australia learn from its peers overseas? Canada, with similarities beyond a Westminster system, a British colonial history and a federal structure, is an obvious place to look. Both nations have comparable home ownership rates and a history of substantial postwar investment in social housing that was effectively shut down in the 1990s.

Canada’s 2018–28 national housing strategy was meant to turn that around. Set up with an “unprecedented” C$40 billion in funding, it aimed to halve rental housing need and chronic homelessness within a decade. When a keynote speaker at Australia’s 2017 National Housing Summit described how prime minister Justin Trudeau had declared that “housing rights are human rights” and promised to enshrine in law the right to adequate housing, the sighs of envy in the audience were audible.

But at the recent Affordable Housing Summit, McMaster University housing expert Steve Pomeroy explained how creating an effective national housing strategy for Canada has been far from straightforward.

On the plus slide, the strategy is embedded in legislation. While the legislation doesn’t entrench housing as an individual right enforceable by the courts, it commits federal and provincial governments to the goal of adequate housing for all. It also provides funding certainty over a ten-year period (and, since 2018, the budget has been boosted to C$72 billion). The ambition of the strategy was lifted too: it now aims to eliminate rather than merely halve chronic homelessness by 2028.

Yet, as Pomeroy told the conference, the vision and its funding don’t align. A 2021 review by Canada’s parliamentary budget office found that housing assistance to low-income households has fallen in real terms despite the increase in overall spending. Even with commitments to build more than 90,000 new units of housing and repair a similar number, the budget office anticipates the strategy will fall well short of its aim of halving housing need, which will have climbed from 1.7 million to 1.8 million households by 2025–26.

The problem is not just the quantum of funding but its form. Rather than providing grants, most new funding comes as loans, making it suitable only for projects that can generate a return on investment. These projects can increase the supply of rental housing overall, and help hold down rent rises, but they aren’t designed to build homes for those who need them most.

Pomeroy says the strategy has morphed into a program of “market rental supply with a poorly designed affordability requirement.” Along the way, it has facilitated “renovictions” in the private rental market, with loans used to fund modest upgrades that then provide an excuse to evict low-income tenants and raise rents. In real estate terms, these dwellings are “underperforming assets,” says Pomeroy, though he considers them “naturally occurring affordable housing.” The Canadian strategy lacks a commitment to enabling not-for-profits to “buy up affordable housing and keep it affordable.”

With the Albanese government facing similar challenges as it builds a national housing strategy, Pomeroy had two key messages for his Australian audience. First, “a national housing strategy is different from a federal housing strategy,” and an over-centralised model is likely to fail. Second, “a strategy without money really isn’t worth very much.”

Discussion of housing in Australia is always dominated by home ownership, and attention right now is focused on rising interest rates and their impact on real estate values and mortgage payments. While these indicators are important (not least for the stability of a financial system highly exposed to property debt), the sharp end of Australia’s housing crisis — fuelled by the lack of new, affordable homes — is in the private rental market.

According to Domain, average rental vacancy rates in Australia’s capitals were just 1 per cent in August. SQM Research puts the rate even lower, at 0.9 per cent. Outside the capitals, the situation is worse still, with Covid-fuelled sea- or tree-changers outbidding locals, not to mention housing lost to recent floods and fires. Domain puts the rental vacancy rate in regional Australia at just 0.6 per cent. In places as disparate as Warrnambool, Kiama, Queanbeyan, Toowoomba and Burnie, essentially no homes are available to rent.

To put these numbers in perspective, the former National Housing Supply Council used an “equilibrium” point for Australian cities of 3.0 per cent — that is, the vacancy rate at which there should be no upward or downward pressure on rents. With vacancy rates well below that figure, SQM data show capital city asking rents rising by more than 20 per cent over the past year. That’s for new listings; rents aren’t yet rising at the same pace for tenants with ongoing leases. Nevertheless, says Domain, a “landlords’ market” is “driving up rents and escalating competition” between tenants.

The return of international students, temporary skilled workers, backpackers and permanent migrants will put more demand into the system. In Australia’s lightly regulated market these pressures will soon flow through to tenants.

Beyond the $10 billion Housing Australia Future Fund, the federal government wants to avoid borrowing heavily to invest in social housing because that would add to a budget deficit that the Treasurer (misleadingly) claims is “heaving with a trillion dollars of Liberal debt.” Labor has also painted itself into a corner by backing away from sensible changes to negative gearing and the capital gains tax discount. Not only could changing the tax treatment of housing raise the revenue needed to build more social housing without extra borrowing, it would also dampen the speculation that inflates property prices.

The problem is partly one of perspective. Social housing is still framed primarily as a cost to the budget bottom line rather than an economic and social investment. Yet numbers crunched by SGS Economics and Planning for the private sector advocacy group Housing All Australians show that every $1 invested in social and affordable housing delivers $2 in benefits — a rate of return greater than many other infrastructure investments.

The SGS report, Give Me Shelter, says a failure to tackle our social and affordable housing needs will cost the nation $25 billion annually by 2051. We’ll pay the price in expenditure on welfare, visits to emergency departments, police and ambulance callouts, and putting people through courts and locking them up in jails. And we’ll lose tax revenue from lost productivity and lower employment.

By contrast, SGS calculates the benefits of providing adequate housing at almost $110 billion. Since the federal government stands to gain more than the states through increased tax revenue and lower welfare spending, it makes sense for Canberra to provide the bulk of the funding for new social housing.

Combined with recent state initiatives, the federal government’s Future Fund is a significant but modest step forward. To deal with Australia’s housing crisis, it will need to do much more. •

The post A new era for housing? appeared first on Inside Story.

All this was supposed to be driven by an expanded “national” machinery of agreements, meetings and institutions centred on Canberra — the only administration not stuck with the tricky business of actually running schools — in which state/territory and federal governments of all persuasions were enlisted. Those responsible for making this Heath Robinson contraption work were left confused about “who is steering the ship” and exposed to incessant micromanagement by state/territory ministers who carry the can for troubled systems. And the system as a whole — already hamstrung by the proliferation of agencies, institutions and authorities — was left with no entity (state, federal or national) with a span of authority and responsibility sufficient to drive improvement.

The “revolution” and its various components were no sooner in place than a leading international authority on systemic change predicted in unambiguous terms that it wouldn’t work. Six years on, the head of Australia’s leading education research agency asked how well we’re doing in meeting a series of “challenges,” ranging from lifting the teaching profession to reducing the long tail of student underachievement. He found that things were going nowhere or backwards in all of them. Six years later he looked again: much the same story. The revolution’s own miserable measure of “outcomes” in the “fundamentals,” the PISA test, has recorded a slow but steady decline in Australia. The rallying cry of “top 5 by ’25,” embedded in the Australian Education Act of 2013, now looks risible.

This comprehensive failure has left an elephant-sized question in the room: now what? The revolution’s one real success was in directing the attention and shaping the language of “policymakers” and “thought leaders.” They now have no other way of thinking and talking about schooling. Hence ministers declaring that yet another bad PISA result to be yet another “wake-up call,” hence more announcements about lifting teachers’ pay or entry scores, hence new tests to make sure that teachers can spell, and hence more looking at other countries to see what they are doing right that might work here — all less from conviction than from not knowing what else to do. Seen from the outside it comes close to a famous definition of insanity.

But what is the alternative? Revive and reconfigure Gonski, the revolution’s one attempt at structural reform designed to “level the playing field,” as proposed in Waiting for Gonski by Tom Greenwell and Chris Bonnor? Put all schools, government and non-government alike, on a common basis of funding and regulation to stem the “residualisation” of the government sector and the damage being done to the learning and life chances of the most disadvantaged students?

Greenwell and Bonnor’s proposal, and the analysis underlying it have a lot going for them, on which more in a moment. But first the “but.” Could Gonski rise again? It enjoyed massive popular and professional support and still didn’t get up last time. What chance a revamped (but not necessarily less threatening) version promoted in the midst of the long post-Gonski hangover? When the non-government schools are already on such a good wicket?

And let’s imagine a school system on the other side of a substantial upheaval. We’d still have much or all of that counterproductive national machinery. We’d still have Canberra finding yet more ways to interfere in everything and federal education ministers wanting to be national education ministers. We’d still have an obsolete “grammar” of schooling centred on ranking rather than success for all. And we’d still have heads full of trivialising ideas about “outcomes,” “effectiveness,” “teacher quality” and “performance,” as well as the belief that salvation will be found in “practice” when the problems are essentially structural. If it is possible to say that the Greenwell and Bonnor proposal is too much, it is also possible to say that it is not enough.

Are we in a catch-22, where what needs doing can’t be done? Not quite. The one thing that can be done is the thinking that the revolution couldn’t do.

• Stop obsessing about a narrow range of “outcomes” and start thinking about all the things that schools do, are and should be. Schools are meant to — and often claim to — “develop the whole person” and not just the cerebral cortex. Very well: how do we know if they are? Getting a broader sense of cognitive “outcomes,” often urged, is just the start. Schooling is an experience as well as a producer of outcomes: around a fifth of most working lives is spent at school. Is it a safe, happy, rewarding experience? For whom? Schooling has outcomes for the social order as well as for individuals. Are they of the kind that a pluralist, democratic society needs?

The case has to be made for indicators that measure the quality of the experience, the diversity within each school rather than between schools, and the development (or otherwise) of “general competencies.”

• Stop devising bite-sized improvements and start trying to understand why incremental reform has such a disappointing record. Consider, for example, the current crop of solutions to teacher shortages, low morale and poor retention in the light of “reforms” stretching back to the 1960s. One by one, apparently sensible proposals led to new agencies and institutions for teacher training, registration, standards and discipline, and the setting of terms and conditions of employment — most within each of the eight states and territories and/or at the national level.

That tangle meant failure for the Rudd/Gillard proposals, and it means that the current crop will fail too. In much the same way, bite-sized improvements in teacher workload have driven one reduction after another in class sizes and one increase after another in numbers and categories of “support” staff. The result has been chronic cost escalation, an extended life for a fundamentally obsolete way of organising student and teacher work, and no improvement in teacher morale and workloads.

• Stop talking about the quality of teaching (or teachers) and start talking about the quality of work in schools. In fact, go a step further: stop focusing on teachers and teaching and begin at the beginning, with learning. For its fixation on teaching, the revolution can thank a vast body of research into “teacher effectiveness” premised on the assumption that it could replicate the success of the medical sciences by doing the same kind of science. The most fundamental mistake lies in imagining that schools are essentially deliverers of the service of teaching in much the same way that hospitals and clinics deliver health services. In reality, schools aren’t like that at all.

Schools are sites of the production of learning, not by teachers but by a four million–strong workforce otherwise known as students. The big determinant of their productivity is not the quality of supervision but the organisation of their work. An inherited “grammar” of schooling is organised around increasingly intense competition, from Year 1 all the way up to Year 12, for position in a ranked order. It guarantees failure for many. A more productive grammar would shift assessment from ranking to the growth and progress of each student and, around that, change the organisation of work and workplaces.

The implications stretch from infrastructure (dominated by the classroom) to industrial awards and teacher unionism to popular assumptions about what schooling looks like. That’s what needs thinking and talking about. It is terra incognita to effectiveness research, and to the revolution.

• As the grammar of schooling is to work and workplaces, so are the “sectors” to the industry as a whole. Don’t take them as a given for policy; do make them its objects. They are not, as is so often claimed, a means by which families can choose an “appropriate” or a “faith-based” schooling, or a way for governments to cut costs by permitting fees to be charged. They are the means by which some schools have sucked the most sought-after students and families out of other schools.

Social segregation in Australian schooling is now more pronounced than in any comparable OECD country. To social segregation is added religious division — government schools are secular, but almost all non-government schools are attached to one or other of around twenty religions and denominations. With that and other sorting devices comes the separation of language and cultural groups too. In this matter, we have a very good starting point for thinking and talking in Greenwell and Bonnor’s book. (And, we should add, a case of “outcomes” being given too much weight and social, religious and cultural division getting not nearly enough.)

• Don’t dwell on “transparency” (a Gillard favourite), or reporting and accountability (state ministers’ contribution to teacher workloads), or “school performance” (intimidatory ranking for schools as well as kids). Start talking about the structure of the system and its governance — the fragmentation of authority and responsibility within state and territories, between the sectors, and between these and Canberra and its purportedly “national” machinery.

How can these bizarre arrangements be reconstructed? Should we go back to the future? Return responsibility for schooling whence it came (and as the Constitution requires), to the states/territories? Install in each a cross-sectoral statutory authority with a remit to drive a long-term restructuring of the industry and its work and workplaces? If not that, then what?

There is no shortage of things that could be added to this list. The revolution’s questionable taken-for-granteds (“equality of opportunity,” “choice,” schooling’s economic contribution) badly need re-examining. So does the habit of looking for silver bullets in other countries rather than trying to understand how Australia’s system has developed and what it can and can’t become. So also the endless talk about what makes a good teacher or a good school to the exclusion of what makes a good system.

But the point is not in a to-do list. The point is that the revolution has failed and so has its way of thinking. The first step towards unbeaching the whale is to start thinking outside that suffocating box. •

Comment to: dean.ashenden@unimelb.edu.au

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Not yet, as it transpired, and nor was the fall of the Republican Party, which continues to deny its real significance. Coincidentally or not, the fall that didn’t quite happen has been a central theme in several major American television series this year. Following major disruption to production schedules through the pandemic, The Morning Show (Apple Plus), Billions (Showtime) and Succession (HBO) all returned with new seasons about those who surf the high tides of wealth, power and celebrity.

The leading characters may not be likeable but their complex and often perverse personalities have disturbing resonances in the real world. Their fantasies, delusions, moods and impulses are consequential because wealth and celebrity mean power. Not the power of the presidency, though they sometimes come close to it, but power that is wide-ranging and even fundamental.

Billions continued its rollercoaster ride through the theme park of hedge fund capitalism, where the key players, always seemingly headed for a crash, take daredevil loops into the next escapade. This year’s season five eventually saw the departure of Damien Lewis from the lead role of maverick trader Bobby “Axe” Axelrod after a marathon combat with prosecutor Chuck Rhoades (Paul Giametti) and, for a while, it looked like a classic downfall.

Regular viewers, of course, knew better than to expect anything like that. Victories and losses in this arena are never final and, while billions are always at stake, that never seems to matter much. It’s all about the combat, which plays out in round after round of alpha male confrontation that is at times overtly primordial.

Episode one begins literally in the jungle, with Axe and his right-hand guy Mike Wagner (David Costabile) bellowing and beating their chests under the influence of the psychoactive brew ayahuasca. Afterwards they hare off on motorbikes, bearded and leather-clad, to get back to the city and be restyled in time for a contest with new challenger Mike Prince (Corey Stoll): not a shootout, but a photoshoot for GQ, vying for the cover profile.

Meanwhile, over at the headquarters of Axe Capital, the women are proving that they too can play hard. Performance coach Wendy Rhoades (Maggie Siff) has arranged a stunt with a friend who poses as a feral intruder looking for trouble. They throw each other across tables, do a few spins and backflips then embrace to the applause of the assembled company. “Now are we ready to do the fucking job for each other?” yells Wendy.

That’s Billions, subtle as a shower of brickbats. Purporting to offer an updated interpretation of game theory, a view of human nature developed by the Rand Corporation in the 1950s, the dramaturgy always revolves around competitive individualism, where collaboration is only another means of serving one’s own ends.

Axe’s departure, with its soundtrack of Bob Dylan’s “Like a Rolling Stone,” may signal the emergence of an instinct to escape the psychological straitjacket, but maybe not. “Why can’t we make our own?” was his response to Chuck’s challenge about the need to recognise wider laws in the universe. Prince arrives to take over Axe’s company, quoting Emerson and apparently offering a more expansive philosophy, until his concluding pronouncement: “What this is, is mine.” Ultimately, this gives us an Ayn Rand world — endlessly profitable but weary, stale and flat.

In its first season, The Morning Show offered a welcome antidote, working a blend of farce and pathos in its portrayal of a major television network descending into mayhem when leading anchor Mitch Kessler (Steve Carell) is forced to leave following allegations of abuse. There was genuine sparkle in the performances of Jennifer Aniston and Reese Witherspoon as Alex Levy and Bradley Jackson, the presenters left with the challenge of holding the audience and restoring confidence.

Integrity, of the news and those communicating it, remains a central theme in season two, but the business of distinguishing between genuine integrity and its public enactment becomes increasingly tortuous. Kessler’s fall is terminal, but with other key personnel implicated in the scandal, the fall of the network is what counts; and there, the public face is all that matters.

The longer story arcs of The Morning Show follow each of the central characters as they confront the question of what it means to be a good or worthwhile person. Their explorations take them on divergent paths, which means the new season has been criticised for lack of dramatic cohesion. Aniston and Witherspoon don’t have enough good material to work with and risk settling into prototypes: Alex as the melancholic narcissist, unable to escape her own mannered persona, and Bradley as the queen of charm whose zipped-on smile vanishes as instantly as it appears.

But showrunners Jay Carson and Kerry Ehrin should be credited with some serious thematic commitment. With his capacity to escape every impasse by stretching the parameters of the situation, chief executive Cory Ellison (Billy Crudup) emerges as the most dynamic figure, becoming a focus for larger questions about the corporate ethos he represents.

Stood down in the first phase of the crisis, he makes a defiant return as head of the news division and fronts the board with debonair contempt. Holland Taylor gives a crisp vignette performance as the board’s chair, Cybil Richards, getting nowhere in her attempts to exert authority over someone whose response to her demands is, “You really think that’s what this is all about, your little television network? This is a battle for the soul of the universe.”

Crudup portrays him as a lightning-witted improviser, always fully present in the moment, “exploiting the landscape of chaos.” Perceptive in interviews, Crudup speculates that if wealth and celebrity are the foundations of our value system, the implicit assumption is that individuals who personify those things must somehow be good.

The invitation to perform honesty, warmth and courage is always there, and some have the talent to do it with aplomb, but when the quest for goodness becomes introspective, as it does for each of the leading characters, and eventually for Cory himself, the corporate vehicle they are piloting may indeed go off the rails.

Succession has been compared to classical dramas of dynastic power and family conflict. Scripted with brutal wit and terse intelligence, and featuring a superb ensemble cast, it is widely acknowledged to be in a class of its own. Nevertheless, I have friends who won’t watch it, saying that the personalities it portrays are too toxic. And so they are, but the history of drama is filled with toxic characters. In ancient Greek tragedy, five generations of the house of Atreus engage in an unrelenting exchange of atrocities. Shakespeare gives us the murderous family pathologies of Hamlet and King Lear.

In these canonical models, the dramatic arc moves towards redemption through the downfall of the villains, and the termination of the regimes over which they have presided. But the rollout of the multi-season television drama allows the dramatic fall to be protracted, and perhaps ultimately averted, and therein lies the most troubling aspect of the contemporary picture.

The central strand of tension in Succession lies in an unresolved question: are we in a world that can no longer bring down a ruthless potentate and the twisted system of values over which s/he presides? Ageing media magnate Logan Roy (Brian Cox) is no mafia figure. He doesn’t dispatch people with physical violence; he destroys them by capsizing their economies and, if they are part of his inner circle, through humiliation and personal abuse. His four adult children are treated to the psychological equivalent of flaying.

This shouldn’t be fun to watch, but sadism in the realms of psychology has always been the stuff of comedy, where unfailing resilience is a source of entertainment. Connor (Alan Ruck), Roy’s eldest son, has an obtuseness that forms a natural defence: when he’s being got at, he usually just doesn’t get it. Roman (Kieran Culkin) and his sister Shiv (Sarah Snook), children of a second marriage, sharpen their wits on each other through pseudo-incestuous sparring that is exuberant and vicious by turns.

Some farcical secondary fallout comes from Shiv’s earnest spouse Tom (Matthew Macfadyen) who rolls with punches then takes it out through mock-bullying sessions with cousin Greg (Nicholas Braun). Only Kendall (Jeremy Strong) seems to have enough human sensitivity to be really vulnerable to the abuse, which, of course, makes him Logan’s prime target.

Spoiled, arrogant and petty, they are all ruined personalities, playing the game of corporate succession because it’s all they know how to do, though much of the comedy arises from their conviction that they can do pretty much anything. Shiv thinks she can dance, Kendall thinks he can sing, Roman fancies himself as a slick negotiator and Connor thinks he can be president.

How it will all turn out is unclear, and with a fourth season announced recently it is likely to remain so for some time, but don’t expect any catharsis. Chaos will always come again, and we live in an era when those who thrive in its landscapes are almost impossible to bring down. •

The post Landscape of chaos appeared first on Inside Story.

The problem arises from market distortions. Few markets are pushed around more by government policy than Australia’s housing market — on both the demand and the supply side — and few market distortions so limit the life choices of so many Australians. The good news is that governments have practical options for solving this problem. The bad news is that it first requires us to stop focusing on the wrong solutions.

On the demand side, there are good reasons why house prices should be rising despite our hiccup with immigration. Covid has seen Australians spending more time at home for both fun and work. With some of this looking to be permanent, it makes sense to upgrade your home, particularly when housing is a relatively safe investment during times of uncertainty.

But our tax system supercharges this investment in all the wrong ways. Because you only pay stamp duty when you purchase the house, buyers have the incentive to build bigger and hold for longer. Higher earners too often look to housing to shelter their income from tax. Negative gearing — which encourages people to invest in rental properties at a loss to reduce their income tax — means Australia has one of the most fragmented rental housing markets in the world, with few corporate investors. First-homeowner grants and subsidies merely inflate prices further.

This wouldn’t matter so much if the supply side of the market could respond easily. But governments are once again causing problems. State and territory rules stop new houses being built. Homeowners in leafy inner suburbs are particularly to blame: studies show that the housing markets with the largest constraints on development tend to be those where home ownership is greatest and owners use their votes to support parties that keep housing supply low and house prices high.

A study by economists Christian Hilber and Wouter Vermeulen compared two regions in England that were almost identical in every way except one: one region had much stricter regulations on housing development than the other. Prices in the more restricted region were 25 per cent higher than in the region where it was easier to build.

The ramifications of Australia’s housing crisis are enormous. Productivity and wages are higher in the cities. Policies that make it harder for people to afford a move to the city result in lower productivity growth and lower wages. In the United States, the lack of new homes has been linked to economic problems including slowing internal migration (which reduces wages), lower productivity and lower GDP.

It’s also bad for the climate. Big cities — where transport, infrastructure and energy are used more efficiently — are the most cost-effective built forms for reducing carbon emissions. Constraints on urban growth make it harder to reduce carbon dioxide emissions and harder to achieve net zero by 2050.

An economic policy in which growth relies on rising housing prices isn’t sustainable. Analysis by the International Monetary Fund shows that rising household debt boosts economic growth in the short term but starts to have the opposite effect after three to five years, when households cut back their spending to pay down debt. It’s short-termism at its worst.

The political consequences are just as big. Housing inequality is a major reason why many people across the rich world feel that the economy doesn’t work for them. It exacerbates tensions between the baby boomers in huge houses and the young families in crowded units. With young people shouldering the cost of Covid restrictions to protect the lives of the elderly, now is not a great time to be handing more wealth to old people at the cost of the young.

Luckily, although housing is in short supply, policy solutions are not.

New South Wales is looking to implement one of those solutions by allowing buyers to avoid the upfront cost of stamp duty by agreeing to pay an annual land tax. The Henry tax review recommended flattening the tax on savings to treat housing more like superannuation: not only would the tax rate on housing fall, so would the rate of deductions investors could use against their wage income.

We can also learn from overseas. New Zealand’s new, bipartisan policy allows up to three houses, three storeys tall, to be built on most sites without requiring resource consent in the country’s major cities. New York City’s system of “air rights” means that a property owner who builds shorter or narrower than allowed under the planning rules can use or onsell the extra space. Britain is looking at devolving planning and zoning decisions to street level, allowing developers to negotiate and compensate those directly affected in order to win the necessary support of 60 per cent of the street’s residents. An analogous program in Israel reportedly led to a 30 per cent increase in new housing starts.

Covid has revealed another solution. Thanks to the pandemic, city centres are full of empty buildings, providing a significant opportunity to revamp these large, prime locations into residential apartments. New York developers have been doing this for years. More than 45,000 people live in Lower Manhattan today as a result. The City of London believes it has room for an extra 1500 homes by 2030.

Together, these reforms would redirect investment to where people most want it and would result in more quality affordable housing. Yet all we hear from the major political parties are the same tired old debates about interest rates and monetary policy, and pointless policies like housing subsidies.

Housing affordability will be a major topic at the next election. Let’s vote for the party that stops complaining about it and instead puts forward real solutions. •

The post Time for a knock-down-rebuild of housing policy appeared first on Inside Story.

A decade on, all this stands like Shelley’s Ozymandias, that colossal Wreck on which is inscribed: “Top 5 by ’25.” Even by its own miserable measure, the revolution failed, utterly. Australian schools have not raced up the OECD league table, as was promised. To the contrary, they are further away from the international Top Five than ever. Others have raced, we have languished. Where did it all go so badly, so hopelessly wrong?

Although Savage disclaims any concern with that question, he provides an important part of an answer in his penetrating analysis, the fruit of in-depth interviews with eighty-odd Australian and international “policy actors,” close scrutiny of the revolution’s myriad speeches, statements, reviews and polemics, and all the latest in “policy studies” theorising.

Savage finds three substantial defects in the apparatus of revolution. First, a “playbook” of reform, a manual of measures and strategies promulgated by the OECD and made just about compulsory by its standardised testing and international league tables. The playbook and its enforcement, eerily reminiscent of the textbook and the Friday test, turned platitudes about “evidence,” “outcomes,” “evidence-based policy” and “evidence-based practice” into a stifling orthodoxy; larger ways of thinking about schooling and its purposes were pushed to the margins or extinguished altogether.

Second, and particularly damaging in Australia, was a mania for “alignment.” “Alignment thinking” drove a massive effort to line up everything from new national institutions to the daily work of every teacher in every school behind the great task of lifting “outcomes” in the “fundamentals.”

Third, and underlying both the playbook and the alignment push, was a “techno-scientific” cast of mind that discounted practical know-how and local knowledge in favour of purportedly universal, evidence-based assertions about “what works.” Linear minds, Savage argues, set out to seduce the non-linear world of schooling “with the alluring promise of order, certainty and progress.” In practice, this overweening drive for order generated disorder of several kinds: pushback by the states and territories against Canberra and its obsessions; a complicated, confusing “policy environment” in which “policy actors” were never quite sure who was “steering the ship”; and a “disconnect” between what policy said and what was done in its name.

Savage’s analysis of the inner workings of the education revolution is quietly devastating, but he resists the temptation to dance upon its grave. What the revolution has wrought, he seems to suggest, is what we’ve now got, and we’ll have to make the best of it. Policy and policymakers need to be more respectful of difference in thinking and practice, and more tolerant of at least some disorder. Above all, they must end their “romance with rationalisation.”

I can second most of these motions without expecting them to be carried, for reasons more apparent to old-fashioned political history than to policy studies. The problem with the “education revolution” was not that it carried out the most wide-reaching and comprehensive reform of Australian schooling policy in the nation’s history, but that it didn’t. With the partial exception of the Gonski funding proposals, Rudd and Gillard left the unique, dysfunctional fundamentals of the Australian school system unnamed and untouched: three “sectors,” each with its own sources and levels of funding, regulation of student selection and choice, and form of government; each sector represented in each of the eight states and territories, making a total of twenty-four “jurisdictions”; and two levels of government, the state/territory and the federal, closely engaged in every jurisdiction.

Problems arising go well beyond a confusing “policy environment” in which “policy actors” are never quite sure who is “steering the ship.” No one steers the ship, or can. With the possible exception of a handful of powerful independent schools, no agency — not the jurisdictions, not the states/territories, not the Commonwealth and not the newly installed national machinery — has the scope of control and responsibility or the stability of direction needed to change anything of real educational significance.

This incompetent machinery is heavily defended. Around the sectors have formed ethnic, religious and class-based interest groups, all in for their chop, each intent upon defending its patch and willing to frustrate any larger scheme that might threaten it. Specifically, as was seen in the sad case of Gonski, the two non-government sectors will go to war over any change to funding or regulatory arrangements that might interfere with prosperity won at the expense of the government sector.

On this divisive and counterproductive organisation of schooling — the timid effort to change school funding excepted — the revolution had no policy. These matters therefore fall outside Savage’s analysis too. “Policy studies” study what “policy actors” do and say, not what they fail to do. A larger kind of “policy studies” would be less inclined to take its cue from “policy,” less interested in critique, less focused on the machinery of policy, and more interested in working out what needs to be done about the deformed structure of Australian schooling.

A first submission: get the feds out of schooling; in each state/territory, move towards a framework of funding and regulation common to all schools; and install within each state/territory a statutory body to keep schools at a safe distance from ever-changing ministers and governments. •

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As of 9 September, only 2 per cent of the population of low-income countries had received at least one vaccine dose. In lower-middle-income countries the figure was 30 per cent, in upper-middle-income countries a slightly more respectable 54 per cent, and among high-income countries 65 per cent. Not one low-income country had met the World Health Organization’s target of vaccinating at least 10 per cent of their people.

The averages hide more shocking disparities. While more than 80 per cent of Australians, Portuguese and South Koreans are fully vaccinated, many governments are struggling to get first doses to even half of their population. In the poorest nations — countries like Haiti, Yemen, Sudan and the Democratic Republic of Congo — less than 1 per cent of the population have had even one dose.

Despite these obvious shortfalls, the British healthcare research company Airfinity calculated in September that rich countries had surplus supplies of more than 500 million shots, even taking account of their planned booster programs, and that the figure is likely to rise to 1.2 billion by the end of the year.

An analysis by the Financial Times shows that rich countries have given out more booster shots in the last three months than poor countries have administered in total doses all year. If those surplus vaccines aren’t sent to the countries most in need, as many as 2.8 million lives could be lost this year.

Epidemiologists are concerned that the current vaccination pattern will prolong the pandemic and create an opening for more dangerous and transmissible variants. The OECD sees inequalities within and between countries escalating, recovery of the global economy slowing, and international travel and tourism continuing to be affected.

An International Chamber of Commerce study found that the global economy stands to lose as much as US$9.2 trillion if governments fail to ensure low-income countries have access to vaccines. Up to half that impact would fall on advanced economies themselves. Even the US intelligence agencies are worried: their latest annual threat assessment concludes that the financial and humanitarian crises experienced by some hard-hit developing countries will increase the risk of internal conflict, government collapses and migration.

How did we get to this point? The course of the pandemic provides part of the answer. It initially fell hardest on high-income countries, which very quickly made early purchase bids for vaccines at prices largely governed by the market. Some countries (the United States, Britain, Canada and eventually Australia) purchased enough vaccines to cover their populations several times over. The G7 countries as a whole, home to just 13 per cent of the world’s population, have purchased more than a third of the world’s vaccine supply — including almost all the current mRNA production from Moderna and Pfizer/BioNTech.

In response to the demand, vaccine manufacturers set their official prices in a variety of ways. Larger, established companies like Janssen (the vaccine manufacturing arm of Johnson & Johnson) and AstraZeneca pledged to market vaccines at no profit during the pandemic. Pfizer’s CEO said the company planned to price for a marginal profit. Novavax plans to make an appropriate return. Newcomer Moderna priced to generate a profit.

In reality, vaccine prices are a movable feast, deeply dependent on quantity, negotiating capacity and demand. UNICEF, the UN children’s fund, has found that many middle-income countries are paying as much as high-income countries, if not more. Researchers at Oxfam calculated that Pfizer/BioNTech and Moderna received US$100 billion of taxpayers’ money to fund research, development and early purchases of their vaccines, but are charging up to twenty-four times the cost of production, and rising.

The AstraZeneca jab is seen as the cheapest of the main Covid-19 vaccines. That might be true in Europe, where the company’s contract with the European Union specifies just US$2.15 a dose, but not elsewhere: the British Medical Journal reported earlier this year that South Africa had paid AstraZeneca US$5.25 per dose for 1.5 million doses to be administered to healthcare workers.

We might all agree that being vaccinated during a pandemic is a humanitarian entitlement, but international action so far has been driven just as much by a concern among Western powers that Russia and China have more successfully pursued vaccine diplomacy with vulnerable nations.

China boldly declared its Sinovac and Sinopharm vaccines to be a “global public good”— as opposed to a commercial product — and has supplied them to some sixty countries, in many cases at no cost. This effort seems intended, at least partly, to undercut purchases already made from Western suppliers but not yet delivered.

But now, with the Chinese vaccines displaying lower efficacy, many of the countries that have used them face a public health dilemma.

COVAX, a global hub for buying and distributing vaccines created by the World Health Organization, the Coalition for Epidemic Preparedness, UNICEF and Gavi, is designed to help countries that would otherwise struggle to negotiate affordable vaccine purchases. It uses funding from governments and donors such as the Gates Foundation to make its own contracts with vaccine manufacturers and deliver supplies where they are needed.

Despite the grand vision, COVAX is 500 million doses short of its vaccine distribution goals. Its aim was to distribute at least two billion doses, two-thirds of them to lower-income nations, by the end of 2021. But only 16 per cent of contracted doses have been delivered, and the two billion doses target has been pushed out a year.

COVAX has struggled for several reasons. Prime among these is the “vaccine nationalism” of high-income nations, which have been slow to meet their commitments to the hub. Though billions of doses have been promised, actual contributions have been paltry, and too often they are small donations of soon-to-expire doses made at the last minute.

Australia is a case in point. The federal government promised A$130 million to COVAX, of which only A$44 million has so far been provided. It promised forty million vaccine doses from the national stockpile and a further twenty million doses for countries in Southeast Asia and the Pacific by the end of 2022. To date, fewer than five million doses have been supplied to developing nations.

In fact, Australia seems to be taking as much as it is giving. The Nine newspapers have revealed that the federal government has bought at least 500,000 Pfizer doses from COVAX to boost local supplies, and the government’s own figures show that it has a A$123 million option to purchase a total of twenty-five million doses for Australian use.

COVAX had hoped that the Serum Institute of India, the world’s biggest vaccine manufacturer, would boost its stockpile, but when Delta infections grew in March this year the Indian government limited exports in order to supply the domestic market.

Around eleven billion doses are needed to fully vaccinate 70 per cent of the world’s population. More than six billion doses will have been administered by the end of this year, leaving a deficit of about five billion doses. A majority of people in the lowest-income countries will wait another two years before they are fully vaccinated.

The problems with COVAX have led policymakers to consider other approaches. Longstanding calls to increase vaccine manufacturing within less well-off countries — extending back to well before the pandemic — have grown louder, with a variety of approaches under discussion. Global health advocates argue that vaccine production must spread beyond the current concentration in the United States, Europe, India and China, not just to tackle this pandemic but also to be ready for future viruses.

A group of countries led by South Africa and India called last year for the World Trade Organization to issue a waiver of intellectual property protections for Covid vaccines. More than one hundred Nobel laureates and seventy-five former heads of state added their support in April, calling on US president Joe Biden to suspend vaccine patents in order to “expand global manufacturing capacity unhindered by industry monopolies that are driving the dire supply shortages blocking vaccine access.”

Despite Biden’s support, the proposal has encountered fiery opposition from the pharmaceutical industry. Vaccine companies say they are already expanding production and the move would have little if any practical effect. Even if they had the formulas, few countries have the trained personnel needed to produce Covid-19 vaccines, and supplies are already stretched.

The World Health Organization has asked innovating firms to contribute their intellectual property to the UN’s Medicines Patent Pool, and proposes a role for itself to coordinate technology transfers, facilitate training, help countries organise the necessary investments in factories, and assist with regulatory approvals and agreements on royalties.

In April the African Union’s Centres for Disease Control and Prevention announced an ambitious plan to establish new vaccine factories with the aim of reducing the continent’s reliance on vaccine imports in general. A push is also being made for an mRNA vaccine manufacturing hub in South Africa. Moderna has indicated it is opposed to patent waivers; now it seems that South African researchers, with WHO support, will attempt to create their own mRNA vaccine using reverse-engineering techniques.

In a recent article in the New York Times, experts in vaccine development and production say that manufacturing mRNA vaccines in developing countries is feasible. Despite resource and timing issues, this approach would give countries the capacity to vaccinate against not just Covid-19 but a whole range of other infectious diseases endemic to low-income countries.

American economist Alex Tabarrok is among those who have argued that patents are not the major obstacle to the current vaccine supply problems. A patent waiver might be largely cost-free for rich countries, he says, but would do little to relieve supply shortages or make distribution fairer. “Sorry, there is no quick and cheap solution,” he writes. “We must spend… Bottom line is that producing more takes real resources not waving magic patent wands.”

Regardless of the force of that argument, two examples highlight why local manufacturing will be vital in the medium to long term. First, the cost of the WHO-recommended vaccine program for children under two years of age — which was set before the pandemic and currently includes eleven vaccines — has been skyrocketing. By 2020 the cost was estimated at between US$37 and US$101 per fully vaccinated child. These important childhood vaccination programs could become unaffordable, especially with the economic fallout of the pandemic.

Second, important newer vaccines — the vaccine against the human papillomavirus, the causative agent of cervical cancer, for example — are already out of reach for many low-income countries. Every year, more than 300,000 women die from cervical cancer, mainly in low- and middle-income countries; nearly all those deaths are preventable by vaccination.

Although the pharmaceutical industry is frequently — and often justifiably — portrayed as purely profit-oriented, the major companies have made efforts over the past decade to support “open source” models of production. These schemes have generally focused on the neglected tropical diseases that receive little research and development funding despite affecting a significant proportion of the world’s population. Could more be done to encourage this approach?

That such hopes are not overly optimistic is indicated by last week’s announcement that US-based pharmaceutical giant Merck has reached an agreement with the UN Medicines Patent Pool to license the international manufacture of its potentially lifesaving antiviral drug molnupiravir for treatment of Covid-19 in adults. This move is expected to create broad access for its use in more than one hundred low- and middle-income countries.

According to the announcement, the three patent holders, Merck, Ridgeback Biotherapeutics and Emory University, “will not receive royalties for sales of molnupiravir under this agreement for as long as Covid-19 remains classified as a Public Health Emergency of International Concern by the World Health Organization.” Many will be watching for signs of other companies following Merck’s lead.

Back in Australia, meanwhile, the End Covid For All campaign last month released a report urging the federal government to lift its commitment to the global vaccination effort by A$250 million in funding and twenty million extra vaccine doses. The group’s Tim Costello urged Australia to “become a vaccine factory for the region.” Help is needed with testing, supplies, transportation and vaccination efforts to ensure these donations deliver benefits effectively and efficiently.

Covid-19 vaccines are a precious resource. Australia needs a plan to ensure it plays its role internationally in making sure vaccinations are managed fairly, without unnecessary price spikes, hoarding or wastage, in recognition that no country is safe until every country is safe. •

The post Bridging the jab divide appeared first on Inside Story.

Coalminers lived as vassals, housed in company towns, patrolled by company guards. They couldn’t leave the area without permission, and strangers couldn’t enter. They were paid by the ton for the coal they extracted, but no one was paid to make their workplace safe; this maintenance labour was derisively known to management as “dead work.” The mine owners habitually rigged the coal scales to favour their side of the ledger. All of this was illegal under Colorado law, but the state government turned a blind eye.

Violence was commonly used against the miners and their families; many were beaten by thugs working for the notorious Baldwin–Felts Detective Agency. In one famous case, a National Guard commander ordered a cavalry charge — sabres drawn — against a crowd of protesting miners’ wives because the women had dared to laugh when he fell off his horse.

When the United Mine Workers of America organised a strike for better pay and conditions at a mine owned by the Colorado Fuel and Iron Company, trouble soon came over the horizon. Twelve hundred miners and their families were evicted from the company town and moved to a makeshift union camp known as White City, where they lived in tents. Their new home was next to a railway depot called Ludlow.

On 20 April 1914, shooting broke out between the striking miners and the company militias. Three strike leaders were captured and shot dead. Seventeen women and children, including three infants, were killed when the militias set fire to the camp. For the next week, a civil war of violent skirmishes led to dozens more deaths on both sides. Peace was only restored when president Woodrow Wilson sent in the US army.

The man held most responsible for the disaster was John D. Rockefeller Jr, heir to the Standard Oil fortune, who part-owned the mine. The Ludlow Massacre is credited with cementing Rockefeller’s commitment to philanthropy, some say as an act of atonement. Until his death in 1960 he funded many and various good works. In 1922, for example, he financed the study of industrial relations in the economics department at Princeton University.

It’s a long way from Ludlow in 1914 to Princeton University’s Firestone Library in the 1980s. This is where the economists David Card and Alan Krueger first met and began to collaborate on labour economics, courtesy of Rockefeller’s original donation.

In 1994 the pair published a paper examining the widely held economic orthodoxy that an increase to the minimum wage led inevitably to higher unemployment. This was always a popular theory in business circles, probably because it accorded so neatly with the prejudices and interests of business owners. I’m sure it looked like common sense to J. D. Rockefeller Jnr. But it had never been studied in the wild.

In their paper, Card and Krueger pioneered the use of “natural experiments” to interrogate economic assumptions. New Jersey had raised its minimum wage in April 1992, but its next-door neighbour, Pennsylvania, hadn’t. This gave them a perfect opportunity to study and compare the real-world effects of giving the lowest-paid workers a little bit more. To do this they surveyed over 400 fast-food restaurants in both states.

And what did they find? They found that the restaurants in New Jersey, contrary to conventional wisdom, had taken on more workers. An economic shibboleth was toppled.

It turns out that lifting the minimum wage improves labour force participation among society’s poorest workers and increases their productivity as well. Business owners benefit from lower staff turnover and reduced training costs. The economy more broadly also benefits — from increased consumer demand — courtesy of having more workers, with more money, spending more.

Over the past twenty-five years Card and Krueger’s work has supplied the intellectual firepower for minimum wage campaigns across the United States and around the globe. In 2015, for example, Germany introduced a minimum hourly wage set at a uniform national level. Business — and some sections of the German media — warned of job losses in the hundreds of thousands. But a new study of the German experience has found that “the minimum wage significantly increased the wages of low-wage workers without lowering their employment prospects.” Rack up another win for Card and Krueger.

And then just a week ago came the ultimate accolade. Card was awarded the Nobel Prize for his work on the minimum wage. But not Krueger. Tragically, he died by his own hand in 2019 at just fifty-eight, and unfortunately a Nobel is never awarded posthumously. As Card told the New Republic, “He probably would have enjoyed getting the Nobel Prize more than me.”

It was once the orthodoxy to treat workers like serfs, despite the terrible costs — to individual lives, to society and to economic performance. And even now, despite the work of Card and Krueger, some people still believe it’s a good idea to pay as little as possible to low paid employees and tell them it’s for their own good. Perhaps this year’s Nobel Prize will finally lay that fallacy to rest. •

The post From the Ludlow Massacre to the Nobel Prize appeared first on Inside Story.

Or perhaps even less. Despite exuding “a bluff, hearty status quo solidity,” as the Weekly’s Lorraine Hickman wrote, Syd had been increasingly worried about his health. If he were to die, he feared that death duties would eventually leave his wife Olga uncomfortably short of funds. In fact, he calculated, 50 per cent of their assets would go to the state and federal governments.

Whether or not he got the figure right, his arithmetic led him to create an anti-tax campaign that would have a spectacular real-world impact. Within just over a decade, every Australian government, state and federal, had abolished death duties, making Australia one of just two Western countries that no longer taxed bequests or inheritances.

Negus’s success attracted the attention of Willard H. Pedrick, a professor of law at Arizona State University. With a research grant from the privately funded Lincoln Institute he came to Australia in 1980 to interview Negus and visit the state capitals to find out how and why Australia had gone it alone. He published his findings in the Western Australian Law Review under the unlawyerly title, “Oh, to Die Down Under!”

As Pedrick described it, Negus’s campaign started small. He began by placing ads in local papers arguing that “bereaved and bewildered widows” were being “robbed of their just rights” by estate taxes, and inviting readers to sign a petition and donate to his campaign. The results, according to Pedrick, were “simply astounding.” Thousands of people signed the petition forms in the ads and posted them to Negus, many of them adding a small cash contribution. “The Negus mail,” Pedrick wrote, “became a flood.”

“We started off with our own phone and a few volunteers,” Negus told the Women’s Weekly. “Then we had to employ two full-time shorthand typists and two juniors, helped by about forty volunteers… We turned the sleep-out into our post office, ended up having to get three telephones and four extensions, and made the sunroom into an office. And I overflowed into the dining room.”

First in Perth, then further afield, Negus began addressing public meetings and appearing on radio and TV, displaying the “unflagging self-confidence, an almost abrasive assertiveness and the ability to talk quickly, constantly and at great length” that an Adelaide Advertiser journalist remarked on the following year. After he turned up uninvited to a meeting of the state’s farming organisation, he recalled, the meeting voted to donate $1000 to his campaign.

The opportunity to go national came with a Senate half-election scheduled for November 1970. Negus professed to be pessimistic about his chances of becoming Western Australia’s first-ever independent senator — “I was doing a lot of praying” — and told Ferrell he wasn’t able to outlay anything like what the major parties spent on campaign materials. Nor did he have much on-the-ground help on polling day: “I don’t suppose — when the time for the election came up — there would’ve been twelve polling booths throughout the West with people on it handing out how-to-vote cards for me.”

Across the continent, though, the Bulletin’s Donald Horne thought “the poujadist from the west… will probably surprise us (and himself) by this week being elected one of Western Australia’s senators.” Horne was right: Negus beat the third candidate on Labor’s Senate ticket by 4000 votes and headed off to Canberra.

But it turned out to be a frustrating few years for the surprised senator. He made virtually no headway with his campaign during the dying days of William McMahon’s Liberal government. Then, after Gough Whitlam became prime minister in 1972, he tried unsuccessfully to amend the Estate Duty Assessment Act in various ways, and then suggested the federal government subsidise the abolition of state probate duties. The latter proposal was supported by the Asprey inquiry into taxation, which reported in 1975, but wasn’t taken up by the Whitlam government or its successors.

It was Negus’s focus on the impact of the taxes on widows that eventually struck a chord. “With the Women’s Electoral Lobby adding their voice to the view that death duties were discriminatory to women,” wrote Ferrell, “Whitlam responded to the mounting pressure by promising that if Labor was re-elected, no widow or widower would be forced to sell the family home to meet death duties.”

Negus might have been surprised by WEL’s support. “Personally, I’m sorry to see these ladies talking about equality,” he told the Weekly. What did worry him was that women weren’t aware of the tax implications of their homes and other assets being held in their husband’s name, which was often the case.

Still, Whitlam’s promise was progress. Not only that: Negus had achieved one very important thing before his Senate career was cut short by the 1974 election. He had turned inheritance taxes into a national issue. And the apparent popularity of his bid to abolish death duties hadn’t gone unnoticed in at least one premier’s office.

The premier in question was that shrewd rural populist Joh Bjelke-Petersen, part way through his nineteen years at the helm in Queensland. Egged on by a series of articles in the Courier-Mail highlighting inequities in the estate duties levied by his own government, he announced in 1975 that spouses’ inheritances would no longer be taxed. Then, two years later, he declared the taxes’ complete abolition (much to the surprise, it emerged, of the state treasurer). It was a popular move in a state Pedrick described as a “hotbed of agrarian resentment.”

In the hope of attracting new residents and new spending, Bjelke-Petersen’s ministers — enthusiastically supported by the state’s tourism authority and business groups — set about promoting Queensland as a tax haven for retirees from the south. “Millions Could Flow North,” said the Bulletin’s headline. “Many observers,” Pedrick found three years later, “thought the abolition of death duties in Queensland was in fact a significant factor in a movement of capital to the Gold Coast state.”

Agrarian hotbed: Queensland premier Sir Joh Bjelke-Petersen. Lakeview Images/Alamy

Were they right? Another American, economist Philip Grossman, painstakingly analysed the data during a visiting fellowship in Australia in 1989. Complicating his task were two other events that might have boosted Queensland’s population at around that time: the Whitlam government’s 25 per cent tariff cut in 1973, which sent some unemployed manufacturing workers northward from Victoria and South Australia, and the destruction wrought in December 1974 by Cyclone Tracy, which drove some people out of the Northern Territory.

Undeterred, Grossman took interstate migration figures compiled by Adelaide University geographer Graeme Hugo, ran them through an eye-glazingly complicated formula he explained at length in the journal Publius, and came to a clear conclusion: “Queensland’s population growth during the first three years after abolishing death duties was an average 0.20 per cent higher due to migrants avoiding the death duties of the other five states. On average, population growth in each of these states was 0.04 per cent lower as a result of the tax.”

Not earth-shattering perhaps, but perceptions were as important as facts. Worried that an exodus might be underway and anxious to head off tax-dominated elections, New South Wales, Victoria and South Australia abolished taxes on estates left to a spouse. Western Australia and Tasmania followed in 1977, and the federal government dumped its inheritance tax altogether in 1979. Estates passing to children continued to attract duties in those five states until 1980 (in South Australia and Western Australia), 1981 (in Victoria and New South Wales) and 1982 (in Tasmania).

And so Australia joined a very select group of Western countries — Canada was the only other member — that spared estates from taxation. New Zealand soon joined up, then Sweden, Austria and Norway. But every other comparable country — including Britain, France, Germany and even the United States — retained inheritance taxes, and still levies them (though often with very generous exemptions).

But Syd Negus shouldn’t take all the credit, or the blame, for setting in motion the abolition of Australia’s estate taxes.

As Willard Pedrick discovered, the taxes’ “monumental defects” made them ripe for attack. Unusually, they were levied separately by both state and federal governments (the former raising about twice as much between them as the latter). The state taxes were tougher, in some cases cutting in on estates worth as little as $20,000 (about $130,000 in today’s dollars), which could mean a family home had to be sold to raise the necessary funds. Farmers and other small businesses with income-generating assets faced a particular problem finding the cash to pay the duties — which created another highly receptive constituency for efforts at abolition.

The taxes also had another big flaw: they could relatively easily be avoided by people with access to the right expertise. As a result, they fell more heavily on the middle-income households who came within their scope than on more well-heeled households.

Among the justifications for abolishing the taxes was the belief that wealth was distributed more equally in Australia than in other countries, making inheritance taxes unnecessary here. “There is a kind of folklore to the effect that the Australian society, if not egalitarian, is at least more egalitarian than other industrialised countries,” Pedrick wrote. “The myth is attractive,” he added, “but it does not conform to the facts.”

If the myth was off the mark in 1980, it’s unmistakably ill-founded in 2021. In a recent report, Inheritance Taxation in OECD Countries, the OECD pointed out that the wealthiest 10 per cent of Australian households own 46 per cent of the country’s wealth — scarcely an egalitarian paradise. And, as John Quiggin showed recently in Inside Story — and the OECD report confirms — that concentration of wealth will inevitably worsen.

The growing evidence that inequality this great is not just socially and politically damaging but also economically harmful has fuelled proposals to toughen up inheritance taxes, at least in countries that do have them. The latest expert support came in the OECD report, which argued that inheritance taxes could play a “particularly important role” following increases in inequality and falls in tax revenue fuelled by the pandemic. As the report shows, other countries have tended to react to complaints about inheritance taxes over the past half-century by limiting their reach rather than abolishing them altogether.

Here in Australia, support for a well-designed inheritance tax dates back decades. As far back as the mid 1970s, in the midst of Negus’s campaign, a Senate committee backed state-level estate and gift duties, Treasury was arguing that estate duties were “important and basic in the system,” and the Asprey committee concluded they played “a quite essential role” in the tax structure as a whole.

Thirty-five years later, the final report of the Future Tax System Review (better known as the Henry review) concluded that “a tax on bequests would fit well with Australia’s demographic circumstances over the coming decades.” During the next twenty years, it went on, “the proportion of all household wealth held by older Australians is projected to increase substantially. Large asset accumulations will be passed on to a relatively small number of recipients.”

Those recipients aren’t only relatively few; they are also relatively old and relatively rich, according to an analysis of detailed probate data from Victoria released in 2019 by the Grattan Institute. “On current trends,” the institute’s Danielle Wood and Kate Griffiths write, “much of accumulated wealth in the hands of Baby Boomers will be handed down to the wealthiest Generation Xers, significantly exacerbating wealth inequality, and inequality of opportunity. Inheritances reinforce the advantages of having rich parents, such as better schooling, connections, and a greater ability to take risks because of a parental safety net.”

Inheritance tax rates, thresholds and exemptions vary enormously across the OECD. Intergenerational transfers of more than US$11 million are taxed in the United States, for example, whereas the threshold in Belgium is just US$17,000. “Most countries have progressive tax rates,” says the OECD, “but around one third apply flat tax rates, and tax rates differ widely.” Gift taxes are generally used to reduce pre-death tax avoidance.

An Australian inheritance tax would need to be not only as straightforward and hard to avoid as possible — the Henry report covered these issues in some detail — but also politically viable. (Labor’s complex franked dividend proposal in 2019 was an object lesson in how not to sell a tax change.) The recipient rather than the estate should be taxed, says the OECD, and the Grattan Institute argues that the funds raised should be directed — and be seen to be directed — to low- and middle-income households. Spouses would be exempt from the tax.

As the campaign for its abolition shows, an inheritance tax should aim to moderate Australia’s growing concentration of wealth by targeting the largest bequests. It would be set at a rate high enough to moderate the growth in inequality but low enough to undercut the inevitable opposition from people whose wealth gives them undue political influence.

Syd Negus’s campaign back in the early 1970s targeted an unfair and badly designed system of inheritance taxes. With the Australian Bureau of Statistics reporting that wealth inequality worsened by nearly 5 per cent between 2005–06 and 2017–18, the time is right for a well-designed inheritance tax system. •

The post Syd Negus, the forgotten tax-slayer appeared first on Inside Story.

Veteran observers question the need for another inquiry. The Financial Review’s long-time property editor Robert Harley has counted five major housing probes over the past two decades, and another — a report on the related issue of homelessness — was published just two months ago. Detailed analyses have also been published by the Reserve Bank, by Grattan Institute, Per Capita and other think tanks, and in a steady stream of research by the Australian Housing and Urban Research Institute, or AHURI.

Yet, says Harley, “while politicians, bureaucrats and developers have championed the cause of the first homebuyer, prices have risen inexorably higher… and home ownership has slipped, particularly among twenty- to forty-year-olds.” What remains unresolved is what makes housing so expensive, and how it can be made more affordable.

One camp argues that the problem is too little supply: we simply don’t build enough houses and flats. Australia’s stratospheric house prices are the product of red tape and nimbyism, and the solution is to liberalise planning and zoning rules so that developers can get building.

The other camp thinks the core problem is excess demand, fuelled by a combination of record low interest rates, easy credit and generous tax concessions. Housing has been transformed from an essential good into a financial asset, with the search for capital gains driving prices up relentlessly. This camp thinks solutions are to be found in changed tax rules and tighter financial regulation.

Opinions don’t divide quite so neatly, of course, and some views are shared by people in both camps. Many argue, for example, that whatever else happens, governments should invest more in social housing, and swap stamp duty for a broad-based property tax. But it’s hard to see either of these sensible recommendations emerging from the inquiry.

The House of Representatives tax and revenue committee, which Falinski chairs, has been asked to report on “the contribution of tax and regulation on housing affordability and supply in Australia.” The cynic might suspect the inquiry was designed to wedge Labor over its contested housing policies in the lead-up to the next federal election. Any hope on that score was short-lived: just four days after treasurer Josh Frydenberg initiated the inquiry, the opposition dumped its pledge to change negative gearing and capital gains rules.

Expectations that the committee would produce new insights have been dampened by Falinski’s confidence that the answer to the question is already clear. In calling for submissions, he declared allegiance to one side of the housing divide, saying “the research points to limitations on land and restrictive planning laws as the major causes of shortages in supply.”

Falinski’s assumption is reflected in the framing of the inquiry. While it sets out to investigate the contribution of tax and regulation to affordability and supply, the terms of reference refer solely to the latter, as if solving the supply problem will look after affordability.

Demand doesn’t rate a mention, even though most of its drivers — interest rates, immigration levels, mortgage lending regulations, homebuilder schemes, or, indeed, tax concessions like negative gearing — are federal responsibilities. Ignoring demand means ducking responsibility, consistent with messaging by housing minister Michael Sukkar that it is up to the states and territories, which “control planning schemes and zoning,” to solve our housing woes.

Yet, as Sydney University housing researchers Nicole Gurran and Peter Phibbs point out in their submission to the inquiry, state and local governments have already significantly eased controls on residential land release and development by standardising local planning instruments, speeding up and codifying development assessments, and “depoliticising” planning decisions by using expert panels and professional assessments. Far from a lack of supply, they say, construction has reached historic highs in recent years, with more than 200,000 dwellings built every year between 2014 and 2019.

“There are more, bigger, better, dwellings per capita in Australia now compared to any point in history,” agrees economist Cameron Murray. His submission to the inquiry questions whether a further relaxation of planning and zoning controls would provide any incentive for landowners and developers to speed up new housing, since it would lower the price of their future sales. Murray argues that developers systematically engage in landbanking, “holding undeveloped sites off market to ensure they match the rate of sales that maximises their total return on assets.”

The view that the stock of dwellings has largely kept pace with population growth — and even exceeded it in recent years — is supported by Reserve Bank research, as this chart from its submission to the inquiry shows:

The sudden drop in population growth (the orange line in the chart) reflects border closures in response to Covid-19. That fall challenges another version of the supply-side argument — that prices have rocketed in recent years because house building failed to keep up with Australia’s high migration intake. In theory, flatlining immigration since early 2020 should have pushed prices back down again. Instead, with a few exceptions (such as high-rise inner-city apartments in Melbourne), the real estate market has boomed.

As the pandemic demonstrates, the relationship between population, housing supply and prices is far from straightforward.

Not everyone on the Coalition side of politics agrees with Falinski and Sukkar. Writing in the Sydney Morning Herald earlier this month, NSW planning minister Rob Stokes declared “the idea that the planning system alone can solve housing affordability” to be “ludicrous at best; wilfully negligent at worst.”

Simple maths supports his contention. As the Planning Institute of Australia points out in its submission to the inquiry, new housing only increases the total stock of dwellings in Australia by about 2 per cent each year. Because most sales and rentals involve established homes and apartments, “it is hard for additional supply to reduce prices rapidly and deeply.” Even if we doubled the volume of new housing coming onto the market — a high hurdle given constraints on labour and materials — the impact on overall prices would be relatively modest.

This is not to suggest that the problem of housing affordability isn’t urgent. It certainly is, but for rather different reasons than Jason Falinski assumes. His primary concern is with declining rates of home ownership, which he describes as “one of the building blocks of Australian society.” But the more pressing problem is the fall in rental affordability for tenants on low incomes.

We’re familiar with comparisons showing a sharp rise in house and unit prices compared with earnings in recent decades. Westpac, for example, reported in June that “dwelling prices reached seven times average annual earnings” at the end of April 2021, about double the ratio at the start of this century.

But property prices are not necessarily an accurate guide to household housing costs, which are better understood as the amount individuals or families must spend each week — usually in the form of rent or mortgage repayments — to stay in their homes. For most households, housing costs as a share of income are far more important than the price of real estate: they can’t be avoided, and they determine how much money is left to pay for other things.

Australian households can be divided into three groups of roughly equal size: tenants, mortgage holders and outright homeowners. For tenants, rents are the most important factor influencing housing costs, and they have generally risen relative to incomes. For mortgage holders, the most relevant cost factor is interest rates; these have dropped, reducing the price of servicing a mortgage, even though people have taken out bigger loans. For outright homeowners, housing costs bear no relationship to fluctuations in rents or interest rates.

This means that two-thirds of households (mortgage holders and outright homeowners) have not faced rising housing costs over the past two decades, despite escalating house prices.

It’s a very different story for the other third — tenants — and especially for low-income tenants in the private rental market. The true nature of Australia’s housing affordability challenge, and where its impact is most acutely felt, is revealed in another chart from the Reserve Bank’s submission, which shows that for tenants in the first “quintile” (the bottom fifth of households by income), rents have risen, dramatically and unsustainably, to 38 per cent of disposable household income.

Not surprisingly, the Productivity Commission has found that half the low-income tenants in the private rental market experienced rental stress in 2017–18, spending at least 30 per cent of their disposable income (and often much more) on rent. That’s around 550,000 households — many of them families with children — that didn’t have enough money left over to pay for other essentials. And it has happened despite the $4.6 billion paid to some low-income tenants in Commonwealth Rent Assistance.

For these households, the supply problem is a lack of affordable homes to rent. Rising real estate prices do make matters worse, because they make it harder for moderate- and higher-income tenants to move to ownership. Wealthier tenants spend longer renting in the private market, out-competing low-income households for the most affordable homes with the best access to jobs and services.

In theory, a general increase in housing supply should push down the prices of houses and flats, and subsequently rents, across the board. Affordable housing would eventually filter down to low-income tenants.

But the filtering theory has at least two fundamental problems.

A general increase in overall housing supply could take a long time to filter down, with much damage done to individuals and families in the meantime. More fundamentally, though, the filtering doesn’t actually happen, because Australia’s tax structure — its preferential treatment of owners and investors — boosts demand for housing as an asset and encourages house-price inflation.

Supercharged by low interest rates, these tax settings make housing a highly attractive asset, for both owner-occupiers and investors. As researchers Blair Badcock and Andrew Beer concluded more than twenty years ago in their book Home Truths, “taxation arrangements have played an unambiguous role in the high proportion of wealth in Australia held as housing. In many respects, high-income earners would be foolish to invest elsewhere!”

In any case, if prices were to fall to the degree necessary for housing to “filter down” to the poor, that would signal a collapse on the scale experienced in the United States, Spain and Ireland during the global financial crisis.

As the Reserve Bank remarked in its submission to a 2015 parliamentary inquiry, “there are no examples internationally of large falls in nominal housing prices that have occurred other than through significant reduction in capacity to pay (e.g. recession and high unemployment).” In other words, the only sure-fire way to quickly make housing substantially cheaper is to crash the economy.

It’s not an outcome anyone would seek. But it points to the high-stakes situation that Australia finds itself in because our sustained residential property boom has dramatically increased household debt.

Just before the global financial crisis, Australia’s total household debt was estimated at $1.1 trillion, or a little over $50,000 per person. By early 2018, the figure had more than doubled to an estimated $2.466 trillion, or close to $100,000 for every person. Over the same decade, the ratio of household debt to annual household disposable income rose from about 160 per cent to around 200 per cent. The vast bulk of household debt is tied up in loans for buying homes and investment properties.

If interest rates remain low, rising household debt is not necessarily a problem. But a rise in interest rates could force a significant number of households into housing stress, with concomitant risks for major Australian major financial institutions heavily exposed to mortgage lending.

Australia’s housing system also encourages a volatile boom–bust cycle of property investment. Since construction is a major employer, this has repercussions throughout the economy. Given long lead times, developers are slow to ramp up employment in an upswing but quick to shed staff in a downturn. As the OECD has concluded, changes to the tax treatment of housing could moderate this boom–bust cycle: “Higher effective taxation of housing is associated with less severe downturns. Moreover, countries with higher taxation experience more moderate house price fluctuations and smoother residential construction cycles.”

And while the building of housing generates jobs, housing is not in and of itself a productive investment. Increased dwelling prices reflect the value of the underlying land more than the value of the dwelling. The escalation of residential property prices, and the increased borrowing necessary to finance it eat up investment funds that could potentially have been put to more productive use.

I share Jason Falinski’s concern with falling rates of home ownership, but not because I want to “restore the Australian dream for this generation and the ones that follow.” More important, in my view, is to reduce growing inequality.

With interest rates so low, the barrier to home ownership has less to do with managing a large mortgage than with saving the deposit needed to secure a mortgage in the first place. Higher education debts, superannuation contributions and a casualised labour market make it harder for the current generation of first homebuyers to assemble a deposit.

As researchers Hal Pawson, Vivienne Milligan and Judith Yates write in their book Housing Policy in Australia: A Case for System Reform, “wealth rather than income” now presents “the major stumbling block to home ownership.” Home ownership must often be facilitated by funds from parents, which are in turn enabled by existing property wealth. Homeowners beget homeowners and renters beget renters, with the risk that home ownership will become a dynastic privilege. And since the primary financial asset for most Australian households is their dwelling, the difference between owning and renting generally holds the key to whether you acquire any lifetime wealth.

Falling rates of home ownership will also increase pressure on government payments. Australia’s relatively ungenerous age pension rate is predicated on widespread home ownership keeping housing costs low in old age. But declining rates of home ownership mean this “fourth pillar” of Australia’s welfare system is crumbling as more households rent in retirement. Unless house prices can be moderated, pushing up home ownership again, the federal government will need to outlay ever greater sums on pensions and rental assistance.

Our best hope is to engineer a gradual deflation of dwelling prices or allow them to stagnate relative to inflation. Changing the tax mix to make housing a less attractive asset is arguably the best way to do this.

In the meantime, Jason Falinski’s committee could have a quick, practical impact on housing costs and rental stress by recommending the federal government increase the rate of Commonwealth Rental Assistance. As AHURI research has shown, that could be done painlessly by targeting rent assistance more accurately to those on the lowest incomes.

For the longer term, the committee could recommend that the federal government makes a substantial investment in social housing. As Nicole Gurran and Peter Phibbs write in their submission, “The most notable shift in Australian housing production over the past thirty years has been the gradual withdrawal of government involvement in land and housing development, with public sector housing completions falling as a proportion of all new housing from around 12.5 per cent in the early 1990s to around 2 per cent by 2016.”

A long-overdue national housing strategy with a time horizon of at least twenty years should fund an annual increase in supply of at least 15,000 new units of social housing to catch up with unmet demand. This is about five times what gets built now, but no more than the numbers regularly achieved in the decades after the second world war. Sometimes to go forward, we must first look back. •

The post Asking the wrong questions about housing appeared first on Inside Story.

Two insights played a crucial role in this surge of interest. The first, associated mostly with the economists Thomas Piketty and Emmanuel Saez, rested on new historical data about the share of income flowing to the richest 1 per cent of households. Piketty and Saez found that the share of income going to the top 1 per cent was substantially larger than previously supposed, and growing rapidly. Most of the benefits of economic growth were flowing to a relatively small part of the population, while living standards for everyone else stagnated or even declined.

The second insight, reached by a broad range of researchers, was that social mobility was declining in the United States, and was lower than in more egalitarian countries in Europe. The chance that a person with parents at the top (or bottom) of the income distribution would end up in the same or a similar position, they found, was now higher in the United States than in Europe. Until at least the late twentieth century, there had been good reason to think that the opposite was true.

Low social mobility is partly a predictable consequence of inequality. Where incomes are relatively equal, only a modest improvement in income is needed to move up the scale.

But inequality is also self-reinforcing, challenging the common distinction between “equality of outcomes” and “equality of opportunity.” The greater the disparity in resources available to households, the easier it is for the better-off to give their children a head start. Since the desire to look after your children is both natural and admirable, there is no real way to offset this tendency except by resisting increasingly unequal outcomes using tax policies and other mechanisms.

One particularly striking piece of evidence, drawn from a study by economists Richard Reeves and Isabel Sawhill, is that rich kids who make bad choices do pretty much as well as poor kids who do everything right. Poor university graduates have only a 20 per cent chance of ending up in the top 10 per cent of earners, marginally greater than the chance of rich high school dropouts ending up there.

The combination of these various findings yielded the new and much gloomier picture of inequality presented most clearly in Thomas Piketty’s Capital in the Twenty-First Century, which became a surprise bestseller in 2013. In the absence of political action, said Piketty, growing inequality would ultimately return us to the kind of “patrimonial” society that prevailed in the nineteenth century. Those were the days when wealth and social position came primarily from inheritances, and marriage was used to consolidate fortunes.

To illustrate his point, Piketty referred to Jane Austen, Honoré de Balzac and other classic nineteenth-century novelists. In their narratives, every possible marriage is graded in terms of the wealth and annual incomes of the prospective partners. Romance might have required that the relatively impoverished heroine wins the affections of the wealthy hero, but reality meant that financial calculation usually triumphed.

This point is even more evident in the “industrial” novels of the later nineteenth century, whose plots are driven by the impossibility of ascending the social scale simply through hard work and intelligence. With the authors of these novels unable to contemplate a political solution, their characters’ dilemmas could be resolved only through “a legacy, a marriage, emigration or death” (in the words of the protagonist of David Lodge’s novel Nice Work). Either play by the rules of patrimonial society and win, or leave once and for all.

Is this the future that awaits us? Recent movements in the distribution of income and wealth suggest it is. Although the clearest evidence is from the United States, Piketty also found signs of growing inequality in Britain and France. Even in Australia, where the shift has been moderated by relatively progressive tax and welfare policies, similar trends are emerging.

The news on inequality in the United States is nearly all bad. The top 1 per cent might have lost more than most during the global financial crisis, but that was just a blip. Between 2009 and 2015, the top 1 per cent of American families picked up more than half of total growth in real income. Their share of national income reached 22 per cent, one of the highest points since income tax records were first collected in 1913.

The top 1 per cent have attracted most attention, but focusing on this group can be misleading. Within the top 1 per cent, like a set of Russian dolls, the pattern of inequality is replicated: the top 0.01 per cent, which may be seen as “the 1 per cent of the 1 per cent,” has done much better than the remaining 0.99 per cent of the top 1 per cent.

Within that group (about 16,000 families), the top 1 per cent (that is, the top 0.0001 per cent of households, amounting to a few hundred people) own substantially more than the bottom 50 per cent of all households. In the racially divided context of US politics, it’s worth noting that the top 0.0001 per cent own more wealth than the entire African-American population, even including billionaires like Oprah Winfrey.

Beyond the top 1 per cent, have high-income professionals and business owners benefited from shifts in income distribution? To some extent they have, but not nearly as much as is often imagined. When Emmanuel Saez broke the top 10 per cent of income earners into three groups — the top 1 per cent, the next 4 per cent, and the next 5 per cent — he found the top 1 per cent to have done very well indeed. Their share of total income bounces about because much of it takes the form of capital gains, but the upward trend is clear and strong. The next 4 per cent have also done well, adding around five percentage points to their share since the 1980s.

But the next 5 per cent haven’t done nearly so well. Their share of total income has barely budged since the 1980s and now appears to be falling. Households in this group have seen their incomes grow in line with the average growth of total income in the United States, which has been considerably slower in recent years than in the 1950s and 1960s. In other words, this group did better in postwar decades of relatively equal income and strong economic growth.

The picture is much worse for the rest of the population. Incomes among households outside the top 10 per cent have declined consistently in relative terms; for many, the decline has been absolute. These disastrous outcomes are reflected in, and reinforced by, a variety of social stresses, including an epidemic of opioid addiction and declining life expectancy for large sectors of the population.

The one apparent bright spot is that those at the top were more likely to earn than inherit their riches. In particular, most of the very wealthiest Americans have made their fortunes from the technology boom that began in the 1990s. This might seem like a refutation of Piketty’s prediction, but in reality it mostly reflects the time lags involved in building dynastic fortunes.

The fact that currently wealthy Americans have not, in general, inherited their wealth follows logically from the fact that their parents’ generation didn’t accumulate wealth at such a rate. Compared with earlier periods and with the current one, income and wealth were more equally distributed between 1950 and 1980. Inequality of income must precede growing inequality of wealth, since wealth is simply the cumulative excess of income over consumption.

So, given the current era of highly unequal incomes and social immobility, we can expect inheritance to play a much bigger role in explaining inequality for the generations now entering adulthood. That will include direct transfers of wealth, mainly via inheritances, as well as the effects of increasingly unequal access to education, early job opportunities and home ownership.

Australia typically follows the United States, with a lag. Between 2003 and 2017, the most commonly used measure of wealth inequality, the Gini coefficient, rose from 0.57 to 0.62 (the higher the number, the more unequal the wealth). By 2017, the top 20 per cent of households held 63 per cent of all wealth. Ownership of shares and other financial assets is particularly concentrated; with asset values increasing faster than wages, this implies an increase in the importance of inheritance.

For the mass of the population whose financial wealth is limited to a superannuation account, a different form of inherited inequality is becoming evident. With median house prices exceeding $1 million in Sydney, it is more or less impossible for young people on average or below-average incomes to enter the housing market unaided. Far more commonly, young people rely on parental assistance to provide a deposit and, in many cases, to guarantee a loan.

What will a patrimonial society look like? Most obviously, it won’t be pleasant for those born to families who lack the resources needed to give them a head start in life. More generally, it is likely to be economically and socially stagnant. A patrimonial society inevitably wastes much of its talent, instead putting its privileged children into positions of power and influence for which they may have little aptitude.

In a society of this kind, as Thomas Gray observed in 1751 in his “Elegy Written in a Country Churchyard,” most people’s opportunities are circumscribed from birth:

Full many a flower is born to blush unseen,
And waste its sweetness on the desert air.

Some village Hampden, that with dauntless breast
The little tyrant of his fields withstood;

Some mute inglorious Milton here may rest,
Some Cromwell guiltless of his country’s blood.

This doesn’t mean that no one can ever rise to the top. Given even the smallest opportunity, those of exceptional ability will rise in any society, as did both Oliver and Thomas Cromwell. But the odds against such an achievement are long.

Indeed, we have probably already passed the point where the growth of inequality and the accumulation of massive fortunes, particularly in the finance sector, have become a drag on economic growth. Even the OECD and other advocates of liberalisation recognise that the finance sector, which has created massive fortunes, has reached the point where it reduces growth, makes economies more vulnerable to crises and undermines the living standards of most households. In Australia, the governor of the Reserve Bank has expressed alarm at the consequences of stagnant or declining wages.

What, if anything, can be done about this trend? The Biden administration is pushing hard to reverse some of the measures that have increased inequality. Most notable is the proposal to tax the unrealised capital gains of assets passed on through inheritance, which would substantially reduce inherited inequality. Precisely for this reason, it is the object of vigorous attacks from lobbyists for the wealthy. In view of the Democrats’ narrow majority in Congress, it remains to be seen whether this measure will be passed, but the fact that it has been put forward at all is significant.

In Australia, by contrast, things are only going to get worse. There is no prospect of any kind of tax on wealth or inheritance. The Coalition’s stage three tax cuts, legislated with Labor’s support, will massively reduce the progressivity of the tax system. Worse, the magnitude of the cuts, rising to $30 billion a year over time, combined with the hangover from the pandemic, means that governments will have little or no capacity to spend money on any measures that might reduce inequality. The current government is already looking for cuts, and Labor has made it clear that the pro-equality proposals it put forward in 2019 are off the table.

Whether we like it or not, the patrimonial society seems to be on its way. •

This is an updated version of an article first published in July 2017.

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Delta slammed on the brakes. Although another economic bounce-back is on its way, it will be smaller and more temporary than it was after the lockdowns in 2020. Worse still, these post-lockdown bounce-backs and unprecedented government and central bank supports have a nasty habit of acting as an anaesthetic: giving the impression of a healthy economy despite underlying conditions suggesting a difficult period once the sugar hits fade.

Increased productivity is the answer, and that won’t happen without changes in government policy. Even though it will be smaller than the last bounce-back, the post-Delta boom might well be the government’s last chance to bite the bullet during good times. Making necessary changes during hard times is much more difficult.

There are several reasons why the economic bounce-back after the 2021 lockdowns won’t be as big as what we saw after the 2020 lockdowns. For one thing, Australians haven’t cut their spending as much. People no longer fear economic collapse and have kept up their purchases accordingly. Spending fell by nearly 15 per cent across Sydney and Melbourne during the 2020 lockdowns but is down only 5 per cent in the current lockdown. This means less pent-up consumer spending will be unleashed on the economy once lockdowns are eased.

The end of 2021 lockdowns will also be a lot less dramatic than in 2020, when we thought Covid was beaten. “Living with Covid” doesn’t mean a return to normality. Many restrictions will persist. Limits on social gatherings, and mandatory isolation periods after visiting exposure sites will be a handbrake on economic activity. Freedoms will return in a trickle, not a flood.

Consumer confidence will be lower as well. Those who were eager to get out in the “Covid zero” world might be less enthusiastic about the “Covid greater than zero” world, particularly older Australians, those with compromised immune systems and those worried about the impact of Covid on unvaccinated children.

Government income support was also lower in 2021 than it was last year. The federal government has been less generous with its payments to struggling businesses and workers. The Reserve Bank is already dialling back its stimulus.

With a smaller economic rebound on the cards, the real question is what happens after that. The economic boom after the 2020 lockdowns was very welcome. But it distracted us from an unpleasant reality: an unhealthy economy being propped up by a one-off burst in economic activity, and unsustainable fiscal and monetary policies.

If the long-run driver of economic growth is productivity (which it is), Australia is in trouble. Every man, woman and child is $11,500 worse off thanks to the worst decade of productivity growth in more than half a century. Multifactor productivity fell for the first time in almost a decade last financial year, and we’re doing terribly on many of the things that boost productivity and support growth in the medium term.

Investment boosts productivity by fuelling research and development, and by giving workers more and better tools to work with. Unfortunately, investment growth is three-quarters below its long-run average. The pre-Covid economy was plagued by anaemic investment and it’s unlikely that the uncertainty generated by a global pandemic will do much to lift it.

Trade boosts productivity by directing our scarce labour and capital to the things we are good at making (which we then export) and away from the things we are bad at making (which we then import) — in other words, by allowing us to make more money with less. But a worsening relationship with our biggest trading partner, a gummed-up trading system struggling to cope with high demand and weakened supply, and growing calls to reduce our reliance on overseas suppliers make for a tough road ahead.

Education is another critical way to boost productivity in the long run. Again, Covid has wreaked havoc. Students in Victoria have missed more than 120 days of face-to-face learning since March last year. The effects will be felt for years to come. Universities have seen their budgets devastated by the closing of international borders and limited support from government, with an obvious impact on both research and student outcomes.

Productivity has been dragged down by inequality, and Covid has made that worse, too. A rise in the share of national income going to the rich means an increase in savings, which pushes down interest rates. This fuels more borrowing by the poor — whose share of national income has been slipping — creating a self-perpetuating cycle of rising inequality, weak demand, low growth and low investment.

Almost every facet of inequality has been made worse by Covid. Not only has it pushed interest rates down further, but it has also driven up the value of rich people’s assets. The poor, meanwhile, have borne the brunt of lockdowns, unemployment and uncertainty. Women have been disproportionately affected by school closures and increased domestic violence. Young people have lost life-changing employment, education and recreation opportunities in order to protect the elderly.

The biggest problem is that none of these challenges is new. The pre-Covid economy was no golden age. It was characterised by low wage growth, low productivity, low investment, below-average GDP growth and high inequality. Covid has made all these things worse. The post-Delta sugar hit should not distract us from these long-run challenges that are hurting our long-run economic trajectory.

Luckily, the post-lockdown sugar hit is also an opportunity. Tackling the myriad challenges outlined above will require reform, and reform is always easier during good times than bad times. The government has wasted many opportunities to undertake reform during good times: the boost from its tax cuts, the boost from its historically large supports during Covid, the boom after lockdowns were eased in 2020. The sugar hit from the post-Delta boom might be its last chance to fix the roof while the sun is shining. The government best start laying the groundwork now. •

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Financial markets went ballistic. During years of ultra-low interest rates to fight the global financial crisis, investors had searched overseas for better returns. Much of their money had gone to developing countries — places like Indonesia, India, Brazil, South Africa and Turkey — where interest rates were higher.

Bernanke’s remark had barely left his lips before the global financial system slammed on the brakes and shifted gears abruptly into reverse. Anticipating higher interest rates in the United States, investors began a fire sale of assets in developing countries and scrambled to send their money back to America. As the US dollar skyrocketed, developing countries saw their exchange rates crash, asset prices tumble and financial capital vanish.

Many of these countries were forced to raise interest rates to stabilise their exchange rates and buttress their financial systems. But the stability came at a cost. Economic growth took a hit; jobs were destroyed. Make no mistake: in countries struggling to reduce poverty, financial shocks like these cost lives.

Dubbed the “taper tantrum,” this abysmal absence of international cooperation looks set to happen again, and the timing for developing countries couldn’t be worse.

In their battle with the Covid-19 pandemic, rich-world central banks have quite rightly used a range of unconventional measures to push down interest rates. Asset prices have skyrocketed and stocks, bonds, property and cryptocurrencies have gone through the roof as investors bet big that low interest rates are here to stay.

If they’re wrong, we’re in trouble. Low interest rates are the key ingredient for many of these investments to make sense. Little wonder that markets are watching the inflation numbers nervously; any sustained rise in inflation could see central banks raise interest rates.

So far it’s not looking great. In the three months to May, inflation in the United States reached 8.3 per cent on an annualised basis, the highest since the early 1980s. Luckily, particularly for developing countries, higher interest rates aren’t an inevitable result.

One reason inflation is so high is simple maths. The 8.3 per cent inflation figure is a year-on-year measure: it’s going to be high in 2021 simply because it was so low in 2020. Even accounting for these “base effects,” though, prices are notably higher for durable goods like cars, furniture and household appliances because demand for those goods is outstripping supply. Why? Because households are unleashing pent-up demand accumulated during the pandemic.

Some global supply chains aren’t helping. Shortages of inputs like microchips and timber are also pushing up prices. In many US industries, customers are returning to businesses faster than their workers are, threating further inflation through wage pressures.

So, will interest rates rise? Given that most of the inflationary pressures are temporary, there are reasons to believe that central banks will hold fire. This is particularly the case for the Fed, whose current chair, Jerome Powell, has adopted a policy of allowing inflation to exceed its target for a period to “catch up” on the preceding period of anaemically low inflation.

Over the weekend, Powell said he believed that the current bout of inflation would be temporary and articulated a path for carefully tapering quantitative easing. But some are worried that the Fed might lose its nerve and increase interest rates if inflationary pressures are big enough for long enough. Other central banks have already started reducing their supports or announced they will soon do so, including in Canada, Australia, Britain, New Zealand and the euro area.

A sharp and disorderly increase in interest rates in the rich world could spell disaster for the developing world. More than a hundred developing countries have sought assistance from the International Monetary Fund as their health systems buckle under the pressure. An inability to obtain enough vaccines, thanks in part to the immoral hoarding of vaccines by the rich world, has condemned these countries — the very ones that desperately need growth — to a slow recovery.

Luckily, there are things the rich world, including Australia, can do to help reduce their financial impact on developing countries.

The biggest risk to developing countries is that investors withdraw their funds as interest rates rise in the rich world, causing their exchange rates to collapse. The debts of developing countries with lots of foreign-denominated debt (which is many of them) would surge, potentially triggering a crisis. To stop this, developing countries need reserves of foreign currency that they can use to stabilise their exchange rates.

The rich world should give developing countries the reserves they need. The International Monetary Fund has approved US$650 billion of support through its “special drawing rights” facility, but ironically the majority of this goes to rich countries. The rich world should voluntarily redirect this money to the developing countries most in need of support and ensure other IMF facilities can be accessed as easily as possible, with fewer strings attached than normal.

But more will be required. Rich countries should expand their networks of bilateral currency swap lines. The Reserve Bank of Australia, for instance, can allow Bank Indonesia to swap rupiah for Aussie dollars, use those dollars to stabilise its financial system, and swap them back later. These facilities are rarely used after they are announced because the mere announcement sends a powerful signal to markets that developing countries can continue to honour their international debts. Josh Frydenberg should increase the size of Australia’s stand-by loan with Indonesia to send a clear signal to markets that we’ve got their back.

Some developing countries will need more. Many of the debts accumulated during Covid-19 — debts they had no choice but to incur — won’t be sustainable when rich-world interest rates go up. This is an opportunity for the G20 to expand its debt-forgiveness program.

Finally, rich-world governments should better coordinate their policies, both domestically and internationally. Domestically, if inflationary pressures persist, governments should consider reducing their spending to take the pressure off monetary policy and their exchange rate. Internationally, governments should use forums like the G20 and APEC to communicate their policy intentions to developing countries, and carefully analyse the collective impact of their policy changes on the rest of the world and strengthen safety nets accordingly.

History will remember many things from the Covid-19 period. One of them will be the failure of the rich world to take care of those in the developing world. It’s one thing not to help developing countries. It’s another to actively make their lives worse. •

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The trend has shown no signs of declining since the pandemic set in, with the 2020 figure topping $372 billion. Correcting for inflation, the annual value of mergers and acquisitions each year in Australia is a whopping eight times bigger than it was back in 1990.

Should we be worried? Mergers and acquisitions have benefits and costs, and if the former are greater than the latter then they should be welcomed. But a growing body of research shows that their benefits, while large in theory, are not so big in practice. The costs, on the other hand, appear to be bigger and more persistent than ever.

Mergers and acquisitions have two main benefits. Bigger businesses benefit from economies of scale: their size and improved efficiencies mean they can produce more goods and services at a lower cost, boosting productivity. And bigger businesses can generate greater economies of scope, saving on costs a bit like a petrol station that also sells milk.

Mergers are an easy way for a business to gain these benefits by expanding into new markets, new locations and even new countries. They allow a business to expand from retail into wholesale, from wholesale into manufacturing, and from manufacturing into distribution and logistics. They can also be a way to save a failing business.

But mergers can create problems, and many of them relate to competition. When competing firms merge, we lose a competitor. This is not necessarily a problem if lots of other competitors exist or if new ones can enter the market quickly. But when a merger reduces competition, it causes all the things we are struggling with in Australia: high mark-ups, low wages growth, low investment and low innovation, all contributing to greater inequality.

Problems can arise even when a merger doesn’t involve competing firms. When mergers result in a business becoming vertically integrated, new competitors find it hard to compete with an incumbent that has its own manufacturing, wholesale, retail and distribution networks. When mergers allow businesses to sell bundled products or services, it becomes harder for customers to change from one supplier to another, reducing competition.

The most common argument in favour of mergers and acquisitions is a fallacious one: that Australia needs big businesses to compete internationally. Most of Australia’s economy isn’t “trade exposed,” and even the parts that are exposed to international competition don’t benefit from being allowed to become dominant — and often inefficient — in the Australian market.

The reason our athletes won so many medals in Tokyo isn’t that they were wrapped in cotton wool back home. They did well because they’ve spent many years competing fiercely against other Australians. The same is true for businesses. Allowing them to get big and lazy at home doesn’t make them more competitive overseas; indeed, it makes them less competitive. Competitiveness overseas first requires competitiveness at home.

The productivity benefits of mergers may also be overstated. Bruce Blonigen at the University of Oregon and Justin Pierce at the US Federal Reserve used detailed firm-level data to study the impact of mergers and acquisitions on productivity and market power across all US manufacturing industries. They found that mergers were associated with increases in average price mark-ups but did little to boost productivity.

The two economists also found little evidence of other claimed efficiency gains from mergers, such as reallocation of activity across plants and scale efficiencies in non-productive units of the firm.

Some studies question whether mergers provide much value to the acquiring company, too. Recent studies found that companies that make lots of small acquisitions tend to increase in value while big, one-off mega-deals tend to be riskier. Mergers might also be bad news for startups. The Economist reported that the FAANGs — Facebook, Amazon, Apple, Netflix and Google — are surrounded by a “kill zone” in which companies are either acquired or quashed.

Mike Driscoll, a partner at investment firm Data Collective, says that technology conferences increasingly “send shock waves of fear through entrepreneurs… Venture capitalists attend to see which of their companies are going to get killed next.” This has made some venture capitalists more reluctant to invest in customer-focused startups.

So what, if anything, should we do about the Covid boom in mergers and acquisitions?

As a first step, we should be more cautious about mergers in industries where there are already too few competitors. More than half of Australia’s markets are concentrated — meaning the four biggest firms control a third of the market or more. Mergers in these industries should logically attract more scrutiny than mergers in less-concentrated industries. Imposing a public interest test on mergers in concentrated industries, having more post-merger reviews, and making more firm-level data available for public scrutiny would lead to better decision-making.

Such measures are important because mergers are hard, if not impossible, to reverse. It would be unwise to allow a one-off pandemic to result in long-term structural changes that weaken the competitiveness of Australia’s markets. This would worsen all the economic problems we have been struggling with for decades.

Covid-19 will have many long-term consequences for Australia. Weakened competition shouldn’t be one of them. •

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It was an impressive feat of skill and dexterity. Yet my admiration was mixed with anxiety; one slip and he would have hit the footpath.

I doubt the owners of the hedge intended to expose him to this danger. They almost certainly didn’t think about worker safety when they selected the most competitive contractor to do the work. Spared the extra expense of a scissor lift or a cherry picker, they no doubt got a great deal, loading the risk onto the man with the hedge trimmer.

There is nothing new about low-paid workers clipping leaves for the rich. In centuries past, such differences in power and wealth were explained away by birth. It was one’s station in life either to live in the mansion or to keep the grounds, to be served or to do the serving. It’s bracing to remember that the original 1848 version of the children’s hymn “All Things Bright and Beautiful” included the following lines:

The rich man in his castle,
the poor man at his gate,
God made them high and lowly,
and ordered their estate.

Yet the aristocratic era is long gone. We no longer believe in the privileges of noble birth. Today’s mantra is merit. In the ABC’s recent Australia Talks survey, around 70 per cent of respondents agreed with the statement “In Australia, if you work hard, you can be successful no matter what circumstances you were born into.” It’s a beguiling idea: we make our way in the world through a combination of individual talent and effort, and so end up in the places we deserve — one precariously sculpting a cypress hedge, another playing tennis on the shady court behind. And if we each lie in a bed of our own making, then we need not be much concerned with one another’s welfare. Indifference becomes the rule.

When we order takeaway, most of us probably spend more time thinking about whether we want Indian or Thai than contemplating the experiences of the delivery rider weaving through traffic with our plastic bags of stacked containers. Our biggest worry is whether the food will have gone cold before it arrives. Yet in the space of two months last year, five delivery riders were killed in road accidents in Australia.

We snap up bargains in the supermarket. Asparagus at $1 a bunch. Strawberries at $2 a punnet. If we spare a moment to think, then it’s inconceivable that the workers harvesting the produce are paid a decent wage.

So we live with a contradiction: we talk about creating opportunity and enabling people to work hard and get ahead, while living in a system that consistently generates high levels of inequality and insecurity. This contradiction is masked by the myth of merit.

A century and a half ago, the philosopher Harriet Taylor Mill described how “the ideas of virtue set afloat by the powerful, are caught and imbibed by those under their dominion.” In her time, the paramount virtue of womanhood was loyalty to men, and so “abnegation of self, patience, resignation, and submission to power” were stamped as the pre-eminent feminine duties and graces. “Power makes itself the centre of moral obligation,” concluded Taylor Mill.

In our own era, power resides in the upper echelons of the financial sector, real estate, mining, big retail and big tech, and prominent among the virtues the inhabitants set afloat is the promise of reward for talent and effort.

In this meritocratic system, efficient businesses want the best person for the job, not the proprietor’s incompetent son or lazy daughter. Bright, eager graduates are in; nepotism and the old school tie are out. If you have a go, you’ll get a go. It is an ideology reproduced in popular culture. Shows like The Voice, Masterchef and The Block reinforce the idea that the combination of skill, persistence and opportunity opens the door to success. This meritocratic mindset is so deeply embedded in our value system that it is rarely challenged.

Once you accept all that, then government’s primary role is to ensure equality of opportunity. “In our view,” as treasurer Joe Hockey said in defence of his infamous 2014 budget, “it is the responsibility of government to provide equality of opportunity with a fair and comprehensive support system for those who are most vulnerable. After that, it is up to individuals in the community to accept personal responsibility for their lives and their destinies.” The government’s duty, he added, “is to help Australians to get to the starting line, while accepting that some will run faster than others.”

Labor tends to imbue the idea of equal opportunity with more substance than its conservative rivals do; a fair start requires not just a welfare safety net and anti-discrimination laws, but also positive interventions in the form of education, training, childcare and healthcare so that all citizens are equipped to operate effectively in an increasingly demanding labour market. This dovetails with arguments about productivity — if Australia’s economy is to be internationally competitive then we must invest more heavily in human capital.

Yet, as American philosopher Michael Sandel argues in his latest book, The Tyranny of Merit, this centre-left approach still accepts that market efficiency will produce winners and losers, or to use Hockey’s sporting analogy, that some will run faster than others, even if Labor can level the playing field a little.

Sociologist Michael Young, who coined the term meritocracy in his 1958 satire, shown here in London in 1994. Neil Turner/Alamy

Sandel recognises the attractions of the meritocratic ideal. For a start, it is empowering: “It encourages people to think of themselves as responsible for their fate, not as victims of forces beyond their control.” It also aligns market outcomes with the application of talent and effort, providing a justification for manifest inequality. “In a society where opportunities were truly equal, markets would give people their just deserts,” he writes.

In The Tyranny of Merit, Sandel updates the work of sociologist Michael Young, who played a lead role in drafting Labour’s manifesto for the 1945 British election, and then worked for Clement Attlee’s Labour government, whose achievements included founding Britain’s National Health Service. It was Young who popularised the term “meritocracy” in his prescient 1958 satire, The Rise of the Meritocracy. Little did he anticipate that his linguistic innovation would become firmly established in the political lexicon, let alone that it would be wielded without a hint of irony, including by those on his own side of politics.

As Young wrote in the introduction to a new edition of his book in 1994, the twentieth century had room for the word meritocracy because it bolstered the self-image of those wielding power and enjoying its privileges. Leaders were all too ready to believe that society was ruled “not so much by the people as by the cleverest people; not an aristocracy of birth, not a plutocracy of wealth, but a true meritocracy of talent.” Even in 1958, though, Young had seen how sad and fragile a meritocratic society could be.

Young’s satire took the form of a sociologist’s report written in 2034, when Britain’s fully matured meritocracy is being buffeted by an upsurge in wildcat strikes and protests. In attempting to explain why “the Populist movement” is revolting against a near-perfect system, the report’s author traces the development of the meritocracy through the course of the twentieth century. He begins in 1914, when Britain was still squandering valuable resources by “condemning even talented people to manual work.” A handful of clever people from working families might climb the ranks, but the majority were held back by their subordinate class position. Equally, the top echelons of society carried the dead weight of the intellectually incompetent members of the elite who had attained their positions solely on the basis of family connections.

Young’s fictional sociologist describes how, in the latter part of the twentieth century, Britain’s suboptimal social arrangements were transformed primarily by mass education. Schools acted as a sorting mechanism, with the bright sent to grammar schools, while the rest were consigned to a vocational track (though in fairness to late bloomers there was a fallback system of adult testing). Results were inscribed on a national intelligence card that accompanied citizens throughout their lives. Those displaying the requisite intellect would receive education and employment opportunities shaped to match their “high genetic destiny,” thus increasing their power to do good for society. Intelligence tests became “the very instrument of social justice.”

Once the meritocracy was fully established, aptitude was rationally distributed across society, regardless of birth, with brilliant minds managing the crucial work at the top while the slow mopped their floors. Young’s sociologist sums up the meritocratic achievement in the following sentence: “The talented have been given the opportunity to rise to the level which accords with their capacities, and the lower classes consequently reserved for those who are also lower in ability.”

The first part of Young’s fictional assessment is familiar. Ahead of the 2019 federal election, Labor’s national platform proclaimed that “a university degree is an opportunity earned on merit, not a privilege conferred at birth” and family wealth “should not determine your ability to grow to your full potential.” In a Facebook post made around the same time, Scott Morrison promised more opportunities and described his vision of an Australia where everyone had “the chance to realise their full potential.”

There is nothing objectionable about such aspirations, but in 1958 Michael Young drew attention to the second part of the imaginary sociologist’s sentence — the unspoken corollary of the meritocratic equation: that “the lower classes” would be “reserved for those who are also lower in ability.” As Young wrote in his introduction to the 1994 edition, “If the rich and powerful were encouraged by the general culture to believe that they fully deserved all they had, how arrogant they could become, and, if they were convinced it was all for the common good, how ruthless in pursuing their own advantage.”

Philosopher John Rawls saw this danger too. He pointed out that political and economic inequalities “encourage those of lower status to be viewed both by themselves and by others as inferior” and warned that this “may arouse widespread attitudes of deference and servility on one side and a will to dominate and arrogance on the other.” These were “serious evils and the attitudes they engender great vices.”

This is what Sandel calls the tyranny of merit. At the heart of the meritocratic ethic, he writes, is the idea that success is the result of personal effort and striving, and therefore a sign of virtue: “If I am responsible for having accrued a handsome share of worldly goods — income and wealth, power and prestige — I must deserve them.” The dark side of this credo is what gives rise to our contemporary indifference: “The more we view ourselves as self-made and self-sufficient, the less likely we are to care for the fate of those less fortunate than ourselves. If my success is my own doing, their failure must be their fault.”

Sufficient air remains beneath the wings of the meritocratic ideal to give it flight. Because it takes skill and effort to slog through a competitive university course or clamber up the corporate, bureaucratic or political ladder, it’s easy to believe that we made it to the top under our own steam, and that others fell by the wayside because they didn’t work as hard.

But this perception corrodes our civic sensibilities: “For the more we think of ourselves as self-made and self-sufficient, the harder it is to learn gratitude and humility,” writes Sandel. “And without these sentiments, it is hard to care for the common good.”

At the end of Michael Young’s fictional sociologist’s report, unrest is growing at both ends of the political spectrum. With like marrying like, the meritocratic elite is in danger of becoming a self-replicating class. Its conservative members are pushing to restore the “hereditary principle” so that their own children will be guaranteed a place in the upper echelons of society, even if the genetic lottery hasn’t done them any favours. Among the lower classes, the Populist movement is pushing in the other direction, with a manifesto for a classless society.

“Were we to evaluate people, not only according to their intelligence and their education, their occupation, and their power, but according to their kindliness and their courage, their imagination and sensitivity, their sympathy and generosity, there could be no classes,” say the Populists. “Who would be able to say that the scientist was superior to the porter with admirable qualities as a father, the civil servant with unusual skill at gaining prizes superior to the lorry-driver with unusual skill at growing roses?” Among the rebels’ concrete demands is an end to educational segregation and the introduction of “common secondary schools for all.”

The sociologist of 2034 is confident that their uprising will be a flash in the pan. Not only do the Populists lack a coherent political program, but the meritocratic system has brought about such “a far-reaching redistribution of ability between the classes in society… that the lower classes no longer have the power to make revolt effective.” Besides, they are challenging an elite that has “all the wise distinction that any heart can desire.” A publisher’s endnote informs us that the author was killed in the subsequent riots.

We don’t live in a meritocracy, of course. The idea that we simply need to get everyone to the starting line and we’ll all have the same chance of winning is demonstrably false — not least because some of us come equipped with the latest running shoes and are well trained in the art of sprinting, while others arrive barefoot with no knowledge of how the race works. Connections and pedigree still open doors, and the lottery of birth remains a powerful predictor of future prospects.

Nor can opportunities and outcomes be easily disentangled. During the pandemic year 2020, the net worth of Australia’s billionaires increased by more than 50 per cent.

The cultural embedding of the idea of merit runs parallel with stagnating average wages and rising private wealth. The rhetoric of opportunity and reward for effort gets louder even as Australia becomes less equal and the likelihood that hard work and talent will truly be rewarded diminishes.

A society that shifts wealth upwards and pushes risk downwards cannot lay claim to being fair, and nor is it likely to be sustainable. It will lack the coherence and common purpose to tackle problems like climate change because it separates us from one another spatially and experientially. When inequality is masked by the language of merit, it breeds arrogance and entitlement at the top and resentment at the bottom.

Sandel blames the tyranny of merit for the failures of social democracy and the triumphs of populism: “For decades, meritocratic elites intoned the mantra that those who work hard and play by the rules can rise as far as their talents will take them. They did not notice that for those stuck at the bottom or struggling to stay afloat, the rhetoric of rising was less a promise than a taunt.”

This is the tin ear that had Hillary Clinton labelling Trump supporters “a basket of deplorables.”

If the promise of reward for effort proves empty, and my efforts to shape my destiny fail, then I might be easily persuaded that others are to blame, like the educated progressives who stacked the system in favour of minorities, or the immigrant who stole my job. Trump, the Brexit campaign and similar populist movements won over disaffected citizens not with pledges of greater opportunity and social mobility, writes Sandel, but through “reassertions of national sovereignty, identity and pride.”

Michael Young didn’t live to witness Brexit, but he too was concerned with the failings of centre-left politics and the hollowing out of democracy. Young’s fictional sociologist foretold the future of the British labour movement, describing how the manual workers and tradespeople who once led both party and unions were gradually replaced by university graduates with no experience on the shop floor.

In 2001, just months before he died, Young lamented the accuracy of his prophecy: “With the coming of the meritocracy, the now leaderless masses were partially disfranchised; as time has gone by, more and more of them have been disengaged, and disaffected to the extent of not even bothering to vote. They no longer have their own people to represent them.”

Yet on both the right and the left, mainstream politics adheres to the view that the failings of meritocracy result from flaws in implementation rather than theory. In other words, we just need to get better at building equality of opportunity. We need to invest even more in education. At best, says Sandel, this amounts to an offer to make the ladder-climbing competition fairer, even as the rungs are being pushed further apart by growing inequality. At worst, it tells those struggling in a globalised economy that they are failing because they didn’t try hard enough in school.

The alternative would be to tackle inequality itself: to focus not just on creating opportunities, but on adjusting outcomes. This is what Michael Young suggested in 2001. Along with urging Tony Blair to drop the word meritocracy from his public vocabulary, or at least admit its downside, he called on Labour’s prime minister to increase taxes on the rich.

We tend to think of taxation as a necessary evil, a way of raising public money to invest in schools, health services, social welfare, security forces and physical infrastructure. We may pay our taxes gladly or grudgingly, but the focus is on equipping government to do its job. Young’s point is that we need to use tax as a tool to narrow inequality too.

This may sound like class warfare, but the intent is not to punish the rich. After all, business executives and high-salaried professionals rarely claim to be in it for the dollars — they say they thrive on challenge and the opportunity to add value. Let’s take them at their word and trim their share portfolios and their hedge funds. At the same time, we could boost the wages, conditions and prestige of underpaid workers like gardeners, delivery riders and fruit pickers — not to mention cleaners and carers.

Even if it’s not quite true that “we’re all in this together,” the pandemic has sparked a conversation about the true value of different types of labour and generated mutual experiences of staying home, of being unable to visit loved ones, of wearing masks, of anxiety and hope.

There is a lesson here. When we no longer encounter one another in ordinary ways and places, indifference grows and may blossom into arrogance on one side and resentment on the other. To overcome these corrosive tendencies, we must reduce inequality.

None of us deserves our luck or merits our starting place in life. The key to a better society is to pool our luck and share it around. •

Funding for this article from the Copyright Agency’s Cultural Fund is gratefully acknowledged.

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But much of the debate about how to close this gap misses the bigger point. By focusing on retirement income policy — especially superannuation — it focuses on the symptom, not the cause.

The gender gap in retirement can only be fully understood in the context of the gender gap in lifetime earnings. The size of that gap is even more striking: an average woman with children, for example, earns $2 million less over her lifetime than an average man with children. Women are financially vulnerable even before they retire, and tinkering with super rules won’t fix that fundamental problem.

But the government has some tools to close the gap at its source, starting with the biggest economic reform available: cheaper childcare. High out-of-pocket childcare costs are the single biggest barrier to secondary earners, most of whom are women, taking on more work. The barrier is so high that in a household where both parents have a full-time earning capacity of $60,000, the second earner would be working for about $2 per hour on her fourth day in a week, and for free on her fifth day.

Raising the childcare subsidy from 85 per cent to 95 per cent for low-income families, flattening the taper, and removing the annual cap, as Grattan Institute has recommended, would ensure 60 per cent of families would pay less than $20 per day for childcare. We estimate these changes would cost an extra $5 billion a year and deliver a GDP boost of about $11 billion a year — and, crucially, an extra $150,000 of lifetime earnings for the typical mother.

If the government were looking for a smaller step in the right direction, it could consider making childcare free for second and subsequent children, recognising that childcare is especially expensive for families with multiple children in care.

A more equal government-funded paid parental leave scheme would also help. We recommend six weeks reserved for each parent plus twelve weeks to share between them, paid at the current rate of the minimum wage. Overseas experience shows that more equal sharing of care early on establishes habits for life.

By supporting women who would like to do more paid work, these reforms would go a long way to closing the gender gap. KPMG estimates that 39 per cent of the gap is the result of caring responsibilities, including career interruptions, part-time employment and unpaid care.

But the gap exists even for women and men who spend the same amount of time in paid work. This problem is harder for governments to fix, since much of it plays out in the private sector and is a result of prevailing norms. KPMG finds that 39 per cent of the gap can be attributed to explicit or implicit discrimination, since it can’t be explained by either the type or the amount of work.

But another 18 per cent of the gap reflects the difference in pay for male- and female-dominated occupations and the undervaluing of traditionally “female” jobs. This is something the government does have some power to change, because it is either directly or indirectly responsible for a large share of wages in the female-dominated care sectors. Care jobs historically have had very low remuneration despite their importance and complexity. We have recommended a review of pay and conditions in care sectors, including how to finance higher pay.

Other changes to retirement income policies can make a difference downstream. A case exists for paying super contributions on government-funded paid parental leave, for example, as already applies to other forms of remuneration. But a Grattan analysis shows that these payments would yield only modest income gains because they would be offset by lower pension payments after retirement. A high-earning woman who takes two stints of leave in her early thirties would get an extra $356 a year in retirement, a low-earning woman $164 a year, and an average-earning woman just $73 a year.

Another long-overdue change — abolishing the $450-a-month threshold for paying compulsory super, which can’t be justified in a world of electronic payrolls — affects almost twice as many women as men. Abolishing it would increase retirement incomes for affected workers by between $100 and $300 a year — another modest improvement.

Both those reforms would help, but only at the margins. Instead, the real priority when it comes to the gender gap in retirement is closing the holes in the social safety net for older women who are approaching retirement or already retired.

Single women who don’t own their home are at greatest risk of poverty in retirement and are the fastest-growing group of homeless Australians. Raising the rate of Commonwealth Rent Assistance by at least 40 per cent would lift the incomes of those women by at least $1300 a year, or about 5 per cent.

These changes to retirement income policy would tackle some of the most acute symptoms of the retirement gender gap. But the economic gaps between men and women begin much earlier.

The problem has no quick fix. It will require ambitious and often expensive changes. But unless we drastically reduce the lifetime earnings gap, we can expect to be papering over the retirement income gap for many decades to come. •

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In the developed world, one historical episode might reasonably be regarded as a golden age. Between 1945 and 1973, countries in Western Europe, North America and Oceania experienced strong economic growth combined with very low unemployment and sharply declining inequality. The dominant policies used Keynesian macroeconomics to stabilise the economy and develop a fairly comprehensive welfare state to protect citizens from falling into poverty due to old age, incapacity or unemployment.

Those Keynesian policies produced, or at least coincided with, the longest period of widely shared prosperity in the history of the developed world. Not only was economic growth consistently strong and unemployment low, but income distribution was equalised to a degree not seen before or since. At the time, this “Great Compression” was seen as part of the natural evolution of a capitalist economy; in retrospect, it is quite exceptional.

Whereas unemployment rates during the Great Depression had risen to levels of 30 per cent or more, the golden age was characterised by nearly continuous full employment. In Australia, unemployment was below 1.5 per cent, on average, and exceeded 2 per cent only once.

With the women who had entered the workforce during the second world war having been encouraged to make way for returning servicemen, the benefits of the buoyant economy initially flowed mainly to male workers and their households. But by the end of the golden age, most of the formal gender inequality in the labour market had been swept away. The bar on employing married women in the Commonwealth public service was abolished in 1966. Equal pay for men and women doing the same work was achieved in 1972.

We might have expected this exceptional period to be the focus of intense study. How were its best features achieved? What went wrong? How, if at all, can we create a new golden age? Strangely, these questions have received remarkably little attention.

At the time, the Keynesian economists whose ideas were dominant during the golden age believed the sustained high employment was easily explained. The correct application of Keynes’s views had replaced failed policies based on the fallacious ideas of classical economists.

The same explanation applied to other aspects of postwar prosperity. Modern technology gave developed societies the capacity to meet everyone’s essential needs. Mass poverty had largely been eliminated. In the United States, Michael Harrington’s landmark book, The Other America: Poverty in the United States (1962), brought public attention to the fact that poverty still persisted and created a new drive to deal with it. But, as his title indicated, poverty was seen as a deplorable exception to general prosperity.

Harrington’s work had some lasting consequences in Australia. It led to the creation of the Henderson poverty inquiry in 1972, which encouraged the Whitlam government’s significant extension of the welfare state. Henderson’s “poverty line” is still regularly updated, and has been given new urgency by debates over the proposal for a universal basic income, most recently advocated in Ross Garnaut’s new book, Reset.

At the peak of the golden age in the 1960s, there seemed no reason why poverty and economic want could not be eliminated once and for all. President Lyndon Johnson’s War on Poverty was an expression of a faith that was shared by the Whitlam government in Australia, though it had the misfortune to be elected just as the economic crisis of the 1970s brought the golden age to an end.

Like the disappearance of mass poverty, the decline in economic inequality during the golden age wasn’t seen to require much in the way of explanation. In the 1950s, Simon Kuznets, the American economist who played a central role in developing national accounting, observed that economic inequality, after rising in the early stages of industrialisation, had fallen in the United States and other developed countries, reaching unprecedentedly low levels by the middle of the twentieth century.

Kuznets suggested that the process might be explained by the transfer of the workforce from a low-wage agricultural sector to a high-wage industrial sector. But most commentary was keener to celebrate (or occasionally deplore) the rise of a “middle-class society” than to explain it.

When the Keynesian social-democratic model ran into trouble in the early 1970s, most attention was focused on the inflation that emerged in the late 1960s. Milton Friedman and other resurgent supporters of classical economics proposed policies that would reduce inflation and — after a period of painful but necessary adjustment — lay the basis for a return to sustained prosperity.

For a while, during the economic expansion of the 1990s, it seemed possible that this promise might be met. Only after 2000 did it become clear that the neoliberal economy offered nothing like the broad-based prosperity of the postwar era. The global financial crisis, and the ensuing years of austerity have made this clear to nearly everyone.

But the golden age was already ancient history for an economics profession in which the mastery of the latest theoretical tools is valued far more highly than any long-term perspective. Most economists, to the extent that they considered the issue at all, were content with simplistic explanations of the golden age as, for example, a straightforward result of the economic activity generated by postwar reconstruction.

This isn’t the place to attempt a detailed explanation of the golden age. But it’s a reminder that we shouldn’t be satisfied with a return to the pre-pandemic economy, in which periods of marginally positive growth in real wages, and occasional reversals of the trend towards ever-greater inequality were treated as triumphs. Rather we should be looking harder at what went right in the mid twentieth century and how we can recapture broadly shared prosperity. •

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The Morrison government said exactly that when it promoted its three-stage personal income tax cuts, which passed into law not long after the 2019 election. Working Australians would receive greater “rewards for effort” without the progressivity of Australia’s tax system being sacrificed. Later, when the government brought forward its stage two tax cuts, it argued they would “improve incentives to work.”

John Howard made similar claims about the income tax cuts at “the heart” of the tax changes his government introduced in 2000. Australian workers would now be given a “genuine reward for their efforts,” he declared. And, lest it be thought this line of thinking is confined to one side of politics, Labor treasurer Paul Keating asserted back in 1985 that “lower marginal rates will enhance our economic performance by better rewarding initiative.” Among other things, he was proposing a substantial reduction in the top personal tax rates from what was then 60 per cent.

It’s certainly true that tax cuts can deliver a sugar hit to the economy, especially in response to an economic downturn. And the design of the tax system — how taxes are collected, and from whom — undoubtedly has an impact on economic performance, for better or worse. But any clear correlation (let alone a causal relationship) between the level of tax and the rate of economic growth — or any other measure of economic performance — is far less obvious, as research by the OECD and the IMF has shown.

The most contentious of all tax cuts, of course, are those targeted at high earners. The frequent claim that they encourage economic growth was recently examined in some detail over a fifty-year period by David Hope and Julian Limberg at the London School of Economics. Using data on economic growth, unemployment and income inequality, the two economists tracked the impact of cuts in income and wealth taxes for high-income or high-net-worth individuals in eighteen OECD countries.

Their conclusion? While the top 1 per cent of income earners undoubtedly captured a greater share of national income (by an average of 0.8 percentage points in the five years after each tax reduction), the cuts had no statistically significant impact on real per capita GDP growth. Nor did they reduce unemployment.

Hope and Limberg’s findings are consistent with other research showing that reducing top marginal income tax rates has no significant impact on the amount of paid work undertaken by people who benefit from them. Without that increase in effort, the argument for the tax cuts breaks down.

What about the other claim made by the federal government: that its cuts will preserve the progressivity of Australia’s tax system?

As a starting point, it’s important to recognise that Australia’s income tax system is more progressive than generally recognised. Its progressivity arises from the complex interaction of its rates and thresholds.

The top personal rate — effectively 47 per cent — is in the middle rank of OECD countries. But the threshold above which it applies is relatively low as a proportion of the average wage — lower, in fact, than all but six OECD countries. Our tax-free threshold, on the other hand, is very high (and twenty-six OECD countries don’t have one at all). And our flat-rate Medicare levy is a lot lower than the social security contributions levied in the United States and most European countries. (Our GST rate is also low compared with the OECD average of 19.2 per cent, with only four of thirty-six comparable OECD countries being lower.)

Combine these factors with a tightly targeted social security system and Australia achieves a significant measure of income redistribution — and it does that despite having a smaller overall tax “burden” than most OECD economies.

Treasurer Josh Frydenberg is correct when he says that Australia will “retain a progressive tax system.” But the income tax system as a whole will nonetheless become less progressive. In fact, an analysis by Grattan Institute suggests that 60 per cent of the plan’s benefits will flow to the top 20 per cent of taxpayers, reducing the share of income tax paid by this group from 68 per cent in 2017–18 to 65 per cent by 2029–30. As a result, Australia’s personal income tax system will become less progressive than in any year since at least 2003–04, and by one measure since the 1950s.

This is only partly because of the proposed rise in the top threshold from $180,000 to $200,000 (which would still leave it relatively low by OECD standards). The reduction in progressivity stems mainly from the fact that people in the top tax bracket will benefit significantly from two other changes: the lifting of the threshold for the 37 per cent marginal rate from $90,000 to $120,000 from the beginning of the current financial year, and its abolition entirely from 1 July 2024; and the increase in the 32.5 per cent threshold from $37,000 to $45,000, and its reduction to 30 per cent from 1 July 2024.

Of course, shielding high-income earners from the benefits of reductions in tax rates or increases in those thresholds is difficult without more substantial adjustments to the rate scale. But that doesn’t justify the pretence that the progressivity of the tax system is unaffected by changes envisaged by the Morrison government.

I’m certainly not advocating (as the opposition did at the last election) that the top marginal rate should be increased — and particularly not at the current or prospective threshold. Among other things, that would almost certainly encourage tax avoidance strategies that (legally) exploit the already large difference between the top personal income tax rate and the company tax rate (especially now that small businesses pay a company tax rate five percentage points lower than other businesses).

More generally, I don’t see any compelling reason why employees who are earning wages or salaries of $200,000 or more and are not using tax-minimisation strategies should be paying more of their wages or salaries in tax than they currently do.

What does worry me is the tax treatment of income from other sources — from capital gains and rent, for example, and from superannuation fund earnings and “business” income routed through trusts. This income goes mainly to people whose annual pre-tax income is well in excess of $200,000 but who don’t pay tax at the same rate as people whose wage or salary income exceeds that threshold. It’s perhaps understandable, but nonetheless regrettable, that the federal opposition has walked away from its reforms to negative gearing and capital gains tax.

If the government truly believes that high marginal tax rates adversely affect incentives to work, save and invest — and if it also believes that Australia’s tax system should be progressive — then it should be looking at how high earners unfairly benefit from features of the tax system intended to benefit low-income earners (including that very high tax-free threshold), at taxing capital income at a similar rate to income from working, and at curtailing high-income earners’ use of tax-preferred saving or investment vehicles to reduce their tax bills.

If it did this, the case would be much stronger for reducing the top marginal rate or making much larger increases in the threshold at which it becomes payable. Or the government might even use the extra revenue to better fund aged care and other worthy programs without having to raise taxes or introduce new ones. Or it might feel less need to raise taxes (or introduce new ones) when the time comes to start reducing the budget deficit. •

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Prime minister Bob Hawke and Keating, his treasurer and successor, won support for tough reforms — holding down wages and instead giving workers universal healthcare and superannuation, subjecting once-universal welfare benefits to income and asset tests — because Australians felt themselves to be economically vulnerable. Being a big agricultural exporter was no longer a ticket to wealth. The elites of left and right agreed: we had to reform, work harder, change our game.

Ross Garnaut was at the forefront of that reform surge. He was Hawke’s economic adviser, then Australian ambassador to China and, from a prestigious base at the Australian National University, an influential advocate for free trade and enmeshing Australia in the Asia-Pacific. His 1989 report advocating scrapping tariff protection for manufacturing to make other industries more globally competitive was crucial to the government’s decision to do just that, which saw 130,000 manufacturing jobs wiped out.

At the 1996 election, John Howard swept Keating away, pledging to make Australians “relaxed and comfortable.” He led one last big reform, the introduction of the GST, and that was it. Reform gave way to media management, giveaways to voters, culture wars designed to wedge opponents, and help for vested interests. In this century the only big economic reform worth the name came when the crossbenches forced the Gillard government to adopt a carbon price, which the Coalition then scrapped on coming to office.

Garnaut played a key role in that reform too, after Kevin Rudd (one of his junior diplomats in Beijing days) asked him to write a report weighing up Australia’s climate change options and Julia Gillard brought him into the final negotiations on how to make a carbon price work. But the return of the Coalition in 2013 saw him back on the outer, as any prospect of serious economic reform disappeared.

While Bill Shorten’s period as leader raised hopes that Labor in government could renew its zeal for reform, a government led by Anthony Albanese looks no more likely to take tough decisions than a Coalition one. Those who see urgent need for reforms seem to be talking to ourselves; those able to do anything about them are simply not interested.

Ross Garnaut is undeterred. His new book, Reset: Restoring Australia after the Pandemic Recession, is a wide-ranging almanac of reform proposals to give Australia a better future: on economic, social and environmental fronts. At times, he seems to be talking directly to the Morrison government, as if hoping that it has Australia’s long-term interests at heart, despite evidence to the contrary, and could be persuaded to embark on politically difficult reforms to secure them.

Appeals to revive the spirit of the Hawke–Keating government under this government frankly seem like a waste of breath. But it is the fate of reformers to debate reform options in their own minds and with those they respect, and Garnaut’s book is full of them, all focused on creating an Australia with full employment — as soon as possible — rising standards of living, sustainable finances, and world-leading new industries based on renewable energy.

Most of the media coverage of the book has focused on Garnaut’s proposals for macroeconomic reform: lifting the growth rate by reshaping and reducing taxes, and financing those changes by issuing new government bonds bought directly by the Reserve Bank. This would further increase the federal deficit, at least initially, and loosen monetary policy to levels comparable to other Western countries, leading indirectly to a lower Australian dollar, and a more competitive economy.

Restoring full employment by transforming our international competitiveness is one of the two key themes of the book. But the other is equally central: to achieve this will require business and government to rapidly develop Australia’s new international competitive advantage in renewable energy and the products dependent on it: the hydrogen economy, ammonia and fertilisers, metal refining, and downstream processing in products such as steel and aluminium.

The macroeconomic agenda is the logical place to start. And for an economist known as a voice of orthodoxy, Garnaut’s proposals show how far that orthodoxy has moved since 2008.

He cuts through the spin we hear about Australia’s economic performance in the past decade, in what Garnaut likes to call the “Dog Days.” As I too have argued, it was unimpressive, whether compared with our past experience or with our international peers. Unemployment stalled above 5 per cent, underemployment swelled, real wages stagnated as never before, and GDP growth rates looked okay only because they were inflated by high immigration.

Without a policy reset, Garnaut argues, that past is what Australia risks going back to as we emerge from this recession. He gives the government high marks for dropping its deficit fetish after Covid-19 struck, when it successfully pumped money into households and business to stimulate spending. But like other economists, he argues it switched its focus too quickly to reining in future deficits when the bigger job is to get people back to work.

He boldly, and rightly, assails the misuse by the Reserve Bank, Treasury and others of the concept of the NAIRU (the “non-accelerating inflation rate of unemployment”), an estimate of how low unemployment can fall without causing rising inflation. The NAIRU makes good theoretical sense but in reality is impossible to calculate accurately when no such events happen. In 2012 the US Federal Reserve estimated the limit for the United States was 5.5 per cent. Yet by 2019 unemployment was 3.5 per cent and inflation almost non-existent.

Except for Western Australia during the labour shortage of the first resources boom, wage growth has not driven up inflation in Australia since the 1980s. Treasury’s estimate of the NAIRU as 5 per cent, and the Reserve Bank’s estimate of “4-point-something” are equally phoney. As Garnaut says, “We simply don’t know, and we won’t know until unemployment falls to a level at which wages rise at an accelerating rate.” He suggests aiming for a 3.5 per cent unemployment rate, and then lower unless inflation is “accelerating dangerously out of the top of the Reserve Bank’s target range.”

To get to 3.5 per cent unemployment by 2025, he estimates that Australia needs to create 1.2 million new jobs in just four years. That is a huge task, considering the headwinds we face: “the huge legacy of public debt, a smaller capital stock per person (because of low business investment)… major losses in export industries… reduced productivity… the effects of climate change, an ageing population… [and] lower population and workforce growth.”

Garnaut makes a second bold but correct call: don’t return to high immigration levels. In the past decade or two, net overseas migration has averaged 1 per cent of the nation’s population every year, mostly from people coming (or staying on) here to work, and taking jobs that in the past went to school leavers or graduates, whether in service stations or in IT and the like.

I have written about this several times. Between 2008 and 2016, roughly three-quarters of all net growth in full-time jobs went to new migrants. Of the 474,000 full-time jobs added in that time, only 74,000 went to workers born in Australia, while 168,000 went to workers born on the Indian subcontinent. Treasury looked at a different set of years and found similar numbers.

“Immigration now lowers the incomes and employment prospects of low-income Australians,” Garnaut concludes. “Integration into a global labour market [has]… contributed to persistent unemployment, rising underemployment… stagnant real wages [and]… a historic shift in the distribution of income from wages to profits.” Temporary worker migration in reality is not focused on solving skill shortages, as promised, and migrant workers are frequently exploited, as Age journalist Adele Ferguson has shown.

Garnaut argues for halving the annual net immigration rate to 0.5 per cent: in round figures, 125,000 a year rather than 250,000. Of all his reform proposals, it is one of the most viable politically.

To create those 1.2 million jobs by 2025, both fiscal and monetary policy must be set unambiguously to expansion. The Reserve Bank, Garnaut says, needs to accelerate as hard as most other central banks in the West are doing to bring the dollar down and make Australian producers more competitive. (He notes that Australia might still be making cars had the Reserve understood the damage it was doing to our competitiveness by failing to halt the dollar’s rise during the resources boom. In the new age of electric vehicles, there is no one left here to make them.)

I would add one caution, however. We can’t ask the Reserve to correct the damage from bad government policies: only governments can do that, and none of our recent governments has wanted to. So low interest rates once again are igniting an explosion of tax-driven investment in rental property that will deprive growing numbers of Australians of the chance to own their own home, perhaps forever.

On budget policy, Garnaut empathises with the Coalition’s desire to start reducing the deficit to minimise the debt it will bequeath to future governments — but concludes that this is not the time for it. The government, like the Reserve, should still have its foot on the accelerator, not the brake, and he has two big ideas on how to go about it:

• The complex tax and welfare system should be simplified to (mostly) one flat tax rate and one big welfare payment. The payment would be what is variously called a universal basic income or negative income tax — Garnaut prefers to call it the Australian Income Security, or AIS — which would guarantee all Australian citizens (except those too rich to qualify) a tax-free payment of about $15,000 a year, topped up with further payments for those who are aged, disabled, unemployed or parents with dependent children.

Conversely, all income from the first dollar would be taxed at the rate of 37 per cent up to $180,000, and 45 per cent above that. The combination of the AIS and the tax would make this more egalitarian than it might appear. Garnaut argues that it would provide a stronger welfare net, provide greater incentive to work, simplify tax and welfare administration, and provide an immediate (but temporary) boost to demand.

• Business taxation would no longer be levied on profits, but on cashflow. This would make all investment spending immediately deductible against tax, providing a permanent incentive to higher investment. But interest payments and financing costs would no longer be deductible, except for banks and financial firms, and payments overseas for royalties, marketing and management fees would be deductible only if they were incurred directly in producing the firm’s output.

Conversely, however, companies with a negative cashflow would receive a cash credit, effectively paid for by other taxpayers. For those other taxpayers, that is a risky part of the design. A similar promise of a blank cheque for losses was one factor in the downfall of the Rudd government’s mining tax in 2010.

Garnaut argues that a cashflow tax would provide an incentive to investment, especially on risky projects. (BHP’s plan to build a fast rail line between Melbourne and Sydney in the early 1990s fell over when the Keating government declined to give it such tax treatment.) He also claims that removing deductions for interest payments and payments for imported intellectual property (often to a related company) would remove “the main opportunities for corporate tax avoidance and evasion.”

It’s an idea that’s been around a long time without any country adopting it. The Republicans in Washington flirted with a version of it a few years ago, but Donald Trump killed that idea.

• Garnaut also raises a third suggestion that is much easier to implement and could provide the right sort of stimulus: dump the convention that requires cost–benefit studies of infrastructure projects to use a discount rate of 7 per cent per annum above inflation to estimate the future value of projects in today’s dollars. At one time, that vaguely matched reality, but it was long ago. In an age of minimal interest rates, the convention is inaccurate, unscientific and harmful to good decision-making.

Frankly, it seems unlikely that any Australian government will implement either of Garnaut’s two big tax and welfare reforms in the near term. The Morrison government’s derisory cup-of-coffee-a-day increase to Newstart despite widespread bipartisan support for real reform shows its aversion to tackling the hard work of economic restructuring. Anthony Albanese seems to want people to like him, above all, and thus to avoid conflict — which unfortunately is an inevitable by-product of reform.

In Garnaut’s view, the Australian economy is facing so many headwinds that business as usual will not generate the jobs required to restore full employment. We need to try a new tack: to rephrase Ken Henry’s famous advice to the Rudd government: “Go hard, go early, go renewables.”

As he spelt out in his 2019 book Superpower: Australia’s Low-Carbon Opportunity, Garnaut sees Australia’s vast land mass and solar radiation as a resource that no other country can match in the dawning age of renewable energy. Just as our coal and gas resources gave us a huge competitive advantage until we began pricing them at global parity, we can produce solar and wind energy more cheaply and plentifully than any comparable country. This could become our leading export industry of the future, as coal exports diminish and gas exports flatline. In his words:

There is no comparable opportunity for profitable expansion of business investment in other trade-exposed industries. Getting carbon right becomes an integral part of getting economic policy right.

The transformation should begin on a large scale now… It is feasible now to replace most of Australia’s large imports of ammonia-based products (such as fertilisers). Building supply from new plants in rural and provincial Australia that rely on renewable energy and hydrogen — at prices competitive with high-emission alternatives — can happen in time to contribute to full employment in 2025.

Zero-emissions electricity at prices within the range required to keep established mainland aluminium smelters alive is possible now. By contrast, aluminium smelting at Gladstone, Newcastle and Portland would not survive through the 2020s with continuous coal-based power supply.

[With budget subsidies]… the first commercial-scale hydrogen-based iron-making plant can be built as part of the movement to full employment. Make a start on commercial-scale plants, and more business investment will follow.

In Garnaut’s view, the hydrogen economy is not for the distant future, it is something we should start creating now. British billionaire Sanjeev Gupta, with whom he has worked, last month launched a feasibility study for an industrial-scale hydrogen-fuelled steel plant at Dunkirk. Three separate consortia are progressing plans to build renewables-powered hydrogen plants in the Pilbara to supply domestic and Asian markets. He sees traditional coal and gas centres like Gladstone becoming centres of hydrogen production and metal refining using renewable energy.

Not all agree. The day Garnaut’s book was released, BlueScope’s chief executive, Mark Vassella, said it plans to use old technology to update its Port Kembla steelworks, warning that “green steel” might not become mainstream for another twenty years.

But many of Australia’s heavy industrial plants will not last that long. And as the laggard of the Western world in reducing greenhouse emissions from industry, Australia now faces the prospect of tariffs in Europe and North America to force it to speed up its transition.

Garnaut argues that green steel, green aluminium and green fertilisers will command premium prices in the renewable era. Australia should be a first mover in using its wind and solar resources to produce them.

He is practical, not religious, in his outlook. Unlike the green lobby, he sees gas playing a prominent role in Australia’s future, backed by carbon capture and storage in areas where that is geologically feasible. But renewables, not gas, are the main game — and our economic flagship of the future.

One subject that appears rarely in this book is China. When Garnaut has been one of Australia’s foremost experts on China for almost four decades, that is surprising, but also a sign that we live in dangerous times.

When he does touch on China, he is careful but clear-eyed. He advises Australian firms to look to develop other markets, especially in Southeast Asia, and warns that ultimately China will look for other sources of iron ore, and of so much else that it once bought from us.

The one passage in which he does address Sino-Australian relations directly is, in my opinion, worth thinking carefully about:

There does not seem to be any early prospect of the restrictions in Sino-Australian trade lifting to leave clear air. There are real issues of Australian security to be managed. There are real Chinese responses to Australian initiatives. Australia and China will respond from time to time in ways that are influenced by the shifting dynamics of US politics and international engagement.

What might be possible is a narrowing of restriction to the minimum necessary for meeting clearly defined and essential security interests, as analysis and the passing of time causes us to see them. This will make heavy demands on Australian knowledge and analysis. It will take subtle and intense diplomacy.

It will require Australians to adjust to the realities of living in a perilous world, in which peace and prosperity, and our effective sovereignty, depend on understanding the world as it is and not as we wish it to be.

This is a world that has been inhabited by other countries of modest size alongside great powers since the beginning of the nation state. It is a world that is understood from history by our Western Pacific neighbours South Korea, Vietnam and Thailand — and by the neighbours of great powers in Europe and Central and North America.

There is pain and wisdom in these words. •

The publication of this article was supported by a grant from the Judith Neilson Institute for Journalism and Ideas.

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The extent of what’s being called vaccine nationalism is clear in the figures. As of early February, more than three-quarters of all vaccinations had been administered in the ten countries that together account for almost 60 per cent of global GDP, leaving some 130 countries, with 2.5 billion people, yet to receive a single dose.

Even before many of the vaccines had completed clinical trials or regulatory approval, the governments of the wealthiest countries had signed agreements with pharmaceutical manufacturers. As a British Medical Journal paper published in December revealed, some 3.76 billion courses (or 7.48 billion doses) of the projected manufacturing capacity of 5.96 billion courses by the end of 2021 were already committed by November 2020.

Of these, a shade over half were allocated to the high-income countries that account for only 14 per cent of the world’s population. Australia, Japan and Canada — countries with relatively small populations and few coronavirus cases — had collectively reserved more than a billion doses. Perhaps 2.34 billion courses would be left for low- and middle-income countries, the authors calculated. By 30 January, Britain had reportedly secured enough vaccines to give each of its citizens five doses, while Canada has ordered enough to give everyone nine doses.

The situation is reminiscent of the 2009 H1N1 influenza outbreak, when a handful of wealthy countries secured most of the vaccine supplies and relatively few of the populations who would have benefited most from the vaccine got it in time to make a difference.

Vaccine nationalism is rarely beneficial in the long run. Modelling by the International Chamber of Commerce shows that the economic benefits of funding equitable access to vaccines dwarf the costs. Advanced economies stand to lose as much as US$4.5 trillion if they fail to give developing economies access to coronavirus vaccines.

That didn’t stop EU health commissioner Stella Kyriakides from threatening to require companies making coronavirus vaccines in the bloc to “provide early notification whenever they want to export vaccines to third countries.” The statement contrasted with pleas for vaccine sharing from French president Emmanuel Macron, German chancellor Angela Merkel and other leaders.

The main international effort to secure equitable and affordable vaccine supplies for all countries, especially the poorest, falls under the auspices of COVAX, a joint initiative of Gavi (a public–private global health partnership dedicated to increasing access to immunisation in poor countries), the Coalition for Epidemic Preparedness Innovations (an Oslo-based fund supporting the development of vaccines against Covid-19) and the WHO.

COVAX aims to build manufacturing capabilities and secure two billion vaccine doses for distribution by the end of 2021. The plan is for more than a billion of these doses to be provided free or at a low cost to ninety-two low- and middle-income countries. The remainder will go to wealthier countries, which will pay for them.

Australia joined COVAX last September with a A$123.3 million commitment to its purchasing mechanism, which will enable Australia to purchase vaccines as they become available. This option may never be taken up, though: it comes on top of the agreements Australia has struck with Oxford–AstraZeneca, Pfizer and Novavax, which together will provide some 120 million doses.

COVAX’s work was initially hindered by the Trump administration’s refusal to participate. That was last September, after it had withdrawn the United States from the WHO, citing the agency’s “China-centric” response to the pandemic. It’s probably no coincidence that China announced its participation in COVAX the following month. In some diplomatic circles its motives for doing so are suspect. Russia, although a major vaccine developer and manufacturer, stayed on the sidelines.

All that changed with the election of Joe Biden, who acted quickly to rejoin the WHO and provide funding for COVAX. He has announced an initial US$2 billion and will release a further US$2 billion over two years once other donors have made good their pledges.

The US funds were appropriated by a bipartisan congressional vote in December — after Biden was elected but when Trump was still in office — and they provided a much-needed boost to the program. Indeed, the decision has been described as a “game changer” that will help mobilise other governments to start contributing to COVAX. The current funding shortfall for coronavirus testing, drugs and vaccines, and the resources to deliver them is estimated at US$27 billion for 2021.

Suddenly Russia, too, is interested in working with COVAX, although it has indicated it will not be substituting COVAX for its supplying of Sputnik V vaccine directly to other countries. China has taken this approach as well, offering priority access to its own vaccines to countries in Africa, the Middle East and Southeast Asia. While less is known about their efficacy, the Russian and Chinese vaccines are considerably cheaper than those produced in the West. These two jousting world powers clearly see their vaccines as a form of soft diplomacy, with more opportunities for this created by Trump’s weakening of America’s international standing and involvement. It is unlikely that the Biden administration will so readily cede this field.

Despite the boost from US involvement and recent pledges for increased support from G7 nations, COVAX faces a huge task in getting the leaders of wealthy countries to deliver their full funding commitments and to match their actions to their rhetoric.

Macron’s rhetoric is a case in point. Supported by Merkel, he called for 3 to 5 per cent of the European and US vaccine supply to be sent to developing countries. Diverting a small percentage of doses would not dramatically affect vaccine rollouts, he said, and would deal with the fear that Moscow and Beijing plan to wage what he called “a war of influence over vaccines.” Direct donations of vaccines, he argued at the Munich Security Conference last month, would be quicker than donating money to COVAX. But it isn’t clear when or even if these donations will happen. The British government said it will “share the majority of any future surplus coronavirus vaccines from our supply” with COVAX but gave no time frame.

Despite the problems, the good news is that vaccines are starting to arrive in Africa. This past week 600,000 doses of the Oxford/AstraZeneca coronavirus vaccine — developed in Britain, manufactured in India, with needles sourced from Dubai and funded by COVAX — arrived at the airport in Accra. This means that Ghana, a lower-middle-income country with a population of thirty-one million, can begin vaccinations this week.

African countries like Ghana have not been hit as hard by the virus as wealthier nations. So far, Ghana has recorded some 82,000 cases and nearly 600 deaths; but now, like many others in Africa, it is experiencing a second wave of infections. Managing the pandemic in Guinea and the Democratic Republic of the Congo has also been complicated by new outbreaks of Ebola.

Experts believe that the emergence of new coronavirus variants has contributed to a new wave of infections in many countries in southern Africa. They are concerned that unequal vaccine supplies and delays in vaccination programs will not only prolong the pandemic but also increase the possibility of hardier, more lethal variants. With more than 130 countries yet to vaccinate a single person, this is yet another reason for concerted international vaccination efforts.

COVAX has no power to compel states to share their surpluses. Some countries, Norway and Canada among them, have committed to sending their excess vaccines to COVAX. Others have used vaccines to advance foreign policy goals (Israel) or placate near neighbours (Spain).

And Australia? Prime minister Scott Morrison initially made a fairly tepid commitment to distributing coronavirus vaccines to the Pacific and some Southeast Asian countries “if Australia develops a supply.” Already, Australia has secured dramatically more vaccine than needed — and is also investing in increased local vaccine manufacturing capabilities — so Morrison should be able to ensure that “we’re doing our bit in this part of the world,” as he said in early February.

International availability of vaccines may also be boosted by cooperative initiatives to lift manufacturing capacity. French pharmaceutical giant Sanofi recently announced it would make its manufacturing infrastructure available to produce the Pfizer vaccine, and US company Merck, whose own vaccine candidates were not successful, has said it is in talks with governments and companies to potentially help manufacture already-approved vaccines. Brazil, China and India all have vaccine industries with enough capacity to manufacture supplies for their own use and for export.

The WHO has called on companies with vaccines to issue non-exclusive licences to allow other producers to manufacture their products, a mechanism that has been used before to expand access to treatments for HIV and hepatitis C.

As countries like the United States, Britain and now Australia are learning, successful vaccination programs require much more than simply getting the vaccines safely to vaccination centres. Trained personnel, technical assistance and equipment are needed, as are careful record-keeping and surveillance, transport and refrigeration. All this is considerably more costly and often more difficult to arrange than the vaccines themselves.

Last May the Australian government redirected A$280 million from overseas aid and humanitarian programs to the international Covid-19 response. Most of these funds (A$205 million) went to the Pacific region for technical assistance and supplies, laboratory diagnosis, personnel and surveillance. The Australian Council for International Development welcomed the decision but decried the repurposing of already-stringent aid funds. Additional resources are required.

The elephant in the room, especially where new vaccines are involved, is who bears the risk of any adverse side effects or injury to patients. Countries funding their own vaccine procurement must also undertake their own liability programs.

In the United States the Trump administration granted companies like Pfizer and Moderna immunity from liability for unintentional problems with their vaccines. It isn’t possible to sue the government or the Food and Drug Administration over side effects either. This rare blanket immunity deal, which extends until 2024, involved invoking the 2005 Public Readiness and Emergency Preparedness Act, which provides legal protection to companies making or distributing critical medical supplies, such as vaccines and treatments, unless there is wilful misconduct by the company. 

The Australian government’s 2020–21 budget included a commitment to provide the suppliers of coronavirus vaccines with indemnity against liability for rare side effects. But experts have pointed out that it isn’t clear what this means in practice, and the government has not released any further details, citing “commercial in confidence” considerations.

The WHO, in what it describes as the “first and only” international vaccine injury compensation scheme, has agreed a no-fault compensation plan for claims of serious side effects in the ninety-two poorest countries due to get coronavirus vaccines via the COVAX scheme. This relieves recipient governments of a potentially serious financial and judicial burden.

Coronavirus vaccines have arrived in record time, and they will have a critical role in bringing the pandemic under control. But population immunity is required to end the pandemic, and this must be achieved internationally if the world and travel and open borders are to return to something like pre-pandemic times.

Achieving that level of immunity will take time and efforts well beyond vaccination programs; it will involve politics as much as science, political will as much as vaccination expertise, and recognition that a global pandemic requires a global response.

To return to the words of the WHO director-general: “Vaccine nationalism is not just morally indefensible. It is epidemiologically self-defeating and clinically counterproductive… Allowing the majority of the world’s population to go unvaccinated will not only perpetuate needless illness and deaths and the pain of ongoing lockdowns, but also spawn new virus mutations as COVID-19 continues to spread among unprotected populations.” •

The publication of this article was supported by a grant from the Judith Neilson Institute for Journalism and Ideas.

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Her number is not connected. Perhaps she has changed it; I hope so. The pandemic has been disastrous for workers like Silvana in Latin America’s informal economy — the bread sellers on the streets in La Paz, the cardboard collectors in Buenos Aires, the domestic workers in Santiago, the fruit sellers on the streets of Lima — and she will have encountered many hardships since we last met.

The coronavirus arrived in Latin America on 26 February 2020 when Brazil confirmed the first case in Sao Paulo — a sixty-one-year-old man. The region is currently a global epicentre of Covid-19.

The pandemic struck Latin America and the Caribbean at a difficult economic time, with the region already experiencing low economic growth. The Economic Commission for Latin America and the Caribbean, or ECLAC, now projects a 9.1 per cent drop in the gross domestic product across the region, which is home to more than 652 million people. “Preliminary estimates so far indicate that we are experiencing the worst economic recession since we started recording it,” says Fabio Bertranou from the International Labor Organization’s South Cone of Latin America section. A recent report from the US Congressional Research Service notes that “the decline in economic growth in 2020 is expected to exacerbate income inequality and poverty throughout the region.”

In the region’s largest sector, informal work, the effects of this health and economic crisis are particularly brutal. Nearly 140 million people — about half the working population — make up the informal economy in Latin America and the Caribbean, and present what Bertranou describes as “a huge structural labour challenge.” These workers have “low or no labour rights, and lack social security, occupational safety, and health and unemployment protection.” The only way out, he says, is to achieve the ILO’s goal of promoting decent and productive work for all people.

This goal is particularly daunting now, though. In May 2020, the ILO estimated that in Latin America and the Caribbean 89 per cent of informal workers would be severely affected by the pandemic; and it is likely that the informal economy will only increase in the near future. “We can speculate that when confinement measures are relaxed and economic activities open up, informal employment will increase considerably again,” says Bertranou. To minimise this problem, the ILO is “providing technical assistance to governments, workers’ organisations and employers.” The final objective, he says, is “to transition to the formal sector of the economy.”

Peru, home to approximately thirty-three million people, has one of the largest informal economies in Latin America. At the time of writing, the country also has one of the world’s highest Covid-19 mortality rates, with over 45,000 deaths.

“Plague has been throughout history one of humanity’s worst nightmares,” Peruvian writer and 2010 Nobel Prize winner Mario Vargas Llosa wrote in March 2020. And in his own country, the pandemic has indeed sparked nightmarish human and economic conditions.

The Peruvian formal economy has lost over six million jobs, according to the country’s National Institute of Statistics and Informatics. At the same time, the informal economy has bloated. “Millions of Peruvians who have lost their jobs have been forced to work on the streets,” says Armando Chunga, president of the Association of Street Vendors of Metropolitan Lima. There were approximately 300,000 street workers in metropolitan Lima before the pandemic hit. “Now there are more than 900,000,” Chunga says. “And around 10 per cent of them are infected.”

Born and bred in this city of nine million, Chunga fears the virus. In the streets of Lima’s historic centre, he sells “clothing, leggings, track pants and t-shirts.” He fears for his life every time he hits the streets, he tells me. When we speak on a Saturday evening, he is coming back from fourteen hours of street work. “In this pandemic, when we go to the street, we are risking our lives,” he says. “But my family depends on me.”

And he is not alone. In Peru, 70 per cent of households depend on the informal economy. It is the economy of the poor, and serves not only those who sell but also those who come to the streets to buy — mostly low-income people.

Lima’s Central Market, for example, has been a source of affordable food since its foundation in 1850. But in May last year, the Municipality of Lima closed it after fifty-nine traders tested positive for the coronavirus. This came after former president Martín Vizcarra described Lima’s food markets as one of the primary sources of contagion. After enormous public pressure, however, the market opened up again only a few days later. “All the evidence suggests that informal food sellers are playing a key role in food security in general and for the urban poor in particular,” says Caroline Skinner from the global organisation Women in Informal Employment: Globalizing and Organizing. The closure of the markets, she tells me, could “lead to increased food insecurity, poverty and exclusion.”

But while those who sell essential products can, for now, continue to work in the markets and on the streets, the majority of informal workers, like Armando Chunga, trade in non-essential goods and have not been so lucky. Chunga says that street vendors and other informal workers are concerned with the rising level of violence they are suffering at the hands of the police. “They are using the pandemic as an excuse to harass us,” Chunga tells me. “The police brutality against us is on the rise.”

Chunga’s association has denounced the police treatment of vendors, which includes arrests and confiscation of merchandise. “According to our information, more than 21,000 people, including street vendors and other workers in the informal economy, have been arrested,” says Chunga. “They have been arrested for not staying at home, but if we stay at home, where will our food come from?”

It’s a problem that extends well beyond Lima. In Chile’s capital, Santiago, the coleros are also struggling. Literally translated as “those in the queue,” coleros are street vendors found around the margins of the established city markets. They’re on the streets, without official permits, displaying their merchandise on blankets while keeping an eye out for the police.

Jorge Vitta is the president of the Independent Workers’ Union of Santiago. “We sell products that are not essential,” he tells me. “We sell whatever.” On one day, he says, he might sell socks, on another, body cream, stationery or hats. “Yes, I know we disobey orders. Yes, we don’t have permission. But what else can I do?”

In the Chilean city of Ovalle, 400 kilometres north of Santiago, the city market has been a source of food security and affordable products since 1986. Ovalle is situated in one of the most impoverished regional zones of Chile. “To close the market, where a large number of farmers sell their products, would have caused a major problem,” Pia López Eccher, media officer at the city’s council, tells me.

Ovalle, the birthplace of internationally celebrated writer Luis Sepúlveda — who died of Covid-19 in April 2020 — is among the Chilean cities worst affected by the virus. Many residents blame street vendors for the sharp spike in cases in mid August 2020, after Ovalle was flooded by street vendors from the neighbouring cities of La Serena and Coquimbo after both went into lockdown at the end of July.

Street vendors feel stigmatised as spreaders of the virus, but Dr Carlos Flores, an epidemiologist from Ovalle, tells me, “There is no medical evidence that the visiting street vendors caused the surge of cases in the city. My study shows that most cases emerged from inside the city.”

There is concern and anger among street-vendor organisations across Chile — and throughout Latin America — that authorities are using the pandemic to stigmatise and bully an already marginalised group of workers. “To demonise us is not new,” says Vitta. “We have always been associated with delinquency, with drug trafficking, and now we have been accused of spreading the virus.”

Of the two billion informal workers worldwide, just over 740 million are women, and the pandemic has hit them hard. The ILO reported in May 2020 that most lack access to social protection and don’t have sufficient savings to deal with the crisis. Many are domestic workers who “work for private households, often without clear terms of employment, unregistered in any book, and excluded from the scope of labour legislation.”

In Latin America, between eleven and eighteen million people are employed as domestic workers, 93 per cent of whom are women, according to a 2020 report from UN Women, ECLAC and the ILO. The report notes that more than 77 per cent of female domestic workers are informal, working in precarious conditions and without access to social protection.

Frequently, domestic workers must travel a long way to reach their employers’ home. “When I was working, it took me around one and a half hours to get to work,” Cristina Quintanilla tells me. Quintanilla lives in La Pintana — an impoverished suburb of Santiago. “I had to leave home at 4am and take two buses to get to my employers’ home at 5.30am.” Her employers live a world apart from La Pintana, in Las Condes, one of Santiago’s wealthiest suburbs.

Like Peru, Chile has been severely affected by Covid-19. And since March 2020, Santiago has been in and out of different stages of lockdown. “I can’t go to work now, but la señora told me she would employ me back after the pandemic,” Quintanilla says. Only time will tell if “the madam” — as domestic workers usually refer to their employers — will honour her promise. After all, I’m told by Chile’s Private House Workers’ Union, thousands of domestic workers have already been dumped by their employers during the pandemic, a considerable number of them fired because their employers saw them as a possible source of contagion.

According to the union,  approximately 300,000 women are employed as domestic workers in Chile. A spokesperson from Chile’s National Coordinator of Private Home Workers’ Organizations tells me that the Covid-19 crisis has left more than 120,000 of them out of a job, “in a state of total vulnerability” with no state social protection.

For people who work in the vast informal economy of Latin America and the Caribbean, the pandemic has added to their daily human drama and further revealed their abandonment and marginalisation. As the ILO notes, “Not working and staying home means losing their jobs and their livelihoods. ‘To die from hunger or from the virus’ is the all-too-real dilemma faced by many informal economy workers.”

“From the crack of dawn to the end of the day — every single day — we roam the streets selling what we can sell,” Armando Chunga tells me in an exhausted voice. “You know, we are fathers, mothers and children, like anybody else — we just need to work.”

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But this is what Australia’s education ministers do. Every ten years or so they get together, accompanied by their minders and equipped with endless briefings and position papers. A day or two later they emerge from their talkfest armed with yet another soaring statement about where our schools should be.

Those who follow this ritual will have heard of 2008’s Melbourne Declaration and 2019’s Alice Springs (Mparntwe) Declaration. Yes, the education supremos make some progress on the easy bits, but anything really challenging is wrapped up in aspirational language and then gently placed in the too-hard basket until it all happens again ten years down the track. Some issues are routinely overlooked, including the very structures that fail our schools.

It is instructive to subject the ministers’ grand statements to an evidence test, the sort of thing they expect schools to do. My co-authors and I do this in Structural Failure: Why Australia Keeps Falling Short of Its Educational Goals, a new paper from the Gonski Institute for Education. Unhappily, our paper demonstrates that Australia’s school system and political leaders have failed. Schools operate the best they can, but amid policies that are holding our country back.

What claims do the education ministers make? They keep saying that our education system promotes excellence and equity. It might promote them, but it doesn’t achieve them. On the excellence side we’ve been through two decades of very ordinary student achievement scores, many of which are heading south. Yes, schooling is about much more than test scores, and some of the tests themselves don’t measure up, but most of the national report cards say the same thing: could do better!

The education ministers’ recent declarations have placed equity up there in lights. That makes sense: serious inequities need to be fixed before real achievements can happen. But they don’t seem to have joined these dots, because they don’t keep up their equity efforts. For almost two decades the figures have told much the same story: equity in school education is in decline. It is the socioeconomic status of families and schools, rather than what schools actually do, that creates around two-thirds of student achievement. Kids from poor families are not getting the much-needed break. Statements about reducing disadvantage are mocked by recurring evidence that we’re doing the opposite.

The education declarations say we are committed to providing education that is inclusive and free from any form of discrimination. Yet school fees and entry tests discriminate and exclude. More schools than ever have overt or covert control over who walks through the gates. On top of that, competition between schools, far from improving quality, sees too many schools seeking the same preferred students. Pity about the others. Meanwhile, too many schools operate as social, academic, ethnic and religious enclaves, making mockery of the education ministers’ aspiration that education should promote and contribute to a socially cohesive society.

We constantly hear about the need to support all students, but the distribution, efficiency and effectiveness of this support is highly uneven. It doesn’t go to those who need it most, inevitably reducing its effectiveness in improving overall student outcomes. An analysis of where the money goes reveals duplication and inefficiencies: support goes to all three school sectors, but our current public–private system isn’t delivering all the goals set for school education.

Where will all this leave Australia after another decade? We have a good idea of where, because recent data lay out the trends for all to see. The diverse team who wrote Structural Failure, including academics and school principals from both public and private sectors, believe that existing structures guarantee that our schools will continue to be let down by the system. Our focus on structures and mechanisms is a deliberate step away from the advocacy and avoidance that has condemned school education to more of the same for decades. A starting point is to illustrate, as our paper does, the pointlessness of the recurring declarations that have institutionalised this failure.

Changing what we have won’t be easy. We need to agree on the purpose, principles and values of school education and prioritise strategies to achieve these. In the process we should learn from our own experience and that of equivalent countries. Other countries have reconciled the vexed issue of school equity and choice. Why can’t we? Creating a level playing field on which schools can operate is essential — it that too hard? It would also make sense to create a better and lasting balance between education as a common good and education as a provider of individual benefits. And can’t we create some distance between school education — and its funding — and the vagaries of politics? Last but not least, if we manage to venture in these directions, wouldn’t it be a good idea to monitor and report on progress?

Governments and their education ministers seem committed to achieving best practice inside schools, especially in the classroom. But they are reluctant to tackle the wider problems that cast a shadow over what they do. Meaningless declarations and good intentions are not enough. Unless we change direction, our national goals for schooling, elegantly reshaped every decade, will continue to reveal what we have failed to do rather than where we want to be. •

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On offer in Princes Hill was a second-floor, two-bedroom apartment. Described in the listing as “impeccably maintained retro,” it was the best-situated flat in an ugly block of chocolate-brown brick walk-ups dating from late 1960s. Its interior was charming, and the publicity wasn’t wrong about the abundance of natural light and gorgeous neighbourhood views. When it came to the price, however, it was way off the mark.

The agent’s indicative guide had the apartment selling for between $630,000 and $680,000. My friend, who didn’t come down in the last shower, had come prepared to pay about $100,000 more. But I didn’t even get to raise my finger on her behalf, because a clutch of other determined buyers quickly pushed the price up to $845,000.

The previous Sunday, I’d been a few streets away in Carlton North, visiting another friend who has just rented an apartment in a similar-sized block of a similar vintage. She’d decided to move when her previous lease in a dingy Victorian terrace came to an end. The new apartment was smaller than her old place, but it was also cleaner, lighter, better maintained and much, much cheaper.

My friend is $175 a week better off after the move. That’s consistent with the latest data, which shows rental returns on units in Melbourne down about 10 per cent on pre-pandemic levels, and falls in the inner city far steeper than the average.

A relative owns a two-bedroom apartment in central Melbourne that’s been returning $590 a week in rent for the past two years. Last month, after the tenants announced they were moving out, the agent suggested slashing the price by nearly a quarter, to $450. It’s a good apartment, but it could still prove hard to let. The rental vacancy rate in Melbourne’s CBD is more than 14 per cent — the highest in the country — which means almost one in seven rental units sits empty.

Meanwhile, just seventy-five minutes’ drive away in Torquay, on Victoria’s surf coast, you can’t find a place to rent for love or money. The vacancy rate there is officially zero.

Not long before Christmas, I offered to bid for friends — first homebuyers — who were keen on a house in Geelong, two-thirds of the way to Torquay. Again, I didn’t get to raise my hand as the auction quickly vaulted past the anticipated price. Between December 2019 and December 2020, the median house price in Geelong jumped from $550,000 to $601,000, a rise of almost 10 per cent. Over the past five years, median prices in the city have risen almost 50 per cent.

At one level, such weirdness is easily explained. Inner Melbourne is suffering from the loss of international students and other migrants who have been kept out of Australia by Covid-19 border restrictions. Meanwhile places like Geelong and Torquay are straining under an influx of sea- and tree-changers imagining a lifestyle that combines working from home with fresh air and outdoor space.

This is a reminder that there is not, and never has been, a single housing market, and averages can conceal more than they reveal. Demand for a house-and-land package in Tarneit on Melbourne’s western fringe, for example, is not a good indicator of the value of high-rise apartments in Southbank or, for that matter, a light-filled retro flat in Princes Hill.

On another level, though, the real estate market is just crazy and has been for a long time.

Basic economic theory links prices to supply and demand. If real estate values are rocketing upwards, like in Princes Hill, that means there aren’t enough inner-city apartments to go around. But if rents for inner-city flats are falling sharply, that suggests the opposite problem — the market is flooded with too much stock.

In theory, demand for housing — and therefore prices — should be linked to factors like immigration, employment prospects and household incomes. Immigration has stopped. Unemployment, and underemployment, though lower than feared, are still well above pre-pandemic levels. And average household incomes have been stagnant for more than a decade — and that isn’t about to change, as Reserve Bank Governor Philip Lowe warned this month. Yet (average) house prices defy these trends, as if disconnected from the everyday economy and ordinary lives.

If the housing market functioned with the efficiency claimed by free-market economic theory, then inner-city Melbourne would not be littered with vacant apartments — indeed, many of the soaring residential towers still being built in the CBD would never have been started. If the market were efficient, then it would allocate housing at an affordable price. Instead, more than half of all low-income tenants live in rental stress, shelling out more than 30 per cent of their disposable household income to keep a roof over their heads.

The weirdness of real estate prices and rents should caution us against relying primarily on “the market” to allocate a crucial good like housing.

Housing can’t be compared with bananas, which jump in price when a cyclone wipes out the Queensland crop and then come down again as plantations recover. If bananas get too expensive, we can switch to apples or pears for a few weeks. Nor is there much point in ordinary consumers speculating on the banana market by buying more than they can eat in the hope of selling at a profit in a fortnight. Bananas that don’t get eaten never rise in value, whereas houses that don’t get lived in just might.

The housing market’s distinctiveness doesn’t end there. The prospect that interest rates will remain near zero for the foreseeable future emboldens buyers to borrow more, pushing up real estate values. This inflationary process is further encouraged by stimulatory measures like stamp-duty discounts, first homebuyer grants, home builder programs and other government handouts that are quickly embedded in higher prices.

Also driving up prices is the generous tax treatment of housing. The asset price inflation that has been a hallmark of Australia’s residential market in most capital cities since the start of the century produces tax-free windfall gains for owner-occupiers (with zero impact on owners’ eligibility for the age pension). Meanwhile the capital gains tax discount makes property highly attractive to investors.

The more prices rise, the greater the incentive for further speculation, and the more vociferous the media spruiking that accompanies it.

Peter Phibbs, professor of urban planning at the University of Sydney, has memorably described Australia’s housing market as the “Game of Homes.” The longer the game goes on, the higher the stakes.

One feature of the game is Australia’s record level of household debt. Eventually, though, property prices must fall back to earth, and the higher the debt, the more damaging the shockwaves will be throughout the economy.

Australia’s Game of Homes is also deepening and entrenching inequality. In the postwar decades, anyone earning a reasonable wage had a reasonable prospect of eventually becoming a homeowner. That expectation has long since evaporated. The cost of servicing a massive mortgage on an average income is not the real barrier — the bigger problem is the size of the deposit required to enter the market. According to ANZ, a typical Melbourne household would need to save 15 per cent of their gross annual income for a decade to come up with the 20 per cent deposit needed to buy a median-priced home. Without an advance from the parental bank, most first homebuyers will struggle to reach that goal.

Home ownership is being transformed into a dynastic privilege, and that matters not because owning is intrinsically preferable to renting but because the primary financial asset for most Australian households is their dwelling. So the difference between owning and renting generally holds the key to whether you acquire any lifetime wealth.

What’s more, Australia’s low age pension rates are predicated on an assumption of home ownership in retirement. As Treasury’s recent Retirement Income Review documented, older renters experience higher levels of financial stress and poverty than homeowning retirees because they have much higher housing costs. Home ownership is sometimes called the “fourth pillar” of Australia’s welfare system, but the pillar is crumbling.

Existing property owners like me, watching our tax-sheltered housing assets rise, are generally winners in the Game of Homes. But the game also generates a constant stream of losers — primarily people on low incomes.

As a new report from the UNSW City Futures Centre and ACOSS shows, state governments did a creditable job of providing around 40,000 rough sleepers with immediate shelter after the pandemic hit. Eviction moratoriums reduced the risk of more people being rendered homeless, as did the banks’ mortgage repayment pause and the JobKeeper program. The lift in JobSeeker (via the temporary coronavirus supplement) made many low-income renters better off than they had been in years.

But as the report documents, only a minority of the people put up in hotel rooms and other emergency accommodation have been moved into longer-term housing, and in some cities rough sleeping is rising again. And the eviction moratoriums, the mortgage repayment pauses, the JobKeeper program and the extra payments to jobseekers will all soon end.

There is a simplistic, frequently repeated and often self-interested claim that Australia could build its way out of its housing affordability crisis if only we liberalised planning laws and let market forces work their magic. This is bunkum, not because planning laws don’t matter, but because “the market” is far more complicated than the claim suggests and is profoundly shaped by many other factors, especially tax settings.

I am yet to find an example anywhere in the world of private developers delivering safe, affordable housing for people at the bottom end of the income scale. Doing this always requires significant government investment. The Morrison government wants to push that responsibility onto the states and territories, but as the lead authors of the UNSW–ACOSS report argue, Canberra must “share responsibility for housing outcomes” because the Commonwealth controls vital policy levers like tax, social welfare and immigration. It is also the only level of government that has the resources to fund and coordinate a coherent national housing strategy.

The impact of the pandemic on housing has yet to run its course, and Melbourne’s bizarre combination of rising property prices and plummeting rents should caution us against relying heavily on “the market” to allocate such a crucial good. •

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The United States is the stand-out failure. For decades, enormous spending on healthcare has failed to produce better health and longer lives than in many other countries that spend less. Covid-19 has added hugely to the mortality toll, with a disproportionate number of deaths among already-lagging minority populations. But even before the pandemic, average life expectancy in the United States, and in Britain, had fallen in recent years.

Life expectancy is the traditional broadbrush measure of population health. It gauges the effectiveness of the healthcare system and the effectiveness of healthcare spending. But it also gauges the impact of the social determinants of health — poverty, housing, education, discrimination and other non-medical factors that play a major role in health and wellbeing. Because life expectancy figures are an average across the population, some groups could actually experience decreases in a particular period while the population as a whole is going forward.

On the basis of the 275,000 US deaths attributed to Covid-19 by early December (the figure is now more than 470,000), University of California researcher Patrick Heuveline estimated average life expectancy for American babies born in 2020 to be lower by more than a year, the biggest fall since the end of the second world war. Heuveline compared the expected mortality rate in 2020 with the actual rate, which included deaths from Covid-19 and the “excess” deaths among people who didn’t get necessary medical care. The more young people are affected, the worse the impact on life expectancy. By comparison, the HIV epidemic reduced the US life expectancy at birth by 0.3 years at its peak in 1992. Covid-19’s impact on US mortality can be expected to cancel a decade of reductions in all other causes of mortality combined.

These findings are confirmed and extended in a study published just this month. American researchers Theresa Andrasfay and Noreen Goldman estimate that US life expectancy at birth has fallen by 1.13 years, to 77.48 years, lower than any year since 2003, and they project a 0.87-year reduction in life expectancy at sixty-five. The African-American and Latino populations, which have experienced a disproportionate burden of Covid-19 morbidity and mortality, are estimated to experience declines in life expectancy at birth of 2.10 and 3.05 years respectively.

This has the effect of increasing the Black–white life expectancy gap from 3.6 years to more than five years, eliminating the progress made in closing the gap since 2006. Latinos, whose mortality rates are consistently lower than white Americans’ (a phenomenon known as the Hispanic paradox), will see their three-year-plus survival advantage reduced to less than one year.

The picture is almost certain to look bleaker in 2021. Further reductions in life expectancy can be expected beyond 2020 because of continued Covid-19 mortality and the long-term health, social and economic impacts of the pandemic. Moreover, most epidemiologists consider that the number of infections in the United States has been severely underestimated and that excess mortality (deaths from causes other than Covid-19) will be higher with hospitals and healthcare systems operating under pressure.

The United States is not the only country to have suffered such a setback. Life expectancy will fall in any country or region that has experienced a coronavirus infection rate higher than 1 per cent, especially if the mortality rate in younger patients is high. A 10 per cent Covid-19 prevalence rate in North America and Europe means a loss of at least one year of life expectancy at birth.

In Bergamo in Italy’s Lombardy region, where serological tests have shown a 50 per cent infection prevalence rate, a group of European researchers has estimated a loss of life expectancy of 4.1 years for men and 2.6 years for women. (In this case the measure is average life expectancy for the population as a whole, so direct comparisons with US findings are not possible.) Demographers at Oxford University’s Leverhulme Centre calculate that life expectancy for both men and women in England and Wales was reduced in 2020 by more than a year (one year for women and 1.3 years for men) as of December 2020, wiping out gains made on life expectancy in the past decade. Australia has escaped this trend, thanks to low infection rates and a high concentration of deaths in the oldest age groups.

For Americans, this dismal news comes on top of several decades’ evidence that life expectancy at birth is lagging, the existence of a large and rising “mortality gap” between Americans aged fifty and older and their international peers, and data showing that even highly advantaged Americans are in worse health than their international peers.

In 2013 the US National Academies of Science (then the National Research Council and the Institute of Medicine) issued a report, Shorter Lives, Poorer Health, that ranked the United States last in life expectancy for men and second-last for women among high-income countries. Edward Alden of the Council on Foreign Relations described the report’s findings as “a catalogue of horrors.” (I was commissioned by the Institute of Medicine to write a discussion paper, Reducing Disparities in Life Expectancy: What Factors Matter?, for the report.)

The research team that produced Shorter Lives, Poorer Health aimed to elucidate why the United States suffers the health disadvantages it documented. Common explanations — obesity, lack of access to healthcare, health disparities between population groups — were all at play, but the exact cause, or combination of causes, wasn’t clear.

Despite the glaring deficiencies this report exposed, the situation has only worsened. The United States now ranks forty-third out of 195 countries for life expectancy at birth (Australia is fifth). In the absence of significant action, is expected to rank sixty-fourth by 2040. The figures are worse for African Americans, Native Americans, and people in poor and rural areas. The US maternal mortality rate ranks last among similarly wealthy countries and its infant mortality rate thirty-third out of thirty-six OECD countries. Many Americans are not living to see old age; the United States has consistently had the lowest or second-lowest probability of surviving to fifty.

The overall pace of mortality improvement has slowed in a number of European countries, and even in Australia, over the past decade. Dementia is the major contributor, along with rising obesity and diabetes and adverse trends in inequalities. The distinguished epidemiologist Michael Marmot succinctly outlined the challenges for Britain — but generally applicable in other developed countries — in his Marmot Review 10 Years On last February.

While access to healthcare is important, it contributes only modestly to longevity. Between a third and a half of these life expectancy gaps are explained by differences in the social determinants of health, including rates of poverty and educational disadvantage.

Poverty has a major impact on health and premature death. The longer people live in disadvantaged circumstances, the greater the risk of ill health. People who are unemployed, and the families of those who are unemployed, experience a much greater risk of premature death. Education is also key. Highly educated adults in the United States have lower yearly mortality rates than less-educated people in every age, gender and racial/ethnic subgroup of the population. These differences are somewhat wider among men than women.

The United States is also confronted with rising mortality rates caused by alcohol, drug overdoses, the opioid epidemic, gun violence and suicide. These “deaths of despair” are exacting an increasing toll on middle-aged, non-Hispanic white Americans, especially those without a college education. Indeed, the most meaningful risk factor for such a death is not having a university degree.

It’s not hard to see how these risk factors were all in play during the pandemic, with access to healthcare and social services more important than ever, employment and income at risk, and the demoralisation and grief brought on by the loss of jobs, social contacts and loved ones. The Trump administration must obviously be blamed for the pandemic’s disastrous impact in the United States, but the foundations for failure were decades in the making. The Shorter Lives report’s catalogue of horrors was a harbinger of things to come.

In the search for answers about inequalities, the report contains a final chapter (regarded by the research team as almost an afterthought) that discusses whether values seen as typically American — individual freedom, free enterprise, self-reliance, a major role for religion, federalism — influence the development of policy and its enactment in ways that are detrimental to Americans’ health.

Recent analysis of state politics and policies has found that American states with more progressive policies have longer life expectancy rates than those with more conservative policies. On this measure, American states have increasingly diverged since the early 1980s, shortly after the federal government began transferring policymaking authority for Medicaid and welfare programs to them. In 1959 Connecticut and Oklahoma had the same life expectancy; by 2017, Connecticut had gained 9.6 years while the more conservative Oklahoma had gained just 4.7.

The researchers estimate that if all states adopted policies similar to those of Hawaii (which has strong laws on labour rights, prohibiting tobacco and environmental protection, and a healthcare system that acknowledges the Native Hawaiian culture), US life expectancy would be on par with those of other high-income countries. These findings are partially countered by an analysis that found even if everyone achieved the health outcomes of white Americans living in the richest counties, health indicators would still lag behind those in many other countries.

The relationship between politics and health is also reflected in voting patterns. In 2016, counties with stagnating or falling life expectancies were more likely to vote Republican. This aligns with the strong support for Trump and Republicans among white Americans without a college education. Many of these Republican-voting areas are now also those with the highest infection and mortality rates from coronavirus.

For president Joe Biden and his team, these data highlight the size of the task ahead. Primacy, of course, must be given to controlling Covid-19, getting everyone vaccinated, and tackling the pandemic’s economic fallout ahead of boosting access to healthcare (including mental health and substance abuse services), housing, employment and education. But if these efforts are not targeted at the most needy communities they will simply widen existing socioeconomic gaps.

There are lessons in these figures for Australia, too. The pandemic has highlighted the inadequacy of the social services safety net — hence the large but temporary lift in the JobSeeker rate — along with the fragmentation of the healthcare system and the widening health disparities. For too many Australians life expectancy is a postcode lottery. For Indigenous Australians the life expectancy gap has not narrowed since 2006.

Better health is undoubtedly related to social expenditure, and social protection may be more important for health outcomes in more unequal societies. In a recent edition of the Medical Journal of Australia, Shane Kavanagh, Anthony LaMontagne and Sharon Brennan‐Olsen warn of the likely impact of calls to prioritise rapid reductions in government debt through cuts to health and social services. Government spending on health, education and social supports has the potential to increase economic growth, they argue, and “avoiding austerity measures will better serve the health of Australia’s population, and indeed the health of the nation.”

The political preference is too often for policy solutions that are readily to hand and simple. A medicine that allows patients to live with diabetes is seen as a more desirable announcement for the health minister than the grinding job of changing food and exercise policies so that fewer people are overweight and prone to the disease. Evidence from the United States suggests that policies on tobacco, labour, immigration, civil rights and the environment appear to be particularly influential for life expectancy.

It is shocking how quickly the hard work of improving life expectancy can be overturned. But there is also evidence that better policies can turn things around relatively quickly. Within four years of the introduction of mandatory health insurance, known as Romneycare, in Massachusetts in 2006 the death rate had fallen by 3 per cent, with the steepest declines seen in counties with the highest proportions of poor and previously uninsured people.

Joe Biden has committed to tackling the social inequalities and inequities in the United States. He quickly appointed a White House health equity task force headed by physician Marcella Nunez-Smith, which will make recommendations on mitigating and preventing health disparities. The task force’s initial focus will be on the equitable allocation of resources, vaccines and relief funds to deal with the pandemic.

The new president has also signed executive orders aimed at improving racial equity across the nation. These include measures to strengthen the anti-discrimination housing policies weakened under Trump and to enhance the sovereignty of Native American tribes. More far-reaching changes are expected in the months ahead.

Biden says he plans to infuse a focus on equity into everything the federal government does. All Australians — but especially those whose lives are shortened and diminished by the lack of an adequate income, housing, education, healthcare and employment — would benefit from a comparable commitment from Scott Morrison and his government. •

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Paid for by industry superannuation funds, this recent TV ad is designed to pressure the government to deliver on its promise to lift the compulsory super rate from 9.5 per cent to 12 per cent in increments of 0.5 per cent, starting in July and finishing in 2025.

The ad’s promise of extra money for nothing sounds great. Except, of course, it doesn’t work that way. Four pieces of research over the past decade — the review of taxation by former treasury head Ken Henry, a Grattan Institute study, work by the Reserve Bank and, most recently, the Retirement Income Review headed by former treasury official Michael Callaghan — have all come to the same conclusion: increases in compulsory superannuation come predominantly from wages.

Arguments to the contrary, including by Labor and the super industry, are unconvincing. Sure, wages growth has been very slow anyway, but that doesn’t mean it wouldn’t be slower still if employers have to increase the superannuation rate further.

Yes, the ad’s description of a 12 per cent rate being guaranteed is correct — so long as you believe politicians keep their promises. This particular pre-election promise by the Morrison government falls into the category of making-promises-we-don’t-believe-in-but-are-necessary-to-help-us-win-the-election. Whether Morrison keeps the promise depends on how much pressure is applied through public opinion, including that influenced by advertising campaigns, versus the wishes of those in the government who have always opposed compulsory super.

And if the future is even more super, as the ad argues, then the future is also even greater inequality — something the Labor Party is supposed to be against. More super is fine if that’s what people want to do with their money, but it’s a bad idea if a large chunk of it comes from taxpayers boosting the retirement incomes of people often better off than themselves.

When treasurer Josh Frydenberg released the final report of the Retirement Income Review in November, he highlighted a few of its findings, including that “the age pension reduces income inequality among retirees, as low-income retirees receive the largest age pension payments.” That’s true, but he left out the rest of the report’s conclusion: “While the age pension helps offset inequities in retirement outcomes, the design of superannuation tax concessions increases inequality.”

That design applies a flat rate of 15 per cent tax on contributions and earnings, meaning the higher your income, the more you save in tax by not paying normal income tax rates of up to 47 per cent.

In June 2018, more than 11,000 people had more than $5 million each in their super accounts. The review calculated that a super balance of $5 million attracts around $70,000 a year in tax concessions on earnings. A $10 million balance attracts more than $165,000. By contrast, the full age pension, with supplements, is worth $24,552 a year for an individual or $37,014 for a couple.

To those who argue that people who pay more tax should be entitled to higher concessions, the review points out that higher-income earners receive not only bigger concessions in dollar terms but also “more superannuation tax concessions than lower-income earners as a percentage of superannuation contributions.” (My emphasis.)

The Henry report calculated that 37 per cent of superannuation tax concessions went to the top 5 per cent of taxpayers. The latest report says the total cost of the concessions on both contributions and earnings grew by almost 40 per cent to $42 billion in the four years to 2019. Unchanged, it projects their value to increase from 4.6 per cent to 5 per cent of GDP over the next forty years, while spending on the age pension will fall from 2.5 per cent to 2.3 per cent. In short, inequality will increase.

Politicians on both sides of the fence used to worry about such unfairness. “A major deficiency of the current system is that tax benefits for superannuation are overwhelmingly biased in favour of high-income earners,” treasurer Peter Costello said in his first budget speech in 1996. And he did something about it by imposing a tax surcharge on superannuation contributions for high-income earners. But a few years later, in 2003, he responded to complaints about administrative complexity by starting to phase out the surcharge. It disappeared altogether in 2005.

Costello’s complete conversion to the interests of the super industry and greater inequality came in 2006, when he introduced tax-free super for all retirees as well as allowing people to tip up to $1 million into their funds before applying generous caps on their annual contributions.

When Wayne Swan’s turn as treasurer came in 2007, he started in the same place as Costello nine years earlier. He spelled out the regressive impact of super concessions on an income tax system that was supposed to be progressive. While those on incomes above $180,000 received a 31.5 percentage point reduction in their marginal tax rate, someone on $35,000 received just 1.5 percentage points.

The situation was even worse for those whose incomes were below the tax-free threshold, who were still taxed 15 per cent on their compulsory super contributions. In other words, they were being penalised for being required to put money into superannuation. Swan fixed that with a rebate, as well as halving the caps for super contributions attracting the tax concession. But he baulked at further reform to tackle inequity, including the Henry report’s recommendation for a uniform 15 per cent tax deduction on contributions for most people.

Apart from their gaining little or nothing in tax subsidies, the superannuation system is a raw deal for many low- and middle-income earners for another reason: as their super income increases, their pension payments fall because of means testing, with the result that they are little or no better off for having been compelled to put aside 9.5 per cent of their salary.

Governments have tinkered further to tackle some of the worst excesses. Costello’s surcharge has been resurrected, with people with incomes above $250,000 now paying 30 per cent tax on contributions. Superannuation balances above $1.6 million (around 1 per cent of retirees) also attract extra tax.

But the basic inequity of the system remains. And it has increasingly been ignored in the debate, despite the best efforts of organisations such as the Australian Council of Social Service, which has a long track record of well-researched campaigning for a fairer system.

The system’s inequity also raises questions about its sustainability. When Josh Frydenberg released the Callaghan report he highlighted its finding that the costs of the overall system were “broadly sustainable.” But he didn’t mention why the report uses the word “broadly.” While higher superannuation balances should reduce the cost of the age pension slightly over the next forty years, the cost of the super tax concessions are projected to grow and exceed the cost of the pension by about 2050. “The increase in the SG [super guarantee] rate to 12 per cent will increase the fiscal cost of the system over the long term,” the report adds.

While the report doesn’t make specific recommendations — something for which the politicians will be grateful — it does make some pointed observations. One of them stresses the unfairness and unsustainability of tax-free super in retirement:

There are areas where superannuation tax concessions are not a cost-effective way to help people achieve adequate retirement incomes. In particular, the cost of the earnings tax exemption in retirement will grow faster than the growth in the economy as the system matures and provides the greatest boost to retirement incomes of higher-income earners.

The report observes that “extending earnings tax to the retirement phase could also simplify the system by enabling people to have a single superannuation account for life and would improve the sustainability of the system.”

It also points out that the present structure discriminates against women, who retire with smaller super balances, on average, and less of a taxpayer subsidy.

Successive reports, including Henry’s, the Grattan Institute’s and Callaghan’s, have found that increasing the super guarantee is not necessary to give people adequate retirement incomes. The benchmark typically applied for maintaining living standards in retirement is 65 to 70 per cent of previous income. This is based on people facing lower costs in retirement, often having paid off their home and raised and educated their children, and no longer needing to save for retirement.

The latest review found that, assuming what it called an efficient drawdown of savings, this benchmark was reached or exceeded for all income levels at the present compulsory super rate of 9.5 per cent. Even given the “inefficient” way many people spend their super — by withdrawing at only the minimum required rates of 4 per cent or 5 per cent, for example — the inquiry found that most retirees’ income was 60 per cent or more of that while working.

Particularly in the earlier years, that means retirees often aren’t running down their savings and feel that they can cover unexpected expenses and, in particular, leave an inheritance. While that is their choice, it doesn’t mean that it should be encouraged by government policy. “Superannuation is intended to fund living standards of retirees, not to accumulate wealth to pass to future generations,” is how the report puts it. And because inheritances are not distributed equally, it adds, they increase inequity in the next generation.

Many developed countries have some form of inheritance or wealth tax. Australia has none. To the contrary, we have a form of reverse wealth tax, with taxpayers subsidising inheritances via the super system. The bigger the amount, the bigger the subsidy.

The super guarantee should not be increased without first making the tax concessions fairer. Otherwise, higher-income earners will receive even bigger taxpayer subsidies — largely paid for by the taxes of lower-income earners, many of whom benefit little from the system but are compelled to put money aside that could be better used to meet their present-day needs. •

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Garbage collection is one of the most dangerous jobs in America. Each year, around one in 2000 workers in the industry lose their lives. Standard economic theory tells us that a risk of this magnitude should be accompanied by substantially higher pay. But the median hourly wage for American garbage collectors is only US$17.40, which hardly seems sufficient to make up for a death rate comparable to serving in a war zone, not to mention the daily risk of other injuries.

In You’re Paid What You’re Worth: And Other Myths of the Modern Economy, sociologist Jake Rosenfeld outlines many of the injustices that underpin the American economy. In Oklahoma City, Walmart workers took up a canned goods collection to support people who couldn’t afford food. The beneficiaries? Fellow Walmart employees who weren’t able to make ends meet on the company’s meagre salaries. Across the United States, home-care workers subsisted on an average hourly wage of $10 an hour. Many couldn’t find full-time work, so they worked multiple shifts at different aged care homes. This precarious arrangement not only made life tough for workers, it also helped to spread Covid-19 among aged Americans when the pandemic struck.

It’s not as though American workers aren’t keeping up their end of the bargain. Rosenfeld cites research showing that truckers are almost twice as productive today as they were in the 1970s. Yet in some cities, their wages have fallen by a third in real terms. Deregulation, declining union power and the pressure on owner-drivers has made a dangerous job even riskier, yet their real take-home pay buys much less than it once did.

Even in manufacturing, often touted as the sector that guarantees stable employment and respectable earnings, the number of good jobs has diminished. When Tesla opened a production facility in Fremont, first-level workers earned US$17 to US$21. Rosenfeld presents evidence that chief executive Elon Musk discouraged unions while touting the fact that employees could enjoy free frozen yoghurt and high-speed rollercoaster travel around the factory.

Across industries and occupations, the past generation has been tough on American workers without post-school qualifications. As MIT researchers David Autor, David Mindell and Elisabeth Reynolds report in The Work of the Future, the real earnings of men with less than a university degree are now 10 to 20 per cent lower than in 1980, while men with a university qualification have seen earnings gains of 25 to 50 per cent. Productivity has continued to grow, but the gains have flowed to shareholders and executives rather than regular employees. A gap between productivity and earnings gains has opened up in many advanced nations, but it is twice as large in the United States as in Australia.

Other worrying trends have emerged. For much of the postwar era, American cities have served as an escalator to social mobility. Traditionally, moving from a regional area to a major city boosts the earnings of all workers, high-educated and less-educated alike. But this no longer holds true for less-educated workers. High-wage professionals get a pay bump from working in a large metropolis; workers without a university degree do not.

While trade has been criticised for hollowing out the labour market, technology has had significantly more impact. Autor, Mindell and Reynolds show that around 60 per cent of Americans work in jobs that did not exist in 1940, including occupations such as chat room hosts, sommeliers and drama therapists. Yet technological change tends to be skill-biased, meaning that less-educated workers are most at risk. The change will not be as dramatic as some have predicted — there are still few robots in small firms — but workers in routine jobs remain vulnerable to automation.

How might the United States improve the quality of work? Rosenfeld argues that no job is inherently bad, and cogently discusses how the quality of work can be lifted. Following the publication of The Jungle, Upton Sinclair’s 1906 novel about meatpackers, the sector became safer, more sanitary and better paid. Indeed, in the 1950s and 1960s meatpackers earned more than the average manufacturing worker. Similarly, unionised garbage collectors receive fair compensation and decent conditions. Bad jobs can be made good.

Rosenfeld also offers a series of sensible reforms that would help tweak the balance in favour of employees. Because pay secrecy tends to advantage the stronger party, its abolition would especially help women. Reining in the temporary help industry would provide more stability of employment. Aligning occupational licences with consumer safety would make over-protected industries less of a closed shop. Banning non-compete clauses would facilitate worker mobility and encourage innovation. Preventing firms from accruing too much market dominance would ensure that workers have more than one employment option in their local area.

At a deeper level, Milton Friedman’s theory of the primacy of shareholder value is coming under increasing challenge. During the 1990s, Coca-Cola chief executive Roberto Goizueta had a computer installed in a room adjacent to his office so he could track the company’s share price. Market analysts rebelled when firms paid their workers a living wage. Boards paid executives in share options, providing a lucrative incentive to focus on shareholders, and leading to a situation in which the chief executive of Starbucks earns as much in two hours as one of his baristas makes in a year.

No law of nature says companies must be run only for the benefit of the shareholders. In 2019 the US Business Roundtable, comprising 181 chief executives, issued a “Statement on the Purpose of a Corporation.” They pledged to lead their companies for the benefit of all stakeholders: customers, suppliers, communities, shareholders — and yes, employees.

The MIT report also emphasises the need to improve the quality of training. While online education has been patchy, Autor, Mindell and Reynolds point out that the pandemic has rapidly increased the investment of firms and educational institutions in improving it. They describe how IBM uses artificial intelligence to suggest to its employees which training modules they should undertake, and expects every worker to complete at least forty hours of training a year (the median IBM employee does fifty-two hours). They describe how “intermediary programs” can work effectively by building close relationships with employers and making sure educational providers are responding to what firms need.

Interestingly for an Australian audience, the MIT report is also critical of how US tax law shapes firms’ decision-making. “A series of tax law changes enacted over the last four decades has increasingly skewed the US tax code toward subsidising machinery purchases rather than investing in labor,” they write. “Tax policy offers firms an incentive to automate tasks that, absent the distortions of the tax code, they would accomplish with workers.” Far from advocating an expansion of accelerated depreciation tax breaks — as the Morrison government did in its 2020 budget — the MIT economists call for the complete elimination of accelerated depreciation, so as not to favour investment in machines over investment in workers.

Together, You’re Paid What You’re Worth and The Work of the Future offer the kinds of proposals that are likely to animate the thinking of the Biden administration: tilting the balance back towards organised labour, reimagining on-the-job training, encouraging corporations to serve the whole community, not just their shareholders. Right now, low-skilled Americans are paid an average of US$10 an hour, well below the US$17 earned by the average low-skilled Australian worker. Although it’s hard to know for sure what impact each measure might have, the net result of a package of progressive labour reforms would surely be to increase the family incomes of millions of working-class families.

But perhaps a single-minded focus on earnings ignores the crocodile in the corner. In Time for Things: Labor, Leisure, and the Rise of Mass Consumption, social theorist Stephen Rosenberg argues that the central omission from this kind of analysis is time. Why should the gains from higher productivity keep going into pay, at best, rather than leisure? Shouldn’t employment be a means to an end rather than an end in itself?

The nub of Rosenberg’s argument is encapsulated in two predictions made by economist John Maynard Keynes in the 1930s. Productivity growth, he predicted, would enable an eight-fold increase in real incomes over the coming century. And much of that would translate into shorter working hours, so the typical person might work around three hours a day, or fifteen hours a week.

Both Keynes’s forecasts turned out to be wrong, but in opposite directions. On economic growth, the indications are that he understated the gains, with incomes rising not by a factor of eight but by perhaps as much as a factor of seventeen. On working hours, he overstated the gains. Full-time employees are working about forty hours a week, much the same as full-time workers in 1940.

On the face of it, Keynes’s predictions were utterly reasonable. His growth projections assumed that the rate of growth he had witnessed since the late 1800s would continue. Thanks to innovation, education and urbanisation, though, economies grew even more rapidly than expected.

In terms of working hours, Keynes was also extrapolating from what he had seen. Average hours for full-time American workers fell from about sixty hours a week in 1900 to fifty hours a week in 1920. By 1940, the average was down to forty. American workers had gone from working six days a week, ten hours a day to five days a week, eight hours a day.

This didn’t happen because of the beneficence of company owners. It was a result of the campaigning of the union movement. In 1866, the General Congress of Labor met in Baltimore and resolved that “the first and great necessity of the present is to free the labor of this country from capitalist slavery in the passing of a law by which eight hours shall be the normal working day in the states of the American union.” Six years later, more than 100,000 New Yorkers went on strike to campaign for an eight-hour working day. By the end of the 1800s, it was said that almost all economists and social reformers favoured a reduction in working hours.

Such a movement certainly accords with economic theory. In first-year economics classes, we show students models in which leisure brings “utility” (also known as wellbeing or happiness), while work brings “disutility.” Raise someone’s wage, and you might reasonably expect them to work a little less. As Mark Twain once quipped, “If work were so pleasant, the rich would keep it for themselves.”

In this case, however, the joke was on Twain. A century after his death, high-wage workers were not pursuing leisure — they were chasing work. Plenty of people buy copies of Tim Ferriss’s book The 4-Hour Workweek, but few take its advice. Industrial campaigns shifted, too: since the end of the second world war, the focus of unions has been on higher pay rather than shorter working weeks or longer holidays.

Why was Keynes wrong? Rosenberg points out that it wasn’t as though a reduction in hours was impossible. Suppose that just a quarter of the productivity gains in the postwar period had been put into shorter hours rather than fatter profits and pay packets. The work week would be about half what it is today. Yet it didn’t happen. As Rosenberg observes, “the effort to limit hours at work, somewhat mysteriously, almost vanished in the second half of the century.”

Various theories might explain why. Perhaps what matters isn’t getting ahead, but getting ahead of the Joneses. If what counts is your earnings relative to other people, then it might be impossible to get off the treadmill. For example, the price of land is largely determined by the demand of others, so if you’re in a society where everyone else works forty hours a week and spends a quarter of their money on housing, then dropping back to fifteen hours a week might mean living in a shoebox.

Another possibility — not one raised by Rosenberg — is that work is addictive. Economist Daniel Hamermesh points out that when people work long hours, their friends become office friends, their jobs come to define their identities, and their leisure activities dwindle. In many occupations, the top jobs are only available to those who are willing to put in extremely long hours. It’s impossible to become an Olympic athlete, High Court justice or university vice-chancellor without sacrificing nights and weekends. Many more with the ambition to take on such roles will put in the hours yet not attain the goal.

Ultimately, however, Rosenberg settles on an intriguing explanation: that the reason workers stopped pushing to reduce working time is that products got better, and consumers began to demand more of them. The car, he argues, was the ultimate consumer commodity. In the 1920s, repayments on a car loan might have cost a quarter of an average person’s wage, but workers were obsessed by them. Within a generation, Rosenberg writes, American towns moved from a horse culture to a horsepower culture. He quotes one union organiser who claims that workers’ infatuation with cars made people less likely to join unions. The individual lure of the automobile, and the status it represented, provided a new benefit for working hard. “The automobile was thus well suited to serve as compensation for work, a counterbalance to the loss of freedom represented by having to sell labor for a wage.”

And so it went for other goods. Rosenberg devotes chapter after chapter to intriguing explanations of the many ways in which consumer products became tangibly better during the twentieth century. As brands emerged, companies had a reputational incentive to ensure that their products performed as well as they claimed. Companies began to offer warranties rather than simply selling them with a “buyer beware” warning. Governments stepped in to ensure that potentially harmful items were tested before they reached the market. Products were rated so that buyers could make an informed choice.

The “inexorable expansion of the industrial economy,” writes Rosenberg, was not merely due to business owners chasing profits but also to “ever-increasing consumer demand.” People stopped campaigning for shorter hours because they wanted to buy more stuff. And why did they want to buy more stuff? Because the stuff on offer was better than ever.

The move away from working-hours campaigns affected not just business, but unions too. Rosenberg observes “a stark contrast between the long tradition, stretching from the 1830s to the 1930s, of American labor fighting for a shorter working week and the postwar era of collective bargaining and productivity-based wage increases.” In the first era, workers wanted more leisure time; in the second era, they wanted more money. Radical reformers had once seen a fundamental unfairness in exchanging labour for money. Consumerism undercut this moral critique of the economic system.

Could this change today? In the realm of consumer products, the online economy may turn out to be easier on the hip pocket. The cost of an android-powered smartphone and a generous data plan is falling fast, while the number of entertaining things that can be done with such a phone continues to grow. A similar trend can be seen with cars and clothing. Yet housing costs continue to grow faster than wages, making it difficult for many people ever to envisage downshifting.

As a result, housing costs matter even more than we might have thought. In Australia, housing affordability has worsened badly over the past generation, with the price of a typical home rising from twice average incomes in the 1980s to around seven times today. The home ownership rate is at a six-decade low, and the decline has been especially marked for people of modest means. Generous tax concessions to landlords mean that housing has moved from being a consumption good to an investment good. As a result, a few people have multiple homes, and many have no home at all. Perhaps it’s no coincidence that a country like Germany has cheaper homes than Australia and its workers enjoy six weeks of annual leave.

This isn’t just individually unfair. If overpriced homes are preventing people from enjoying more leisure, then that has a social cost too. If working longer hours to pay the mortgage reduces the time I have available to watch television, then that’s just an individual cost. But if the effect of longer working hours is that I give up coaching the school soccer team, then it affects others. It’s harder to build a strong community when people are toiling long and unpredictable hours to pay down gargantuan mortgages.

As Jake Rosenfeld and the MIT economists have documented, there is a lot to dislike in the way the American labour market has operated over the past generation. Getting middle-income workers a fair share of their productivity gains, improving workplace safety, and making bad jobs good should all be important goals for a civilised society. No one should have to risk losing a finger just to earn a living. Together, such sensible reforms would reduce inequality in the United States, which has grown to levels that match the Great Gatsby era.

Stephen Rosenberg’s work brings a much-needed social dimension to our understanding of work and shows that another campaign is waiting in the wings. If workers can get a fair share of their output, and housing can be made more affordable, it should be possible to provide employees with more leisure time. There is no reason why union campaigns for shorter working days and more generous holidays should be consigned to the dustbin of history.

No constitutional provision would prevent the United States from moving from two weeks’ annual leave to four weeks. Similarly, no iron rule says it is impossible for Australia to follow the European example of providing six weeks annual leave to the typical worker. Indeed, at a time when Australian community life has frayed, increased leisure time might provide a way to build a more reconnected Australia. Prioritising family and community time might mean that we become a nation more of “we” than of “me”: a nation where we don’t just live to work, but work to live. •

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So far, the response of rich-country governments to Covid-19 has contrasted starkly with the response of their counterparts in poor countries. Rich-country governments have increased spending and cut taxes by an average of 10 per cent of GDP since Covid-19 began, and extended similar amounts as loans and guarantees. Poor-country governments have increased spending and cut taxes by just 1.7 per cent of GDP — less than one-fifth that of their rich counterparts — and increased loans and guarantees by a mere 0.25 per cent of GDP — one-fortieth that of rich countries.

Why can’t poor countries spend as much as rich ones? The obvious answer is that they have less money. But remember that most of the extra spending in the rich world is covered by deficit financing: they don’t have the money either. It’s true that poor countries struggle to raise as much tax revenue as rich countries: households and businesses have less income for the government to tax, and the fact that much of their economic activity is more informal means it’s harder to collect and police taxpaying in the first place. But there is another vital reason why poor countries can’t spend as much as rich ones: they are treated fundamentally differently by international financial markets.

Governments that spend more than they receive in taxes usually borrow the shortfall from the public by issuing bonds. But when the public doesn’t have much saved to begin with (as is the case in most developing countries), governments need to borrow from overseas.

This is not unusual. Australia has done it for decades. Because of our strong institutions, foreign investors are happy to lend our governments, banks, businesses and households lots of money, for long periods, at low interest rates, denominated in our own currency. For developing countries, however, it’s often the opposite. When they want to borrow from overseas, they often find they can only borrow small amounts, for short periods, denominated in someone else’s currency (usually US dollars) unless they are willing to pay exorbitant interest rates.

This creates financial risks. The first is called a currency mismatch. If you borrow in a currency that’s different from the one in which you get your income, there’s a risk that, if the exchange rate falls (due to a global pandemic, for example), your foreign debts get bigger while the income you use to service them gets smaller. Investors, fearing default, withdraw their money from the developing country, pushing the exchange rate down even further, causing even more debt and triggering the very default they feared.

The other financial risk is called a maturity mismatch. This happens when a country borrows short-term to undertake long-term investment or spending. Because these short-term debts must be refinanced regularly, the country risks being unable to access international financial markets (due to a global pandemic, for example) to roll over its debt. It either defaults on its loans or is forced to repay the full amount, which may or may not be possible.

Both these factors act as a handbrake on how much developing-country governments can spend in a global pandemic, placing them in an impossible situation. If they don’t increase spending, their people suffer, their economy suffers and then their people suffer even more. But if they take on too much debt, they risk spooking investors and causing a self-fulfilling panic that leads to an inability to repay their debts and, ultimately, a debt and/or currency crisis.

Almost half of the world’s low-income countries are opting for the former: they are projected to cut total government spending in 2020 compared with 2019 levels. This is a shockingly bad thing to do in the midst of the worst economic downturn since the Great Depression. But many governments have little choice. Half of the world’s developing countries are already spending more than 20 per cent of all their government revenues servicing debt and have been deemed by the IMF to be in debt distress or at high risk of debt distress, as of September 2020.

What to do? With too many developing countries too close to their debt limits, two things need to happen: their governments need to get their current debt levels further below their limit, and then they need to work on ways to increase that limit so that, like rich countries, they can rely on debt to support their populations during these difficult times.

Reducing the existing amount of debt means rich countries need to suspend, reduce or (ideally) forgive the debts of poor countries. The G20’s debt suspension initiative is a good start, but it’s too small and it only kicks the can down the road. The sheer size of the Covid-19 challenge means that the only sustainable solution is debt forgiveness, not debt suspension.

Second, rich countries can help ease the international financial pressures on developing countries to allow them to spend more. The way to stop the vicious cycle — investors panic, withdraw their money, push down the exchange rate, inflate foreign-denominated debts, and then panic more — is to ensure developing countries have access to the foreign currencies they need to service those external debts.

A series of virtually cost-free measures — expanded lending by the Asian Development Bank and its international counterparts; bilateral stand-by loans like Australia’s facility for Indonesia; expanded currency swap lines, which allow a developing country’s central bank to temporarily swap its currency for that of a developed country’s central bank — can be facilitated by rich-country governments. They would reassure international financial markets that a given country will be able to service its debts, thus killing off the self-fulfilling cycle and changing the way international financial markets treat that country. And they would reduce the cost of developing countries’ debts and let them do what the rest of the world is doing: spend more to fight Covid-19.

The fight against Covid-19 will be won or lost in the world’s developing countries. As rich countries like Australia get on top of the pandemic, they need to start focusing more on what’s happening in the rest of the world. The progress in reducing global poverty has been too important for it to be lost now. •

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Possible is not the same as easy. Political and constitutional barriers make it hard to change the way assistance is allocated, but better housing for hundreds of thousands of struggling tenants is a worthy prize. And any government should be keen to ensure it spends an annual $4.6 billion wisely.

To understand what a better system would look like, we need to get to grips with how rent assistance currently works. Its aim is to reduce the “housing stress” that occurs when poor households — the bottom 40 per cent — spend more than 30 per cent of their disposable income on housing. At that level, they are forced to cut back on other essentials like food, power, phones, transport or medical expenses. By giving tenants extra money, rent assistance helps ease the pressure on tight household budgets.

About 1.3 million “income units” receive rent assistance. Apologies for the ugly terminology, but it’s hard to avoid. An “income unit” is not the same as a person or household. A single parent with two children is one income unit, for example, but a share house with four unrelated tenants contains four income units.

The median fortnightly payment of rent assistance is $137, which, while meagre, is sufficient to stave off rental stress for about two out of every three recipients. Even with the supplement, this leaves about one in three stuck in rental stress — and almost one in ten still shelling out more than half their income on rent.

Rent assistance doesn’t solve housing stress for everyone because payments are capped at low levels and have not kept pace with rising rents. A single person in a share house receives a maximum payment of $93 per fortnight, and the limit for a person living alone is $140. What’s more, an additional quarter of a million poor households — sorry, “income units” — live in housing stress but get no help at all.

Why not? Because rent assistance is only available to people who receive a Centrelink payment, like the age or disability support pension, Austudy, the youth allowance, JobSeeker or the family tax benefit part A (above the base rate). Low-income workers without children — and thus without any government payment — are not eligible, even though they make up a significant share of stressed tenants.

So, extending rent assistance to everyone who needs it — regardless of whether they receive a Centrelink payment — could do a great deal to reduce housing stress. As could increasing the rate of rent assistance, a point I’ll come back to.

Clearly, paying rent assistance to more people — like low-income workers with no children — is not going to save the government money. In fact, it’s going to cost hundreds of millions more. But the extra expense can be more than offset by targeting rent assistance more carefully.

This is where the new research comes in. According to a report published by AHURI, the Australian Housing and Urban Research Institute, hundreds of thousands of tenants receive rent assistance even though they aren’t experiencing housing stress. This “targeting error” arises largely because eligibility for rent assistance is linked to eligibility for family tax benefit part A, and it goes not only to struggling low-income tenants but also to tenants on moderate incomes who are less likely to be in housing stress.

Depending on the child’s age, households with one child and an income up to almost $80,000 may qualify for part A payments above the base rate, and therefore qualify for rent assistance. In a household with two children the income limit — and the linked eligibility for rent assistance — can rise to almost $97,000.

Another feature of the current system also contributes to the error: it is paid at a uniform rate nationwide, even though rents are much higher in some places than others. A single parent with two children who pays $560 a week to rent a two-bedroom unit in Sydney, for example, receives the same rent assistance ($82) as single parent paying $390 for a three-bedroom house in Dubbo.

There are strong ethical and public policy arguments to pay rent assistance to those with the highest housing needs. On this basis, it should be taken away from some moderate-income households with children and directed to low-income workers with no kids. On the same grounds, tenants should get more assistance in regions where rents are higher and less where rents are lower.

The AHURI researchers modelled only the first of these two options, looking at what would happen if rent assistance were paid at current rates on the basis of housing costs alone. Under this scenario, all low-income tenants whose rent exceeds 30 per cent of income would get support, regardless of whether they are eligible for any other government payment. On the flip side, some better-off tenants whose rent is less than 30 per cent of their income would lose their current supplement.

Aligning rent assistance with need in this way would save the government $1.2 billion a year. A free lunch? Not quite. There are two big stumbling blocks, the first constitutional, the second political.

Under its narrow social security power, the federal government can only make payments of a certain type. As the AHURI researchers write, these “do not include rent or other housing payments in their own right.” This makes it impossible to subsidise the rents of households that don’t already receive some kind of Centrelink benefit.

Rental assistance could be extended to other Australians, but none of the options is straightforward in constitutional terms. The least fraught would involve either the states agreeing to refer the necessary powers to the Commonwealth under section 51 of the Constitution, or the federal government leading a federal–state initiative, with Canberra providing grants and state and territory housing departments delivering the payments.

I hardly need to spell out the political barriers to implementing better targeting. Taking away existing entitlements is never popular, and it is particularly difficult when those most likely to lose out are families with children. If a brave government were to push ahead, though, support would go to those welfare recipients who need it most, with the $1.2 billion in savings used to increase rent support for the lowest-earning tenants.

The AHURI researchers calculate that lifting the maximum payment by 30 per cent would cost about $1 billion annually and cut the incidence housing stress among low-income tenants from 60 per cent to 36 per cent. An additional 340,000 “income units” would have affordable homes. That’s a big policy pay-off.

Even in its existing poorly targeted form, an increase in rent assistance makes good economic sense in the economic downturn. As the Grattan Institute argues, most of the extra funding would immediately find its way back into the economy when tenants spend it on essential goods and services. At least one of the AHURI researchers was sceptical about Grattan’s argument — fearing that higher rent assistance would simply lead to higher rents, just as first home buyer grants lead to higher house prices — but the modelling behind their report shows that such concerns are exaggerated.

While some of the extra assistance will find its way into landlords’ pockets, the proportion — between 7 and 32 cents in the dollar — is relatively low. The figure would be higher in the disadvantaged areas because housing supply there is less responsive to changes in demand and poorer tenants are less likely to be able to resist rent increases by moving somewhere else. But even if landlords benefit at the margins, the bulk of any increase in rent assistance would still go to boosting tenants’ spending power.

This points to two features of Australia’s rental assistance program that are worth preserving: payments go to tenants, not landlords; and rent assistance doesn’t have to be spent on rent. This not only reduces the rate of capture by property owners, but also gives tenants greater control, at least in theory. They can choose to devote rent assistance to securing better housing, if it is available, or they can choose to stay put and spend it on other goods and services they need.

None of this means that rent assistance is better or more appropriate than other possible measures, like the social housing investment the government seems so reluctant to make. Rent assistance does nothing to improve the quality of housing in the private rental market. Even though taxpayers are footing part of the bill, landlords are under no obligation to keep houses in good condition, offer secure leases, carry out repairs in a timely manner, improve insulation or install energy efficient appliances.

More importantly, rent assistance does nothing to increase the overall supply of housing. And that’s the strongest argument for a national post-pandemic investment in social housing. Not only would it stimulate the economy and create much-needed jobs, it would also enable state authorities or community housing providers to build tens of thousands of new, high-quality homes that low-income tenants can actually afford to rent. •

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The biggest budget announcement is full immediate expensing of business investments, at a cost of $26.7 billion in just over two years. Under the scheme, almost every company in Australia will be able to immediately write off in full any eligible depreciable asset. Bringing forward depreciation reduces the real cost of investing for firms, particularly in long-lived assets such as plant and equipment. Similar schemes have proven effective in boosting business investment and employment.

The plan to offer wage subsidies to firms that hire workers under thirty-five should boost employment. Young people have been hardest hit by the Covid-19 recession, and are at the greatest risk of scarring should they remain out of the workforce for an extended period. The government will subsidise the wages of newly employed workers to the tune of $200 per week for new employees under thirty, and $100 per week for those under thirty-five, so long as they are employed for twenty hours a week or more and are a net addition to the payroll. This will support employment, but it’s a big step down from the JobKeeper wage subsidy, which is scheduled to be phased out by March next year.

Each of these measures will support employment and investment. But most striking is what’s been left out of the recovery plan for now, especially more direct measures to boost employment, and support for household spending beyond next year.

The plan to bring forward $13 billion in personal income tax cuts will help, but the extra money for middle-income earners won’t flow through until mid next year. Further cash handouts of $250 to pensioners and carers, in December and again in March 2021, should also boost spending, although many pensioners proved reluctant to spend the first two tranches in April and July. But there’s little in the budget beyond the end of next financial year to keep households spending.

So what’s missing?

Social housing is the most obvious absentee, given it can be rolled out quickly and delivers something that is desperately needed. Industry forecasts suggest that 12 to 18 per cent of all construction workers could lose their jobs in the months ahead, as the pipeline of apartment buildings starts to dry up. The government should have committed to build 30,000 social housing units, at a cost of $10 billion, to quickly fill that hole.

Boosting the childcare subsidy to reduce parents’ out-of-pocket costs is among the more significant economic reforms the government could have announced. More direct spending on government services like mental health and aged care would also have been a proven job winner. Instead there’s another $10 billion for major road projects, where capacity constraints are already biting.

The question of what happens to the JobSeeker benefit remains unresolved. More than a million Australians are benefiting from a temporary $250-a-fortnight boost to JobSeeker from the coronavirus supplement, but that’s due to end in December. The government says it will make an announcement closer to Christmas, but the lingering uncertainty will crimp households’ spending in the meantime.

Support in the budget is so heavily concentrated in the short term that policy decisions taken since the Mid-Year Economic and Fiscal Outlook last December actually improve the budget bottom line in 2023–24.

At least some further spending in some of these areas is almost inevitable in the coming months. Beyond JobSeeker, the Royal Commission into Aged Care is all but guaranteed to recommend substantial further funding for aged care when it reports next February.

But perhaps the biggest concern with the budget is that it simply settles for getting back to the pre-Covid era, and takes nearly half a decade to get there.

While the government expects unemployment to peak at just 8 per cent by Christmas, it’s still expected to remain above 6 per cent by the end of 2022, and be 5.5 per cent by mid 2024. Yet those who can still remember pre-Covid Australia will remember the economy back then was nothing to write home about. The jobless rate averaged 5.5 per cent over the five years to February 2020, and the average worker’s wages rose by just 0.3 per cent a year (after inflation) over that time.

Unemployment of 5.5 per cent in four years’ time would remain well above Treasury’s “full employment” estimate of 5 per cent, so it’s no wonder real wage growth is forecast to flatline over that time. Even for people in work, living standards are expected to stagnate.

The government should inject a further $50 billion in fiscal stimulus by the end of 2022. This could drive unemployment one percentage point lower, kickstarting growth in wages nearly two years earlier than under its current plan.

Concern over the cost of public debt shouldn’t hold the government back. Australia is expected to spend 0.9 per cent of GDP on interest this financial year, falling to 0.8 per cent by 2023. That’s lower than the 1 per cent it spent in 2018–19, despite a big growth in debt. And debt is expected to shrink as a share of GDP over the next forty years, despite projections that interest rates will gradually rise from 1 per cent today to 5 per cent within the next two decades.

Budget 2020 is a good start, but there’s plenty of unfinished business. There remains more work to do come MYEFO in December, and the 2021 budget in just seven months’ time. •

Brendan Coates is Household Finances Program Director at Grattan Institute.

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Josh Frydenberg and his Coalition colleagues have often framed their aversion to government largesse as an argument about our responsibility to future generations. “Every dollar we spend today is a borrowed dollar,” said the treasurer ahead of the budget. “That’s the reality and the debt will be there for future generations to pay back.”

Finance minister Mathias Cormann agrees. He once compared budget deficits to parents using their credit cards to pay for the weekly groceries and then leaving their children to pick up the tab. “Not a single parent would expect their children to pay off that credit card in those circumstances. Neither should the Australian government.”

Does this mean that the current taxpaying generation is behaving unethically by allowing the government to amass a $213 billion deficit to inject life into the economy, and leaving others to pick up the tab?

In reality, the government had little choice but to spend on a vast scale. What might make that spending more or less ethical in intergenerational terms will depend at least partly on the effectiveness of the budget measures according to the government’s job-creation goals.

Take the tax cut for people in work, which creates a multibillion dollar hit to the budget bottom line, or a permanent increase to JobSeeker payments, again with a multibillion dollar price tag. Which one will be judged to have had a greater impact on job creation — and hence a greater ethical justification — in a decade’s time?

The government chose the tax cuts, using the argument that relatively well-off taxpayers will stimulate the economy by spending the extra dollars or investing in job-creating businesses. But economists know that people on higher incomes are more likely than others to save any extra income they receive or park it in tax-protected assets that don’t generate jobs, like negatively geared property. That’s especially true in uncertain times.

That’s why a majority of leading economists agreed that putting cash in the bank accounts of unemployed Australians would be a better bet, since that money would mostly be spent on food, rent and other essentials and quickly circulate through the economy.

The preference for tax cuts over a permanent increase to JobSeeker is indicative of the character of the budget and how the Coalition’s political message has shifted. Once, its primary claim was “deficit and debts are bad, surpluses are good.” Now it concedes that borrowing to stimulate the economy and create jobs is necessary, but asserts that business and private investors must take the lead, not the government. The constant thread is an ideological preference for small government.

So, the $3 billion spend on roads and other shovel-ready infrastructure projects over the next four years is dwarfed by the $26.7 billion cost of enabling businesses to instantly write off the cost of new assets. And support for the housing sector takes the form of more incentives for first homebuyers rather than direct investment in building homes for renters on low incomes, who can never aspire to own a house.

The common ground across the political spectrum is the urgent need to create jobs. But even if the recovery is to be led by the private sector, that still raises questions of priority. Should the government throw its financial weight behind a gas-led recovery or a wholesale shift to a renewable economy? The response to this question might depend on how seriously you follow the scientific evidence of accelerating climate change.

And here’s an interesting thing. The concern that some political and business leaders show for not burdening future generations with public sector debt is rarely matched by an equivalent resistance to saddling future generations with the catastrophic consequences of more droughts, floods, hurricanes, bushfires and crop failures. An uninhabitable Earth is one hell of a credit card bill to leave to our kids.

The well-established cognitive bias to preference immediate rewards over future gains helps explain inaction on climate change. Carbon pricing is an attempt to counter this perceptual flaw by bringing future costs into the present.

An equivalent ethical justification exists for government borrowing in response to the pandemic recession — it can reduce long-term harm. The recession’s impact is being felt acutely by people who have lost their jobs or watched their small businesses go under. They need immediate assistance. But the damage will also reach well into the future.

We know, for example, that many older workers who lost jobs in the early 1990s recession — the one we “had to have” — never worked again. A downturn forces young people out of the workforce or prevents them from gaining a foothold in the labour market, leaving them demoralised and limiting their life prospects. Training opportunities are lost; skills stagnate. Research and development stalls, as does investment in new plant and equipment.

Collectively, these are known as “scarring effects,” and they cause profound damage to the fabric of society. As Reserve Bank governor Philip Lowe warned in a recent speech, “The clear evidence from history is that the deeper and more protracted a downturn, the more severe are the economic scars.”

We have to hope not only that the government’s multibillion dollar bet on a business-led recovery pays dividends, but also that the benefits are widely shared. As Chris Richardson from Deloitte Access Economics points out, the recession’s impact is unevenly distributed, with regions that were already doing it tough “now struggling a lot more” and affluent areas less severely affected.

The differences are not only geographic; the fault lines are also gendered, class-based and generational. As an outright homeowner with thirty-plus years of well-paid employment and a healthy superannuation balance behind me, I am much better placed to ride out a downturn than a single mother casually employed in the tourist trade.

So when the treasurer tells Australians, “We have your back,” someone like me, pocketing my backdated tax cut, might feel better protected than an unemployed worker who just had his or her coronavirus supplement slashed.

The government’s role in borrowing and investing should not be confined to restarting the economy; it should also make sure the risks are shared fairly. And we can’t assume that the collective good automatically arises out of the cumulative effect of private companies seeking to grow their businesses, and of citizens and families advancing their personal interests through individual spending decisions.

Public borrowing for direct public investment in housing, education, research and healthcare isn’t like flexing the credit card to put your groceries on the never never; it’s laying the foundations for future prosperity. A business-led recovery, and giving Australians back more of “their own money” in tax cuts push risk back onto individuals and households. •

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The pun might have been too tempting to resist, but the article tells a more modest tale. For a super fund managing more than $54 billion in super assets, an investment of “up to” $10 million is barely a drop in the vast ocean of unmet housing need. And it’s not clear how much of it will go to housing people on the lowest incomes.

Cbus is joining with the National Housing Finance and Investment Corporation to finance a ninety-six-dwelling pilot project across six “shovel-ready sites” owned by the NSW Land and Housing Corporation. The land will be offered to community housing providers on a forty-nine-year lease, creating a subsidy that will help deliver housing at lower rents.

But it’s unclear how many of the new homes will qualify as “social housing” — dwellings reserved for poor tenants who would pay no more than 30 per cent of their income in rent. The pilot will provide “mixed tenure dwellings,” and the not-for-profit housing organisations are allowed to partner with private developers and investors to deliver them. This suggests that the numbers will only stack up if the lowest-cost homes are cross-subsidised by dwellings rented out at full commercial rates.

The project is also likely to include an “affordable” component pitched at “key workers” on low to moderate incomes. These homes, rented at 20 per cent below market prices, may come closer to profitability but are unlikely to generate the level of returns super funds require.

NSW housing minister Melinda Pavey says this “innovative build-to-rent and financing model” will deliver on the state government’s objective “to build new and better social housing by renewing ageing assets that are expensive to maintain.” In other words, rather than invest public money or take on extra debt to directly expand and upgrade the state’s declining and outdated public housing stock, the government hopes super funds will finance community organisations and private developers to do the job for it.

Beyond the pilot, the Land and Housing Corporation will invite bids to develop a further 300 homes on sixteen sites in metropolitan and regional areas across New South Wales. And the model could be extended to other states. Cbus has suggested its lending to the sector could exceed $100 million within three years. “We need more of this type of innovative thinking and collaboration that provides the best possible bang for our buck we can get,” says Pavey.

But whether this really represents the best possible bang for the public buck is open to dispute. With Commonwealth bond rates at 0.8 per cent, as former prime minister Paul Keating recently told Fran Kelly on Radio National Breakfast, “we could be building public housing now till the cows come home.” Australia’s leading housing researchers make a similar case: the most efficient way to build homes for low-income renters is “direct public investment,” and Australia should avoid “overly complex private financing ‘innovations’ that have proven ineffective elsewhere.”

“Yes, putting it simply, that’s correct,” admits Stephen Anthony, chief economist at Industry Super Australia and lead author of a recent report on affordable housing for the NSW Community Housing Industry Council. The problem is that the federal government has no appetite for investing in social housing, despite joint calls for action from unions and industry bodies and compelling arguments from economists and housing experts that it is an ideal form of job-creating stimulus. Canberra believes it already has enough pump-priming planned and sees social housing as a responsibility of state and territory governments.

While state governments are stepping up their own efforts — Tasmania, for example, is promising 1000 new units of social housing over the next three years — only the federal government has the resources to make any kind of dent in the national social housing shortfall of more than 430,000 dwellings — a figure that, without action, will grow to well over 700,000 by 2036.

So, in the absence of federal investment, what would it take for super funds to play a role in housing the Australian nation?

When I put this question to Stephen Anthony, he responded by asking me to step back and consider why it is difficult to turn a buck from rental housing in the first place. The main reason is simple: residential property is very expensive. And every time prices go up, so does the investment needed to develop a project. Since tenants — especially low-income tenants — can’t afford to pay proportionately higher rents, the rate of return on capital goes down and rental housing become less attractive to institutional investors.

And why are property prices so high? The rot set in with financial deregulation in the 1980s, says Anthony, when banking was “handed over to the money changers” and became “all about collateralised lending.” Instead of providing small and medium-sized enterprises with capital to expand their businesses and increase employment, the banks’ “main game” shifted to “unproductive” property loans. (As of March 2020, about two-thirds of new lending by deposit-taking institutions was for housing.)

Combined with negative gearing, the capital gains tax discount and record low interest rates, this shift in lending fuelled the rise of “amateur” landlords — the “mum and dad” investors — who are more focused on rising property values than on rental returns. Because they mostly buy existing dwellings, they add little to the overall supply of rental housing. (Almost three-quarters of housing loans are for existing properties.) Instead, they bid up prices and inflate real estate values, especially in Sydney and Melbourne.

Treasurer Josh Frydenberg’s latest push to wind back responsible lending laws and make it easier to borrow from the banks (in the hope that looser credit rules will boost economic activity) is likely to ramp up speculative activity. If prices start rising again, super funds will be even more wary of investing in housing projects focused on rental returns rather than capital gains.

As Stephen Anthony points out, superannuation funds gain no benefit from negative gearing because they can’t borrow to invest in property and so can’t claim interest payments as a deduction. While they do get a capital gains tax discount, it is 33 per cent rather than the 50 per cent available to small investors — and capital gains shouldn’t be the main game in build-to-rent projects anyway. The way states levy land tax further discourages large-scale rental investments.

All this helps to explain why Cbus’s involvement in the NSW housing project takes the form of debt rather than equity. The return to its members will come as interest payments on a loan rather than as an income stream from tenants’ rent, which also means that the community housing providers, rather than the super fund, will bear most of the risk.

The point here is not to disparage the Cbus loan, or other recent initiatives by industry funds like HESTA, Aware (formerly First State), NGS and Australian Super to provide homes for low-income renters and key workers. Rather, it is to argue that investment in rental housing on a significant scale — rather than in once-off niche projects — will remain unlikely while Australia’s tax and financial arrangements encourage landlords to focus on rising property prices rather than a steady flow of long-term rent income.

The higher real estate prices go, the lower the return on investment in rental housing, and the less attractive it becomes to super funds. What’s more, rising property prices discourage governments — state or federal — from developing social housing because the required subsidy keeps getting bigger.

A 2018 report for the Australian Housing and Urban Research Institute, or AHURI, calculated that the average subsidy needed to build a unit of social housing in Australia was $13,000 per dwelling per year. Costs vary greatly between regions, of course: in parts of rural New South Wales the figure could be as low as $5000 annually; in parts of Sydney it could be as high as $35,000.

Let’s imagine that we want to get a super fund to invest in a hundred-unit social housing project (with rents set at 25 per cent of tenants’ income) in one of Sydney’s middle or outer suburbs. For the project to generate a gross rate of return of 6.5 per cent, Industry Super estimates that every two-bedroom townhouse would require an annual subsidy of around $25,000. If investors settled for a lower rate of return — say 4.5 per cent — then the annual per-dwelling subsidy would be about $15,000. If the state government (or a local council or a non-government organisation) provided land at no cost, then the required subsidy would almost halve. And of course, the subsidy can be reduced even further, or wiped out altogether, if, like the Cbus project, the development is a mix of social, affordable and market-priced rentals.

According to AHURI’s modelling, overcoming the NSW shortfall in social and affordable housing would require a state government investment of about $3.5 billion every year until 2036. This might sound like a great deal of money, but since the broader housing sector already receives billions of dollars via negative gearing and the capital gains tax discount, governments could tackle the challenge by changing priorities rather than borrowing more.

This is not just about targeting support to those who need it most, but also about dampening the fires that propel property prices.

In the current low-growth environment, says Stephen Anthony, institutional investors could be attracted to an affordable housing project that offered a return of something like inflation plus 3 per cent. In the first instance, the investment may come not from Australian super funds but from their North American and European counterparts, which will settle for lower returns based on reliable income streams like rent payments because their members are generally older.

But broadscale institutional investment is unlikely until we close the gap between the cost of new housing and the rents low-income tenants can afford to pay. “To make a market work you have to have a market price in there,” says Anthony. “We have to fill the subsidy bucket somehow.”

In the absence of significant tax reform or debt-financing of social housing, prospects might seem bleak. But Stephen Anthony says there are still things governments could do.

One would be to create an Australian version of the Low-Income Housing Tax Credit that operates in the United States. The scheme allows not-for-profit organisations that build social and affordable housing to generate tax credits that they can then sell to private companies looking to reduce their tax liabilities. It helps develop about 110,000 units of housing each year, worth around US$8 billion.

Anthony, who once worked briefly for the conservative Heritage Foundation in Washington, says the tax credit was created by Ronald Reagan’s administration. “It is a game-changing policy that can appeal across the political aisles,” he says. “The ability to trade in tax credits is gold for corporations trying to manage their tax liabilities.”

In operation since 1987, the scheme has an established record and the confidence of corporate investors. It’s no free lunch — just like negative gearing, it means revenue forgone for the federal government — but it may be a more palatable option than extra borrowing.

Another suggestion is for the federal government to set up a housing investment fund along the lines of the Clean Energy Finance Corporation. While this would require a big up-front injection of capital — the CEFC got $10 billion — it has the advantage of taking housing funding off the government’s balance sheet. The NSW Social and Affordable Housing Fund and Victoria’s Social Housing Growth Fund are initiatives of this kind, but their capital of just $1 billion each falls well short of the scale required to match the problem.

A much larger national fund could support social housing developments with equity investments as well as discounted loans to help attract additional private investors. Again, though, it wouldn’t alter the fundamental equation in which rents from low-income tenants are insufficient to generate a positive return on investment (as the CEFC is expected to do across its portfolio).

Anthony argues that the states could also use their planning powers more aggressively to increase the supply of social and affordable housing. His report singles out Western Australia’s integrated property development model, which requires that new land releases or urban redevelopments include various types of affordable and social housing, from discounted rentals to shared equity. It’s rare to see inclusionary zoning used in Australia, but it is common in many other countries.

As the Cbus example shows, super funds can be attracted to social housing if sufficient support is on offer — whether it’s free or discounted land, capital grants, cross-subsidies through market rentals, tax credits, or some other method or combination. Another way to change the equation, of course, is to permanently increase and properly index JobSeeker payments and Commonwealth Rent Assistance so that social housing tenants can afford to pay more rent (though some of the gains would flow to private landlords).

For social housing to be developed at scale, Anthony and other analysts say that Australia needs an agency similar to the National Housing Supply Council, created by the Rudd government in 2008 and abolished by the Abbott government in 2013. “This is not central planning but coordination,” says Anthony. “It’s overall guidance to identify where the shortages are, what resources are available and which players might come to the table.”

The other key requirement is certainty. “You need an institutional constant to establish the framework and leave it in place for future governments,” says Anthony.

The potential rewards of tackling the problem are considerable, as are the potential risks of not acting. As Anthony’s housing affordability report warns, Australia is experiencing its biggest peacetime economic shock since the Great Depression, and our approach to housing finance could make matters much worse.

Australia’s pre-1980s banking system was “framed by the tragedy of the 1890s property bust,” says Anthony, and “forged under fire during the Great Depression of the 1930s,” and “eventually informed by the 1936 Banking Royal Commission.” Deregulation, though, has “reawakened the old boom-bust property cycle” and fostered “an addiction to household debt,” which as a share of disposable income is much higher in Australia today than it was in the United States immediately before the global financial crisis.

If we transform financing and tax arrangements for housing then we can lay the foundations for future prosperity, just as we did after the second world war. And even if government has to take on extra debt to build homes for low-income renters, it’s a public investment that will return a dividend in higher productivity, lower health costs, lower welfare spending and changed lives.

“That’s indisputable,” says Anthony. “The bottom 30 per cent of the population by income just need a roof over their head. They want to live in one suburb for as long as possible. They want stability. And anything that brings stability to the family unit ticks all the boxes for investment and saves government a motza in the long run.” •

Funding for this article from the Copyright Agency’s Cultural Fund is gratefully acknowledged.

The post What would it really take to supercharge social housing? appeared first on Inside Story.

Last month’s survey asked participating economists whether they believed the legislated increases in compulsory superannuation contributions — set to climb from 9.5 per cent of wages to 12 per cent over the next five years — should proceed as planned, be deferred, or be abandoned.

If I’d been asked that question at almost any time since the increase was first proposed by the Rudd government in its response to the Henry review of Australia’s taxation system, I’d have said “yes,” unequivocally.

I’ve been a supporter of compulsory super since the Keating government legislated for the superannuation guarantee in 1992. I’ve never had any particular hang-ups about how the scheme gave unions a role in the management of superannuation savings that (in the eyes of some) is greater than warranted by their declining membership.

Apart from supporting the superannuation guarantee’s stated objectives of extending the benefits of superannuation (including very generous tax concessions) to a much larger proportion of Australians than those who had traditionally enjoyed them (mainly public sector employees and white-collar private sector employees), and reducing the proportion of retired Australians who were solely reliant on the age pension, I also supported the scheme’s expected contribution to lifting overall national savings.

For the first two decades or so of my career as an economist, the need to increase Australia’s national saving was seen as one of the most important policy challenges the nation faced.

Australia has long had a capital-intensive economy. Why? Because mining, an inherently capital-intensive activity, accounts for a much larger share of Australia’s GDP than that of other countries. This is because we have a relatively small population spread over a very large area and thus need to spend relatively more on transport infrastructure (another capital-intensive activity) than other countries. And because we have chosen to live in larger houses on larger blocks of land than people in most other countries, which means we spend more on housing and (hence) on urban infrastructure than most other countries.

In other words, investment has long been higher as a proportion of GDP in Australia than in most other “advanced” economies. And although we’ve also typically saved a greater proportion of GDP than many of those economies, we typically haven’t saved enough to fund all the investment we’ve wanted to undertake.

Hence, for most of our existence as an independent nation, we have needed to “import” savings from overseas — by borrowing or accepting foreign equity investment — in order to make up the difference between what we want to invest and how much we’re willing to save.

The counterpart of that requirement for foreign savings has been the deficits we’ve typically run on the current account of our balance of payments, which reflect the fact that, more often than not, we have imported more goods and services than we have exported, and paid out more by way of interest and dividends to foreign investors than we have earned from our own investments overseas.

During the 1980s and 1990s, when the current account deficit averaged 4.2 per cent of GDP (up from an average of 1.6 per cent in the 1960s and 1970s), we funded it largely by borrowing from abroad, so that our net foreign debt increased from 6 per cent of GDP in 1981 to 40 per cent of GDP by June 2000. Between 1988–89 and 2009–10, almost 11 per cent of our export revenues were absorbed by interest payments on our foreign debt — including a peak of over 18 per cent in 1988–89.

In this environment, “increasing national saving” was a core objective of economic policy. It was the main reason Paul Keating, as treasurer in the Hawke government, gave for pursuing budget surpluses in the late 1980s. (Running budget surpluses meant that the public sector was adding to national saving rather than absorbing it.)

It was one of the main reasons why the Reserve Bank, with the endorsement (as was required in those days) of Keating as treasurer, pushed interest rates up to 17.5 per cent in the late 1980s, bringing on the “recession we had to have.” (It was only after the event that history was in effect rewritten to say that it had been all about “snapping the inflation stick.”) And after Vince FitzGerald’s report on national saving, commissioned by the Keating government, it became one of the main arguments for the superannuation guarantee.

Of course, since those days we’ve learned that countries can run larger current account deficits for longer periods than was thought possible back then. And more recently Australia hasn’t been running current account deficits at all: since the June quarter of 2019, we’ve been chalking up current account surpluses for the first time since 1974. Or, put differently, national saving has exceeded national investment for the first time in more than forty-five years.

So the “national saving” argument for increasing the superannuation contribution rate no longer applies. But that’s not the main reason why I answered the Conversation’s latest question in a way I wouldn’t have considered as recently as three years ago.

The main thing that changed my mind was a November 2018 report by John Daley and Brendan Coates of the Grattan Institute (where, I should mention, I worked between August 2009 and December 2011). In my opinion, Daley and Coates convincingly demonstrated that a superannuation contribution rate of 9.5 per cent was sufficient to guarantee the “average worker” a retirement income of more than 90 per cent of their working income — well above the OECD “benchmark” of 70 per cent.

They also showed, persuasively, that lifting the rate to 12 per cent would have two perverse effects. Many workers would face the prospect of having a higher income in retirement than they had while working; others, particularly lower-income workers, would see a net reduction in their overall retirement income because the higher income from higher superannuation savings would be more than offset by a reduction in the age pension to which they would otherwise have been entitled.

Brendan Coates, together with Grattan colleagues Matt Cowgill and Will Mackey, followed up that report in February this year with a working paper demonstrating that although superannuation guarantee contributions are formally paid by employers, at least 80 per cent of increases in compulsory contributions are passed on to workers in the form of lower wage rises than they would otherwise have obtained.

This is entirely consistent with the intentions of the founders of Australia’s compulsory superannuation system. When the ACTU, under the leadership of Bill Kelty, first pursued the idea of wider access to superannuation in the second half of the 1980s, it was partly meant as a “trade-off” for the wage increases the Hawke government was trying to restrain in order to prevent an acceleration in inflation. As Keating himself has since said, “the cost of superannuation was never borne by employers. It was absorbed into the overall wage cost… In other words, had employers not paid nine percentage points of wages, as superannuation contributions, they would have paid it in cash as wages.”

The Fair Work Commission explicitly took into account the last increase in the compulsory super rate, from 9 per cent to 9.25 per cent in 2013, when awarding a smaller increase in the national minimum wage “than it otherwise would have been in the absence of the super guarantee increase.”

In the years before the current pandemic, persistently slow wages growth had become a matter of increasing concern to policymakers. In a speech to a peak business group in June 2018, Reserve Bank governor Philip Lowe went so far as to say that “slow wages growth is diminishing our sense of shared prosperity” and, if it persisted, could “make needed economic reforms more difficult.”

And, of course, wages growth has slowed even more since the onset of Covid-19, and (as forecast in the government’s most recent Economic and Fiscal Update) it is expected to remain slow in the years ahead.

None of which is to deny that there are problems with Australia’s current superannuation system. In particular, it isn’t delivering for women, who retire with 47 per cent less superannuation, on average, than men. Given that the average woman lives five years longer than the average man, this means that women’s retirement income is far less likely to be “adequate” than men’s.

But no one has explained how increasing the super contribution rate to 12 per cent for everyone is going to deal with that problem.

And that’s why I answered the Conversation’s survey question about the currently legislated increase in the super guarantee contribution rate in the negative, and it’s why I expressed a relatively high degree of confidence in my response, something I don’t always do. •

The post Why I changed my mind about super appeared first on Inside Story.

Ridiculous? Well, this is essentially the system we have set up for second-income earners in Australia, most of whom are women. Here and elsewhere, Covid-19 has shone a spotlight on how inequality is baked into our social structures, and one of the many inequalities so exposed is the differential impact of crises like this pandemic on women.

It’s a deep divide, beginning with the high proportion of women doing the essential caring work in hospitals, the indispensable cleaning of public and private places, and the nurturing of children in the home. In order to take up the last of those roles, women often have little choice but to reduce their paid working hours. If this weren’t enough, women’s jobs were among the first to be cut in sectors such as hospitality and retail.

Perhaps we shouldn’t be surprised about these inequalities. In Australia today, just seven of the thirty federal government ministers are women — an imbalance that extends across state and territory government too, with women filling only forty-eight (or 26 per cent) of 181 ministerial positions. When it comes to pressing public policy issues, whether they are social, economic or political, women are noticeably absent from the key decision-making forums.

So, are we going to continue to buy this pre-Covid product, or are we going to demand something more fit for purpose?

This week, a formidable coalition led by former foreign minister Julie Bishop, epidemiologist professor Fiona Stanley, former SA premier Jay Weatherill and philanthropist Nicola Forrest has called for a major structural reform that has the potential to build a more equal society. What they want is a high-quality, universally accessible childcare and early learning system.

On one view, “childcare” might be thought of as being the responsibility of individual parents. Looked at differently, though, high-quality childcare is fundamental to ensuring greater equality. It is also key to increasing women’s workforce participation. In Australia, women are currently 38 per cent of all full-time employees, and 68 per cent of all part-time employees. While some women want to work part-time, research confirms that many want full-time employment but can’t afford it.

Even after subsidies, full-time childcare fees absorb a quarter of household income for an average earning couple with two children in Australia, compared with the OECD average of 11 per cent. A family getting the maximum subsidy (on an income of less than $68,000) still needs to find an annual $9000 for full-time care. Almost half of Australian parents with children under five report struggling with the costs.

This means that if both parents earn $60,000 a year and the secondary earner — usually a woman — chooses to work more than three days a week, the secondary earner currently loses 90 per cent of the income on the fourth day, and all of it on the fifth day. This obviously has a brutal impact on women’s career trajectories, with part-time work rarely leading to leadership roles.

Lifting women’s workforce participation is an important step on the road to ensuring that both women and men have an equal opportunity to become political leaders. There’s plenty of room for progress — of the 193 countries in the United Nations, only thirteen are led by a woman.

Representative democracy is about representing the needs of the whole community and drawing on the expertise of all people. The current system discourages women from becoming active citizens for a range of reasons, including their disproportionate responsibility for childcare. Sharing the caring, not only within the family but within society as a whole, is fundamental to ensuring women are equally represented at decision-making tables around the country.

Universal, accessible early learning also benefits the children who are our future leaders. Research shows that the early years of a child’s life, up to five years of age, are critical to their future academic, health, social and professional trajectories. Play-based early learning develops the executive functions critical to our nation’s economic future. Competencies and emotional frameworks that lead to high-value jobs (which should include childcare) in the fastest-growing sectors are developed in those early years. We are investing in our future if we invest in children’s education at this age.

While we know these early years are critical, preschool is currently only universally available for four-year-olds, except in Victoria, where three-year-old preschool is becoming available. Childcare varies hugely in quality and is simply unaffordable for many Australian families.

These problems are reflected in the data, which shows that many children are continuing to fall through the gaps. The Australian Early Development Census reveals that one in five children entering school are developmentally vulnerable in one or more domains. If we look only at Indigenous children, the numbers are stark: six in ten are developmentally vulnerable. By the time these kids get to school, critical neural pathways are embedded. It will be a struggle for them to catch up, whether in reading, writing or emotional regulation.

As our leaders search around for “shovel ready” projects to get the economy back on track, they need to look beyond the obvious strategies of investing in bridges and roads. An investment in building universal, accessible early learning in Australia will have a multiplier effect, improving our economy and society in ways that benefit everyone. •

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The divergence between the facts established by the intelligence services — sometimes by the decision makers themselves (as notably in the case of McNamara) and often available to the informed public — and the premises, theories, and hypotheses according to which decisions were finally made is total. And the extent of our failures and disasters throughout these years can be grasped only if one has the totality of this divergence firmly in mind.

— Hannah Arendt

I have a theory that the truth is never told during the nine-to-five hours.
— Hunter S. Thompson

1. Introduction

From 1788 till the 1960s, Europeans established themselves on Indigenous land in a brutal regime, first of dispossession and then of disregard. Yet some among them had strikingly good intentions. A year before Wilberforce took on the cause, nearly eighty years before the Emancipation Proclamation, Arthur Phillip accepted his commission insisting that slavery had no part in the new colony. Phillip sought to treat the Indigenous people fairly, at least according to his own lights. But mutual incomprehension reigned and those with murkier intentions soon prevailed.

Today, good intentions abound, though racism often lives on in unacknowledged assumptions. Governments outlay vast sums, whether adequate or not, on specific Indigenous programs and in general expenditure on Indigenous health, education and social security. Widely supported grand gestures are announced every few years. You might think “Closing the Gap” was Kevin Rudd’s idea but it rebooted (or is that rebranded?) a Hawke government initiative of twelve years earlier. But the results are meagre.

Now comes a new cycle of activity, this one focused on whether formal evaluation processes might allow us to identify and scale up those Indigenous programs that actually “work.” Most recently, the Productivity Commission has been hard at work on a national Indigenous Evaluation Strategy, which was the immediate trigger for this essay and to which I’ll return. Will this cycle of activity produce better results than earlier efforts? I’ll explain below why I have my doubts.

To first clarify where I’m coming from, it is not from deep knowledge of Indigenous policy. My focus here is rather on a prior question: how our formal institutions of government — and most particularly our bureaucracies — might need to change to succeed where previously they have so consistently failed. To make that question concrete I draw on my experience in other intractable areas of social policy that bear family resemblances to Indigenous policy.

Programs to protect children from abuse and neglect, particularly in disadvantaged families and communities, follow the same endlessly repeated cycle of failure followed by grand plans for reform that then run into the sand before the cycle begins again. This essay focuses on how little the system really appreciates the distance it would need to travel to really be effective, in terms of either its own values and objectives, or those of the disadvantaged communities — including Indigenous communities — it claims to be serving.

2. The “what” and the “how,” the saying and the doing

So here’s my very simple description of the problem: despite endless pronouncements of what we must do, there’s minimal comprehension of how to do it.

This is an endemic problem. Dependable know-how itself — whether it’s improving outcomes in an Indigenous community or representing government in the High Court — is not directly legible to government systems. Anyone can claim to have that know-how but a bureaucracy needs something more dependable than that. As a consequence, it will interact with know-how as a certified, decontextualised “what.” That “what” could be a credential, the meeting of a key performance indicator, or a particular bureaucrat’s informal reputation for being a “good operator” or a “safe pair of hands.” In improving Indigenous lives, however, know-how won’t align with any such things, not least because so much of it resides among Indigenous people and communities themselves. We need to access their knowledge and their agency to improve their own lives in ways that matter to them.

The cliché used to convey this idea is “putting people at the centre” or “putting people first.” However well-intentioned such slogans are, more often than not they operate as a kind of doublethink — as if adopting the slogan were to put its intent into practice.

The philosopher Martha Nussbaum offers a story that illustrates this difference between saying and doing. She describes how a development program encounters a woman in a traditional rural community who is uninterested in education for herself or her children. Nussbaum is showing how our (reductive) framing of the other’s perspective can cut us off from the wisdom of the other’s lifeworld. “Clearly,” she writes, “a one-shot logical argument” wouldn’t be enough to engage the woman:

[S]uch a procedure would only reinforce her conviction that education has nothing to do with her. Nor would the exchange get very far if the development workers sat down with her… asking… calm and intellectual questions about what she thinks and says. But suppose, instead, they spent a long time with her, sharing her way of life and entering into it. Suppose, during this time, they vividly set before her stories of ways in which the lives of women in other parts of the world have been transformed by education of various types — all the while eliciting, from careful listening over a long period of time, in an atmosphere of trust that they would need to work hard to develop, a rich sense of what she has experienced, whom she takes herself to be, what at a deeper level she believes about her own capacities and their actualization. If they did all this, and did it with the requisite sensitivity, imagination, responsiveness, and open-mindedness, they might over time discover that she does indeed experience some frustration and anger in connection with her limited role; and she might be able to recognise and to articulate wishes and aspirations for herself that she could not have articulated to Aristotle in the classroom. In short, through narrative, memory, and friendly conversation, a more complicated view of the good might begin to emerge.

Nussbaum’s scenario is based on actual fieldwork in Bangladesh, and couldn’t be cost-effective if it involved professionals engaging rural women en masse. But, as I discovered when I was chairing the Australian Centre for Social Innovation, the spirit of this translational endeavour is already captured in existing and cost-effective programs in Australia.

The centre’s Family by Family program takes families who feel they’re close to crisis. A trained coach then takes each family through a structured program of mentoring by another local family that has come through similar stresses. The family seeking help chooses the family that mentors them and sets the objectives they want to work on.

The program was co-designed with families over many months, but the simplicity and obviousness of the end result gave those involved in it and many lookers-on numerous “aha” moments. Family by Family embodies the rare art of professionals vacating centrestage in a therapeutic intervention to create space for those who must do the real work. Professional knowledge, which grows with the program, is always there — but as midwife, not obstetrician.

Talking to some of these families, I was struck by their visceral engagement with the program and their mentors. To take just one example — of which there were many — one mother in the program had received twenty-seven statutory “notifications” documenting outsiders’ suspicions that she was neglecting her kids. The relevant department was heading to court to take her four kids into guardianship. When her mentor family took her family camping, she learnt many things from them — not least to hug her kids. The department stopped proceedings against her.

The thirty-week program cost around $13,000. If that sounds expensive, it’s a fraction of what social workers would have cost, and much more effective. Moving all four kids into care would have cost around $224,000 per year. So, if Family by Family steered just this family from the shoals of state intervention it probably paid for its development and first couple of years of operation.

Before I saw Family by Family in action, I’d have described my outlook as that of a tragic liberal — committed to fairly generous spending on social disadvantage, but with very modest expectations of how much it could turn things around. After seeing Family by Family, the penny dropped. Ingrained patterns and social reinforcement are immensely powerful, almost immovable forces. But people’s desire to work towards better lives for themselves, their families and their communities is similarly elemental if they can somehow unlock their own agency and that of those around them.

3. Lord Acton’s fault line

After acknowledging the vast gulf between identifying the “what” and mastering the “how,” between the saying and the doing, we should then do something I’m doing for the first time in this essay. For decades I’ve referred to it in asides, but it needs to be brought centre-stage so we can look it in the eye. It’s significant that it’s a joke, just as it’s significant that so many of the best insights into bureaucracy are provided by comedies like Yes Minister, The Office and Utopia.

More than a century ago Lord Acton quipped that rowing was the perfect preparation for public life. Why? Because you face in one direction while moving in the other. One crucial reason that we’ve made so little progress is that in a thousand ways, large and small, the actors in the system face in one direction — with their mission statements, corporate values, strategic plans, evaluation strategies and all the rest of it — while moving in the other.

Of course, they’d prefer to do a good job — most people would. But when push comes to shove, their animating imperative isn’t to keep progress going in the field. It’s to keep up appearances. Seen this way, all those grand announcements we keep making are part of the problem. They’re really directed at our own anxieties. They alleviate and distract us from facing our disappointment — our discomfort — that the world remains so resiliently impervious to our good intentions.

Lord Acton’s fault line appears between the two feet on which we stand — between what we say and what we do. That’s why the words we use matter so much, and why we should take George Orwell’s advice to choose the simplest and clearest words we can. As he put it:

If you simplify your English, you are freed from the worst follies of orthodoxy. You cannot speak any of the necessary dialects, and when you make a stupid remark its stupidity will be obvious, even to yourself. Political language — and with variations, this is true of all political parties [and here we can include officialese]… is designed to make lies sound truthful… and to give an appearance of solidity to pure wind.

Since those in the system are the ones with the power, all we have to appeal to is their own self-respect — their own desire to feel better about themselves. When they say they want to change, the real question is how much. The system has said that it wants greater Indigenous agency in its programs for ages. But as I’ll illustrate, our programs are so dominated by that same system’s routines and perspectives that Indigenous agency barely gets a look-in. Instead it gets reduced to things that are legible to the system — such as Indigenous ethics codes and certified cultural sensitivity. These things may have some benefits. They may also have costs, which I’ll discuss. But they are mostly the system saying rather than doing.

This takes us to the nub of the problem. It is only humility, or some institutionalisation of it, that can create that space within which Indigenous agency might be nurtured and grow. But “humility” itself is now turning up as a cliché in all those “how to” guides (it appears just before “nuance” and after “authenticity” — yes, authenticity really was a corporate value of PwC for a while there). So I’ve tried to revivify it with Iris Murdoch’s magnificent words above. For the non-Indigenous among us who fancy we care, we must find ways to untangle ourselves and our institutions from the “the anxious avaricious tentacles of the self.”

4. Enter evaluation

Like a patient resisting therapy, the system constantly initiates new beginnings. But Lord Acton is never far away. At the political level leaders talk of evidence-based policy, but then shunt it aside when convenient. In fact, substantial performance evaluation was built into the structure of the Aboriginal and Torres Strait Islander Commission but sidelined after ATSIC was dismantled by John Howard’s government. The failure of the Northern Territory Intervention to take an evidence-based approach is legendary, worked up as it was over a few days in Canberra in the run-up to an election and yet largely maintained by the incoming government.

More recently, while stressing his own commitment to following the evidence, newly elected prime minister Malcolm Turnbull expanded income-management schemes without mentioning that the independent evaluations were highly equivocal. However well the idea played in non-Indigenous Australia, the evaluations suggested that compulsory income management has clear, positive impacts in very few cases and gives rise to “considerable feelings of disempowerment and unfairness.” As one might expect, voluntary income management is more successful.

Now, it is one thing for senior officials not to speak publicly of their political masters’ hypocrisy. But their complicity goes deeper. In 2009, a finance department review of Indigenous expenditure stressed the need for “a more rigorous approach to program evaluation at a whole of government level.” In 2016, the nation’s most senior public servant, the secretary of the Department of the Prime Minister and Cabinet, Martin Parkinson, echoed those sentiments. In response to such concerns, $40 million over four years was allocated for evaluation. Parkinson’s department was responsible for Indigenous affairs, but the Audit Office reported three years later that its performance was desultory.

As ANU researcher Michael Dillon has suggested, even the Audit Office’s report was “extraordinarily hedged and timid, and failed to make a substantive assessment of the actual independence of the evaluations undertaken” by the department:

Of thirty-five evaluations on the department’s 2018–19 workplan, fifteen had not commenced. Of the remaining twenty, eight had been published and twelve withheld from publication… In at least four cases (involving very significant and sensitive program evaluations) the department was waiting to brief the minister or awaiting his noting of a brief. In plain language, the minister was preventing timely publication of the evaluations.

Further, Dillon observed, Parkinson’s response to the audit “fails to acknowledge or address in any way the negative content of the audit.” Is it likely that the system will engineer something better if it can’t acknowledge its own failure to do as it says?

Which brings us back to the Productivity Commission’s Indigenous Evaluation Strategy, a draft of which was released in June. The PC has always attempted to pitch its proposals to government within the “Overton window” — that range of options that will be taken seriously by powerful people. Given that constraint, as I’ll explain, I respect its compromises on policy. But the point of the PC’s independence is that, however much it compromises on the policy, it spares no one, least of all itself, the truth. What the great scientist Richard Feynman wrote about science is also true of social science. For me, it’s a holy grail of social policy and aligns nicely with Orwell’s advice: “The first principle is that you must not fool yourself, and you are the easiest person to fool.”

5. Putting Indigenous people at the centre: the words

There’s a kind of ambiguity at the very heart of the PC’s draft strategy that’s increasingly common. It’s Orwellian in the bad sense. I guess the genre was introduced into polite society by the “vision statement.” Here one states an aspiration as a fact. You know the kind of thing: “PHP Residual Solutions is the world’s foremost residual solutions provider.” At least in its awkward baldness, it’s not misleading. We all know that global domination is an aspiration, not a fact.

But this fusion of fact and fancy appears as the fundamental building block of the PC’s draft strategy: “The Strategy puts Aboriginal and Torres Strait Islander people at its centre, and recognises that governments need to draw on the perspectives, priorities and knowledges of Aboriginal and Torres Strait Islander people if outcomes are to improve.”

One of the ways to ensure we remain fixed to the spot with Lord Acton’s fault line yawning beneath us is to encourage the idea that saying something is doing it. Does the PC know how to put Indigenous people at the centre of its strategy? Can it point us to better and worse examples of doing so? Can it highlight cautionary tales where grand claims have been made that are belied by the facts on the ground? These are some of the questions — pointed, uncomfortable questions — that we need to answer if we’re ever to step over Lord Acton’s fault line and enter the promised land of “how.”

At the level of programs, rather than evaluation, there are at least two perilous steps in the expedition to get from saying to doing — from signing the cheques to putting the resources of government properly at the disposal of Indigenous people and their communities:

1. We need to learn how to put Indigenous people and communities at the centre of these programs — or, to put it differently, how to realise their agency within them.
2. Then we need emerging successes to spread. That requires validated new knowledge of what’s working in the field — always fragile in large organisations to say nothing of systems of organisations — to trump the institutional imperatives that so often frustrate the spread of successful practice.

To me, these are the great priorities for the Indigenous-specific programs I have focused on in this essay, though analogous priorities would apply when considering the impact of general welfare programs on Indigenous people and communities. And any evaluative strategy would emerge from an appreciation of how evaluation might contribute to their wellbeing. As progress was made it would shed light on how further priorities might be set.

But the draft strategy makes clear that this is not the kind of priority-setting the PC has in mind. Its initial priorities reproduce those of COAG’s Closing the Gap report, and their foremost characteristic is their legibility to the system. They’re even arranged around the system’s existing organisational structure, which includes families, children and youth, health, education, economic development, housing, justice, land and waters. Makes you wonder what isn’t a priority! And all of them identify a “what” rather than a “how.”

6. Putting Indigenous people at the centre: the actions

How will we get Indigenous people and perspectives into the centre of evaluation? In their submission to the PC, researchers from Inala Wangarra and the University of Queensland argue that:

“Accountability” has become a lopsided concept, whereby the focus is overwhelmingly on service providers being accountable to government, and where there is no concomitant focus on the accountability of government to the most important stakeholders: Aboriginal and Torres Strait Islander peoples.

So might placing Indigenous people at the centre of an evaluation strategy involve making service providers and government policies accountable to Indigenous people? This possibility doesn’t seem to have made it into the PC’s strategy, even as a “what.” And even if it had, I’d argue that what the PC has endorsed is likely to be implemented in a way that actively obstructs getting to the “how.” The PC talks about the importance of “whole-of-government” approaches to evaluation. That sounds innocuous enough — commonsensical even. But why does it have me thinking of “whole-of-church” approaches to the solar system at the time of Galileo?

The only way I can imagine a whole-of-government agenda not doing more harm than good is if it were to imagine itself as being at the service of solving the concrete and urgent problems in the field — by identifying good practice in the field, for example, and coordinating the system to expand its influence.

Despite senior officials’ and politicians’ protestations that they aspire to encourage innovation in the field and spread and scale “what works,” progress has been conspicuously lacking. Peter Shergold saw this as a major problem as he rose through the ranks of the public service, but after over a decade at its commanding heights conceded there’d been little change. As he put it in 2005:

If there were a single cultural predilection in the Australian Public Service that I could change, it would be the unspoken belief of many that contributing to the development of government policy is a higher-order function — more prestigious, more influential, more exciting — than delivering results. Perhaps it is because I have spent so much of my career in line agencies, learning to deliver Indigenous, employment, small business, and education programs that I react so strongly against this tendency.

Eight years later he confessed that little more progress had been made:

Too much innovation remains at the margin of public administration. Opportunities are only half‐seized; new modes of service delivery begin and end their working lives as “demonstration projects” or “pilots,” and creative solutions become progressively undermined by risk aversion and a plethora of bureaucratic guidelines.

In its preoccupation with grander narratives than identifying what works and spreading it, the PC sets its evaluation process up to be driven by the system rather than its intended beneficiaries, however much it protests that they’re “at the centre.” In a familiar move, the PC suggests that its strategy is driven by four principles, each identified by a pleasing adjective with them all arranged in a pleasing diagram. According to this diagram, evaluation should be “Credible, Ethical, Transparent and Useful.” But these words are so general, so capaciously flaccid, that they constrain no one, like a scientific hypothesis that couldn’t possibly be falsified. And so, rather than constraining (and so guiding) practice, those words will come to mean whatever people want them to mean, often in retrospect to justify whatever practice is chosen.

Note two further aspects of the high-level pronouncements echoed by the Productivity Commission. First, the PC speaks of evaluation as if its function is to bolster the accountability of those in the field to their senior managers, with evaluation’s function being to objectively certify the extent to which the program meets the system’s stated objectives. Second, it shows little awareness of how broad and permissive this relatively new discipline of evaluation is. In reaching for some actionable means of validating that it is embracing a thing called “evidence-based policy,” evaluation is taken to be something far more settled and definitive than it is — as if getting something evaluated were like getting an auditor to check financial accounts or an engineer to check the structural integrity of a bridge.

As Michael Dillon has observed, the assumption that there are or should be simple linear relationships between objectives and performance is “problematic in cross-cultural contexts and certainly not necessarily the case in the… Indigenous domain.” In that regard the system — and the PC — seems oblivious even to the existence of “goal-free evaluation.” There, the evaluator investigates the impacts of the program without referring to — or ideally even knowing — a program’s stated goals.

In an increasingly managerial world oriented to the needs of organisations and their senior managers, this unconstrained focus deploys the evaluator’s skills in an open-minded way that can more fully reflect the interests and aspirations of other actors in the system — most particularly, intended beneficiaries of the program and the families and communities of which they are a part. Goal-free evaluation puts the evaluator in the best possible position to notice and document all consequences, both good and bad. It can also improve program hygiene just as double blindness adds to the hygiene of a randomised controlled trial.

7. The anatomy of Lord Acton’s work

Then there’s the question of exactly how evaluation will identify what is and is not working, and how these findings will find improve policy and practice.

This raises several challenges at the heart of the PC’s draft strategy. First, evaluation should be independent so that it is candid. Second, it should be published, in order to help develop a “knowledge commons” around “what works” (and what doesn’t) and to strengthen incentives for policy, programs and practice to follow the evidence. Yet past behaviour shows that the system responds to such constraints by saying one thing and doing another. So why would it be any different here?

Indeed, the woods are full of regimes in which higher-order objectives are foisted on policymakers to do the Lord’s work (Lord Acton’s work that is). These systems allow those at the top to say one thing as they face towards an objective in general, while they do another thing that quietly prevents it happening in particular. And thus ensues a prosaic variant of something Oscar Wilde told us about life:

Yet each man kills the thing he loves…
The coward does it with a kiss,
The brave man with a sword!

Freedom of information regimes sit atop Lord Acton’s fault line. And the discomfort this induces is all too often relieved with strategic cowardice. Having been lowered from on high, freedom of information faces boldly towards transparency. At least in general and at least when it comes to the saying. When it comes to the particular, to what is actually done, officials travel in the other direction. Transgressions go off the record — into corridors, personal phones and email accounts — or are reclassified “cabinet in confidence” or some such. And that’s just the tip of the iceberg as far as actions that are routinely taken to delay and obfuscate transparency under FOI.

If FOI solves its problems the coward’s way, regulation reviews use the sword. Today, new regulation can’t be introduced without a “regulatory impact analysis” duly demonstrating that its benefits exceed its costs. Australia introduced it in 1986, and it seemed like such a good idea that it was replicated around the world — but invariably with the same (desultory) result. Here’s the British Chambers of Commerce back in 2007:

Both Conservative and Labour administrations approach deregulation with apparent enthusiasm, learn little or nothing from previous efforts and have little if anything to show from each initiative.

Sound familiar? Regulation review is another take on the Lord Acton quickstep. Those at the top introduce a compliance regime, but those administering it are trying to get things done for their ministers. So they obey the letter but not the spirit of the regime, and it degrades into empty box-ticking.

8. Getting past Lord Acton’s fault line

To recap: as attractive as they sound, independence and transparency cannot be imposed without setting off powerful and perverse incentives. Any attempt to deal with these dilemmas must look them in the eye. I foregrounded them in 2016 with my own proposal for an evaluation architecture. I called it the evaluator-general to stress the importance of independence and transparency, and also to structurally separate the delivery of services from the means by which we validate their fitness for purpose.

The organisation of the public sector already honours this principle of structural separation — between doing and validating the effects of what we’re doing. Thus, the Audit Office and the Bureau of Statistics are independent information and integrity agencies whose work helps inform us of the success or otherwise of other “doing” agencies directed by ministers — such as the health department and Treasury. At the same time, we expect all these agencies to collaborate — sometimes quite closely.

My proposal for an evaluator-general provides the institutional scaffolding within which the same close collaboration amid structural separation between doing and knowing can be brought right down to operations in the field. That way independence and buy-in can grow quietly from the bottom up within organisations rather than being heroically imposed from the top in a grand gesture that experience suggests will fail and fail again.

My aim was to nurture the self-accountability of those out in the field — Feynman’s imperative that one mustn’t fool oneself — and to build system accountability on that foundation. That’s how Toyota revolutionised manufacturing productivity in a way that’s now imitated the world over. It found a way to build from “how.” It did so by placing the workers on the line, the suppliers and the customers at the centre.

Are my ideas viable or just naive? We’ll only know when we give something like them a good try. We’d need no more than a dozen or so teams to try them. In the PC’s near 400-page background paper there’s some reporting on these problems of independence and transparency, but not in the context of any critical vision or clear explanation of how they can be overcome.

9. Independence-for-hire and the he-who-pays-the-piper problem

The PC’s incuriosity extends to its ignoring the incentive issues arising from how evaluation is commissioned and conducted. As I’ve argued, allowing firms in our private sector to appoint their own auditor profoundly compromises auditors’ independence. By contrast, the auditing of government finances is overseen by an independent auditor-general. Still, while it’s far from optimal, we’ve made the independence-for-hire of private sector auditors work tolerably by specifying highly prescriptive auditing standards. With evaluation, things are very different, there being any number of ways to conduct evaluations to serve numerous tastes and purposes. So evaluators’ independence-for-hire provides wide scope for doing Lord Acton’s work.

As I’ve argued elsewhere, independence-for-hire sits at the heart of a “now-you-see-it-now-you-don’t” catch 22 that prevents promising developments in the field even becoming visible to the system, let alone having their expansion supported by it.

It goes like this. Responding to all the stirring visions of government “scaling what works,” non-government organisations seek government funding to expand their most promising programs. At this point, departments of finance oppose such funding, as well they might, until the programs are independently evaluated. They don’t take responsibility by commissioning the evaluation themselves or even specifying what kind of evaluation they require. Thus, when the NGO returns, a few hundred thousand dollars poorer, with a Deloitte, PwC or Lateral Economics report in hand (we’re cheaper!), it’s ignored again because independence-for-hire isn’t independence. And so the process of “scaling what works” is stopped dead in its tracks.

Though it understands the value of independence in evaluation, the PC completely flubs the “independence-for-hire” problem, simply associating contracted-out evaluation with independence. And it won’t bite the bullet and recommend true independence because it knows this would be rejected out of hand. But to keep the idea of independence in play, it proposes Lord Acton’s independence — an independent Office of Indigenous Policy Evaluation that will “oversee” evaluation, though the actual evaluation will continue to be conducted within the very agencies whose performance is being evaluated.

No doubt the PC hopes that this might introduce some independence into the process. But progress, if any, will be agonisingly slow. Allowing agencies to do their own regulatory impact analysis has kept the tiger of regulation review pristinely toothless for thirty-five years now in every country where it’s been introduced. The old Office of Regulation Review operated within the PC itself, but the greater notional independence it had there made not the slightest bit of difference. The requisite boxes were ticked and regulations — both the good and the bad — went on piling up as normal.

10. Stated intentions and animating imperatives

It’s Lord Acton pretty much all the way down. The PC’s draft strategy stresses the need for evaluations to:

• be done ethically
• involve and engage Indigenous people
• be respectful of and in sympathy with Indigenous cultures and knowledges.

Now, each of these is a commendable objective as a “what.” As I keep saying, the hard part is working out the “how.” And tackling each of these matters productively requires great insight. Further (and astonishingly), the importance of each of these requirements is relatively new to the system even as a “what.” Should we really put that same system in charge of learning the “how”? What will happen is already a foregone conclusion — the PC more or less recommends it. Rather than proceed humbly, foregrounding its ignorance, the system will go through its well-worn routines. Codes of practice will be developed. I assume there’ll be lots of consultation.

But these codes won’t deliver what is written on the packet any more than the mission statement “putting families at the centre” would have delivered Family by Family. However well-intentioned, these codes’ animating intent — what will matter when push comes to shove and someone might end up on the telly or in a headline — will be the institutional safety of those developing and administering the codes.

This is what happens when the system’s commanding heights are put in charge of delivering something that is difficult and context-sensitive but not highly valued in our political culture. Those defending Indigenous interests would be well advised to look on the burgeoning performance regimes in numerous sectors — particularly education and university research — where more and more practitioner time is taken up complying with relentlessly expanding requirements from bureaucracies that have neither the slightest knowledge of nor regard for what’s going on out in the field. As the accountability theatre ramps up, administrative numbers and salaries swell at the centre and performance declines. As Britain’s Institute for Government documented in a different context, inquiries and restructurings abound and new ten-year plans are announced once every three or four years.

I recall when, in response to another paedophilia scandal, South Australia strengthened its child safety requirements. The very department whose lapses had produced the outrage refused to stagger the starting date of the new system for different community organisations. With the department’s processing capacity thus overwhelmed, it took over a month to clear the new paperwork. Family by Family was paralysed. If exceptions were allowed to the deadline, they were for more important folks than us. Overnight, practices that had worked brilliantly and safely for several years — that placed families at the centre of the program — became an offence. I don’t know about then, but today the department describes itself as “a customer-focused organisation that puts people first.”

In fact, an evaluation was done on Family by Family. The process was a train wreck. From memory numerous preliminary ethics processes took around nine months, though this was simply to ask families questions about their progress — as they’d been asked regularly within the program. The evaluation ignored the program’s effect on children. Why? Because getting that aspect through the ethics procedures would have been too expensive, uncertain and time-consuming. How ethical can you get?

When the evaluation finally began, the department funding the program wouldn’t give evaluators the data to identify our cohort of families. So the evaluation was forced to compare impacts on all families in the host suburb against two other areas (one of which was bizarrely incomparable). As I recall, the result was mildly positive but inconsequential — unsurprisingly, given the small number of families involved. To use J.K. Galbraith’s term, it was all “innocent fraud” — that is, all that effort and money produced an outcome that amounted to nothing. But its worthlessness was a system failure despite the best of intentions of everyone in it.

I expect that the National Health and Medical Research Council, which issued the ethics guidelines, the family services department and the university centre for family studies thought of themselves as putting people first. But far from nurturing the innovation breaking out on the edges of the system — driven by bright, idealistic, young professionals and increasingly enthusiastic families — the incumbent organisations imposed their own routines and imperatives, each one making the labyrinth denser, more bewildering, more dysfunctional, each one making it harder to put the families first.

Whether or not the evaluation report was released (I don’t believe it was), we all cooperated in covering up its worthlessness, which required nothing more than not to advertise it. This is just one close-up of a phenomenon the disillusioned development economist William Easterly has called “the cartel of good intentions.” It is built on Lord Acton’s fault line. But you won’t see any serious engagement with any of this in the PC’s material on Indigenous evaluation.

11. The perils and the promise of candour

You may think what I’ve written so far is scathing. Yet, as I indicated above, I think the PC makes the right basic calls in its draft strategy. Bereft as the report is of suggestions about how to bring it about, it nevertheless endorses more Indigenous involvement in evaluation. And it backs independence and transparency. In a system that’s nowhere near ready to seriously engage with such things, it also makes defensible compromises in shepherding those values into policy. The real shame is that the pathologies of the existing system are deeply entrenched and yet they hardly get a look-in in the commission’s analysis. So any strategy for shifting them requires something much more hard-headed — more problem-focused — than four pleasing adjectives and a well-intentioned tagline about putting Indigenous perspectives at its centre.

Here we get to Orwell’s point. The greatest service the PC could do Indigenous people — the way it could really put their interests at the centre of its concerns — would be to express itself simply and candidly. Its draft strategy asserts that program participants and the broader community should “have confidence that policies and programs are being assessed objectively and independently.” Poppycock. It should stop pretending and fess up on behalf of the system. Having recommended a highly compromised form of independence for now, it should explain that the system isn’t ready for much candour right now and explain why.

Now you can see the power of Orwell’s advice about speaking simply. Speaking simply makes it hard, excruciating even, for you to cover your tracks — to mask your motives — with the usual sophistry. Once the officialese is jettisoned (or should that be official-ease?) the discomfort that the system is defending itself against becomes its own discomfort in explaining the sorry situation it is dealing with. And the only way to relieve that discomfort would be to go further and sketch out a longer-term plan to reach the outcome described in the honeyed words.

12. Towards the final strategy

For the final strategy to deliver a minimum viable product, I think it needs changes to the draft.

First, it should base its policy compromise on a much harder-headed understanding of the obstacles that stand between us and the land of “how.” After explaining why the whole system can’t possibly embrace real independence and transparency at the moment, it should go on to sketch its own vision of how that might be grown from the bottom up. I’ve shown one possible model with my proposal for an evaluator-general, which involves structural separation between the system’s doing on the one hand and its knowing and evaluating on the other. It needn’t be grandiose and system-wide: it can be built on a small scale and grown from there. Some submissions to the PC seem to think it has merit. The PC itself gives the idea considerable elaboration, but only as reportage. If it has a better model it should set it out.

Second, if the strategy is its contribution to thought, its direct contribution to action should be to call for and begin the process of designing a new burst of energy and innovation that might grow at the margins of current activity and begin to spread through the system.

Here, the current weakness of the system lies not so much in the lack of promising experiments in the field as in the relationship between them and the system itself. The system must be able to identify, validate and acknowledge the best of those experiments. Currently, it can’t do that. Evaluation can play some role in fixing that, though we should guard against something that’s already clearly in evidence — the system grabbing hold of evaluation as a deus ex machina, it’s next fad diet that will save it from itself.

And there are two far graver obstacles to progress. First, as those in the field can attest, our politicians frequently play to their own political advantage irrespective of the evidence. Second, bureaucracies have terrible trouble responding to knowledge of what’s working from the field, for such bottom-up learning is countercultural in a hierarchy where power is at the top. Further, if learning were to rise from the bottom at any scale, it would involve the discomfort and uncertainty of change for large numbers of people.

The PC can do little about the first of these more serious problems. But it can hope to be influential regarding the second. I think it’s possible to be very concrete and specific about what is necessary here. The system can only sustainably expand what works by bolstering the status of the individuals and communities who have made it work and giving them much more authority and resources within that system.

Those at the centre of the system are just as important as the successes in the field, but there’s nothing unique about them — or there shouldn’t be if the system is working properly. Those in the system need to be made accountable not just for talking about expanding what works but for making sure it happens, despite the discomfort it will undoubtedly cause. To that end, a regular report could be recommended, by the auditor-general or some other independent guardian of integrity in the system, to document, say every two years, what progress was being made towards this goal of spreading “what works” and particularly the increasing empowerment of those who make it work.

For those of us who call ourselves Australians to properly begin the task that governor Arthur Phillip began with such high ideals and so little to show for it, we can only do it to the extent that non-Indigenous people and their institutions unloose themselves from those “anxious avaricious tentacles of the self.” To the extent we falter, the soft voice of conscience will keep whispering that destiny to us. •

This essay benefited from helpful comments on earlier drafts from Romlie Mokak, Keryn Hassall, Janina Gawler, Michael Griffith, Jon Altman, Mike Dillon, Christos Tsiolkas and Clive Kanes. As always, I am wholly responsible for the essay’s remaining inadequacies. The title “Orwell that ends well” is shamelessly stolen from my friend Konstantin Kisin.

The post Orwell that ends well? appeared first on Inside Story.

“It is the socioeducational status of students, even ahead of the work of schools, which is having an increasing impact on student achievement,” a forthcoming Gonski Institute paper finds. At the heart of our problems, it suggests, is the nature of choice and competition between schools and sectors. “Our schools are increasingly characterised less by what they do and more by who they enrol.”

The solution, Piccoli believes, is to create a level playing field in which all schools are resourced and regulated on the same basis. “We have one of the most segregated school systems in the world,” he says. “Australia needs dramatic reform to deal with this.” Specifically, he proposes that non-government schools, in return for full public funding, should be subject to the same prohibition on charging fees as government schools and required to enrol all comers.

As the Gonski paper puts it, “A public charter of operation and obligations needs to apply equally to all funded schools.” Under such a charter, private schools would continue to be self-governing and could maintain their religious character, just as church schools do in Canada and New Zealand. But they would be regulated in the same way as all other schools.

Piccoli takes this a step further. “Why not fully fund all schooling options in primary education given that they are almost fully funded already?” he suggests. “I propose only primary schools at this stage because it’s where the smallest funding gap is.”

Two premises underlie Piccoli’s proposal: first, that the intense concentrations of social disadvantage found in the Australian school system are a major driver of declining student wellbeing and achievement; second, that those clusters of disadvantage are generated by competition between fee-charging schools and free, comprehensive schools.

He is on solid ground in both respects. Consider this statement by George Pell when he was archbishop of Sydney in 2006: “Catholic schools are not educating most of our poor, especially at the primary level. Seventy-two per cent of Catholic students from families with lowest third of family income attend government infant/primary schools and only 19 per cent attend Catholic schools.”

Bishops may not have been so candid since then, but we know from My School that the proportion of disadvantaged students at systemic Catholic schools has further declined over the last decade, and the share at independent schools is even lower.

Because it is more difficult for low-income families to access fee-charging schools, children from disadvantaged backgrounds are under-represented in those schools and over-represented in public schools that can be just minutes away. The degree of disadvantage in one sector is an artefact of the lack of it in the other. Of the schools in which more than half of the children come from highly disadvantaged families, 95 per cent are public schools.

In practice this means that the kids who bring the least cultural and social capital through the school gates — whose educational success is most dependent on what happens in school — have the odds further stacked against them. Students with acute learning challenges find themselves vying for teacher attention with others in the same boat, in classrooms disrupted by behaviour that is ultimately the product of poverty and social dysfunction. The aspirations of the school community are accordingly low, as is teacher morale, recruitment and retention.

Piccoli views these arrangements as a recipe for educational failure. As the Australian Council for Educational Research has repeatedly found, the social background of students’ peers has as powerful an effect on their educational achievement as their own family background. The Gonski review recognised this, recommending extra funding for schools with high concentrations of disadvantaged children, but Piccoli is proposing that we can tackle the root cause of the problem. Making all schools fully taxpayer-funded and therefore free to users, his argument goes, would produce a more even distribution of advantaged and disadvantaged students through the whole school system, substantially reducing social segregation and removing a major structural driver of educational underperformance.

But would it be affordable? Piccoli’s argument is that the rapid growth in public funding to non-government schools in recent decades means it wouldn’t be a huge leap. By 2017, non-government schools received somewhere between 83 and 105 per cent of the recurrent public funding going to government schools that enrolled similar students. So it would now cost only an additional $1.1 billion annually to fund all non-government schools at the same level as public schools. Topping up capital funding to equivalent levels would cost the government a further $966 million each year. For perspective, the annual cost of the federal government’s Stage 1 tax cuts is $8 billion, and the additional annual cost of each of the Stage 2 and 3 tax cuts is likely to be double that.

Piccoli has suggested that wealthy schools wishing to continue charging fees would no longer receive as much, or perhaps any, government support, creating savings. Governments provide more than a billion dollars in subsidies annually to around 200 exclusive private schools where the fees are already higher than the total income per student at public schools. Starting with primary schools would reduce the initial cost of the plan further, although secondary schools are where the most acute social segregation occurs.

There’s a larger point, too. If Piccoli’s case about the structural cause of Australia’s declining educational performance is correct, the increase in government outlays would be more than justified by greater productivity, more jobs, better health, and reduced crime and welfare dependence.

Research conducted by Deloitte Access Economics for the federal government in 2016 found that a 5 per cent increase in scores in the OECD’s Programme for International Student Assessment would increase GDP by around $12 billion by 2066. The report could have pointed out that this figure also represents the cost of the decline in our PISA scores — also around 5 per cent — so far this century. Ultimately, making users pay for school education is costing us far more than it saves our governments.

A more equal distribution of obligations and responsibilities across the school system also has the potential to transform the incentives faced by individual schools, shifting their focus from recruiting the “right” students to making the students they have brighter. Education researcher John Hattie uses the term coasters to describe schools that look successful simply because they are populated by the offspring of the affluent and well educated. They are good at recruiting students with natural aptitude, but they don’t add anything to our overall educational achievement. With less power to discriminate over whom they enrol, the coasters would be compelled to focus less on marketing and more on improving learning.

If there is a sound educational case for Piccoli’s plan, what about the politics? At the moment, Catholic and independent schools can have their cake and eat it too: they are publicly funded to almost the same level as government schools but retain the right to charge fees and enrol selectively. Why would private schools or parents entertain any disturbance of the status quo?

One reason is that current arrangements don’t actually provide choice in a meaningful way. Think of those less well-off Catholics who overwhelmingly attend public schools, and do so in much greater numbers than their more well-off co-religionists. Piccoli’s proposal would enable low-income families to exercise their first preference for their child’s education, an initiative that would likely also resonate with those parents who struggle to pay the fees at their non-government school of choice. It could also appeal to those religious figures for whom the under-representation of disadvantaged kids at their schools is a cause of unease.

And in terms of immediate organisational self-interest, full public funding would position non-government schools to expand their enrolment share. Christian Schools Australia made the case for full public funding of non-government schools in its submission to the Gonski review. National Catholic Education Commission executive director Jacinta Collins has greeted Piccoli’s proposal with qualified approval. It “may have some merit,” she told the Sydney Morning Herald.

But other parts of the non-government sector would likely reject full public funding as long as it meant they could no longer charge fees as well. The most prestigious independent and Catholic schools wouldn’t readily relinquish the market power their present status provides, and for some parents the right peer group and a resource advantage over neighbouring schools are precisely the attraction.

But if Piccoli’s proposal became a serious possibility, the non-government sectors would have to think very carefully. They could not rationalise rejection on the grounds of choice, because that’s precisely what Piccoli’s proposal provides. Nor could they appeal to affordability, because they would be arguing against free schooling. To continue to demand the right to charge fees and enrol selectively would simply be to insist on an unsustainable claim to privilege, aided by the public purse.

Because Piccoli’s approach affirms that every family, as citizens and taxpayers, is entitled to access a fully publicly funded education — and that there shouldn’t be a financial penalty attached to a conscientious choice of a non-government school — it invites a coalition between two groups that currently exist in opposition: those who want education to be free and those who want choice. This potential coalition would cut across the secular–religious lines just as decisively as when Protestant and Catholic school authorities decided in the mid twentieth century that their common material interests were more important than their spiritual differences.

Such a coalition would be a necessary precondition for fundamental change, but proponents of public education would have reason to baulk, fearing that free private schools would lead to a significant loss of enrolments. In the short term, the fear would be justified — the whole objective is to make church schools just as accessible and inclusive as public schools. In the long run, though, it would mean that schools will compete for enrolments on the basis of what they do rather than on their attractive student profiles and resource advantages.

A range of complex issues would need to be tackled to achieve this new settlement. “The starting point has to be cross-sectoral and wider community consultations to establish consensus on the purposes and principles which should underpin our schools,” says the Gonski Institute report. Its immediate achievement is to raise the thorny question of how responsibilities and obligations, as well as resources, are shared across our school systems.

The alternative to confronting this question is to continue drifting along in a post-Gonski torpor, imagining ourselves to be closing in on needs-based funding, the supposed panacea for our educational ills, as it grows ever more elusive. Between 2009 and 2018, government funding for private schools increased by more than five times the increase for government schools, even though the latter enrol four in every five disadvantaged students, research published in June in the Nine newspapers revealed. In response, the Grattan Institute’s Peter Goss observed that private schools are on track to receive their full needs-based funding allocation by 2023 while “very few government schools will ever get fully funded.” As he added, “By 2030 we’re going to be having this same argument and it’s all predictable from now.”

It is predictable, in part, because Australia continues to have two conversations about school education that never really join up. On the one hand is the central challenge of ensuring our schools are adequately resourced to meet our students’ educational needs, a challenge we are abjectly failing. On the other is the old debate about why some parents have to pay out of their own pockets for school education and others don’t, an argument that has simmered away since before Federation.

The trajectory of government funding over the last decade will seem perverse to many. But parents who pay for private schooling — and who contrast their own experience with that of neighbours, sometimes better off than themselves, whose children enjoy a fully publicly funded education — have reason to see things differently. When these parents learn that their child’s school, and other schools like them, are receiving more government support than ever, they are apt to think that this is only fair.

What Piccoli’s intervention points to is a way we can join the two conversations up, comprehensively resolving the old debate so as to create room to address the urgent contemporary questions. “We don’t think you should have to pay school fees anymore — and we’re going to provide the public funding for your school so you don’t have to,” a politician who ran with this proposal would be able to tell the electorate. “You have the right to choose your child’s school, and you shouldn’t be financially penalised for your choice.”

Having settled that question once and for all, we would be in a much better position to recognise the corollary. Once a private school is funded just like a public school, it no longer needs to charge fees — and suddenly a level playing field, in which all schools are free and inclusive, and facilitate choice and diversity, looks possible. •

The post Should private primary schools be free? appeared first on Inside Story.

Tess Ryan writes:

In the waiting room of a general practice a woman sits waiting to see the male clinician. She is uncomfortable and worries, because of past experiences, whether her concerns will be taken seriously or the doctor will see her problems as trivial.

An Aboriginal person also sits uneasily, knowing that the non-Indigenous people around her have no understanding of what her life entails, or what it means to be deemed a problematic statistic, or the assumptions that dictate how her health concerns are framed. If you have kidney or liver problems, it must be due to alcohol use. If you are a diabetic, it is due to the food you eat.

Also waiting is someone with a chronic condition. This person is running through her mind the list of concerns about her body, and the next complications she may face. When some new problem arises that can’t be explained neatly within diagnostic categories, she knows from past experience that she will be told, unsatisfyingly, “This is probably just a part of your condition.”

And an academic, who writes about race, cultural nuances and systemic failures across various institutions in the hope of disrupting them for the better, also waits for the doctor.

How many people sit in that waiting room? The answer is one. Me.

I walk into a medical practice with an understanding of health systems derived from my various identities: a Black Australian, a woman, someone with a deepening chronic illness, and an academic and writer with an understanding of the denial of Black voices and how health systems ignore the totality of people’s lives.

I come with many languages, some embedded in an emotional place that echoes through my body, and a history of being told I am less. I also bring an intellectual language for describing my understanding and experiences of racism and intergenerational trauma.

Observing myself in that waiting room, I am overcome with exhaustion. These discussions about race and racism that have come to the fore with the pandemic and with Black Lives Matter are necessary. But so utterly tiring. In case you haven’t noticed, we have been doing this work for a very long time.

____________

Melissa Sweet writes:

On a late spring’s evening in 2018 the Fred Hollows Foundation hosted a historic celebration in Adelaide. Guests whipped out their phones to record and tweet the beaming smile of the guest of honour, the president of the Australian Indigenous Doctors’ Association, Kris Rallah-Baker, with his arms wrapped around his parents. The celebration marked Dr Rallah-Baker’s graduation as Australia’s first Indigenous ophthalmologist.

Although he was just thirteen years old when the legendary eye surgeon Fred Hollows died in 1993, even then he had his sights set on becoming a doctor. But a careers counsellor at his school advised him against doing medicine, despite the fact that he was a top student, because “Aboriginal doctors were virtually unheard of.”

Low expectations are among the many ways that racism is expressed towards Aboriginal and Torres Strait Islander people, and Rallah-Baker experienced many other manifestations during his medical training. Not long before that graduation ceremony, he decided to put his concerns on the public record. “My own dealings with blatant racism, degradation, training delays, bullying, harassment and racial vilification are unfortunately considered an unremarkable experience amongst my Indigenous medical brethren,” he wrote in Insight, the industry magazine for the eye-care sector.

Initially the Royal Australian and New Zealand College of Ophthalmologists, or RANZCO, dismissed those concerns. But it quickly came under fire, with one headline referring to the college’s having engaged in “whitesplaining.” In an open letter, Aboriginal and Torres Strait Islander academics and health professionals, along with the Australian Indigenous Doctors’ Association and members of the Leaders in Indigenous Medical Education Network, condemned the college for “its callous disregard” of Rallah-Baker’s “experiences of racism and bullying and the attempt to publicly undermine his integrity and commitment to his profession and his people.”

Rallah-Baker had given RANZCO the chance to be part of the solution, they wrote. “We urge RANZCO to take up the call for the necessary institutional reform needed to ensure that Dr Rallah-Baker is not the first and last Indigenous ophthalmologist in this country. We urge you to listen and learn from his experiences and further, commit to action in the interests of Indigenous health justice.”

Within weeks the college issued a public apology — and Rallah-Baker is struck by how far the organisation has evolved since then. “I am absolutely impressed at how far they have come,” he tells me. “It’s been transformative for the organisation.”

He describes an increased focus on Indigenous eye health in training programs and an ambitious Reconciliation Action Plan. Aboriginal, Torres Strait Islander and Māori flags are now displayed prominently at college events, Acknowledgement of Country and other Indigenous protocols are in use, and the college has introduced cultural safety training — a strategy for tackling racism that encourages health practitioners to reflect critically on their knowledge, skills, attitudes and behaviour.

At a personal level, Rallah-Baker appreciates how RANZCO colleagues have rallied around at critical times, such as when the mining company Rio Tinto destroyed sacred sites at Juukan Gorge in Western Australia during Reconciliation Week, and when the Black Lives Matter movement brought global attention to the pervasive and violent effects of racism in all its forms.

But the point is not so much that a conservative, largely white organisation like RANZCO could change for the better. More significantly, this is just one of countless examples of how hard Aboriginal and Torres Islander people work, individually and collectively, to deal with racism — and not only in its most obvious forms.

The work has involved generations of scholarship, teaching, training, activism and advocacy. It has involved campaigning for policy and organisational change to tackle the institutional racism whereby society’s institutions and systems are designed to operate in ways that privilege some groups over others. In Australia, institutional racism is most glaringly evident in the failure of mainstream health, education, justice, media and other sectors to address the aspirations and needs of Aboriginal and Torres Strait Islander people.

Aboriginal and Torres Strait Islander people also contribute immense emotional labour in pushing for justice and change after loved ones have been harmed or killed. In her report on the death of Wiradjuri woman Naomi Williams from septicaemia at Tumut Hospital in 2016 — the result of an infection that is usually treatable — NSW deputy coroner Harriet Grahame acknowledged “the enormous pain Naomi’s family and friends feel and I thank them for their courageous attendance and dedicated participation in these difficult proceedings.”

Grahame saw their motivation as twofold: “They have been dedicated to trying to find out exactly why Naomi died, but they have also been looking for ways to improve health outcomes for other Indigenous patients in their local community. In this way they are honouring Naomi’s life and acknowledging her status as an emerging leader of her community.” Her report stresses the importance of Aboriginal people’s representation at all levels of the health system, and explores the impact of implicit bias and racism on healthcare for Indigenous patients.

Grahame documents “clear and ongoing inadequacies” in Ms Williams’s care, also finding that the care provided to her family after her death was “not compassionate or appropriate.” In the several months before she died, she presented at least eighteen times to the hospital with recurring, persistent symptoms, including vomiting and nausea, but felt her concerns were not being taken seriously because she was being stereotyped as a drug user rather than being referred to appropriate services.

The pandemic has brought the harmful impacts of racism to greater prominence, with headlines around the world reporting that Black people are not only more likely to contract Covid-19 but also more likely to die from it.

For Aboriginal and Torres Strait Islander people, however, such concerns are no revelation. Next year will mark the fiftieth anniversary of the Redfern Aboriginal Medical Service, the country’s first Aboriginal community-controlled health service. It was established to provide a culturally safe alternative to mainstream services, and since then it and other similar organisations have argued that tackling racism is critical to improving the health and wellbeing of Aboriginal and Torres Strait Islander people.

Yet these calls have fallen largely on deaf ears. In fact, the r-word doesn’t appear in three landmark documents in the history of Australian health reform: Australia: The Healthiest Country by 2020, the “roadmap for action” of the National Preventative Health Strategy (316 pages); A Healthier Future for All Australians, the final report of the National Health and Hospitals Reform Commission (279 pages); and Building a 21st Century Primary Health Care System, which spelt out “Australia’s First National Primary Health Care Strategy” (forty-four pages).

Last year saw the release of health minister Greg Hunt’s ambitiously titled but modestly scoped report, Australia’s Long Term National Health Plan to Build the World’s Best Health System (twenty-four pages), and plans for a new national preventive health strategy. Again, though, silence on this central issue.

Writing in the Medical Journal of Australia in March, University of Queensland health researchers Chelsea Bond and David Singh highlighted other omissions and pointed out that the National Health and Medical Research Council has yet to invest in a research program to understand and tackle racism in the health system.

By contrast, the National Aboriginal and Torres Strait Islander Health Plan 2013–2023, released by the government in 2013 and developed in partnership with Aboriginal and Torres Strait Islander organisations, made action against racism central, as did this year’s report from the Close the Gap campaign, which represents peak Indigenous and non-Indigenous health bodies, non-government organisations and human rights organisations. Yet the most recent of the federal government’s Closing the Gap reports mentions racism just once and contains no specific targets for tackling it, whether population-wide or in critical areas such as health, education or justice.

Among the Aboriginal and Torres Strait Islander organisations and leaders working overtime to break this silence is the Coalition of Peaks, which represents about fifty Indigenous organisations. In March, the coalition signed an historic agreement with the Council of Australian Governments setting out a power-sharing arrangement over the next decade, including a commitment to three-yearly Aboriginal and Torres Strait Islander–led reviews of Closing the Gap work.

The Coalition of Peaks is due to sign an agreement with federal, state and territory governments and the Australian Local Government Association on the next iteration of the Closing the Gap strategy. It is pushing not only for increased investment, according to its lead convenor, Pat Turner, but also for funding to go directly to Aboriginal and Torres Strait Islander–controlled organisations.

For Kris Rallah-Baker, the present moment — with the convergence of the pandemic and the Black Lives Matter movement — brings a unique opportunity.

The Aboriginal health sector’s response to the pandemic, faster and more effective than those from mainstream organisations, has been widely acknowledged. The role of the Aboriginal and Torres Strait Islander Advisory Group on Covid-19, which has been advising the Australian Health Protection Principal Committee, shows how tackling institutional racism through structural change can lead to better outcomes. The group, co-chaired by the National Aboriginal Community Controlled Health Organisation, or NACCHO, works on principles of shared decision-making, power sharing, two-way communication, self-determination, leadership and empowerment, according to a report in the Medical Journal of Australia.

Rallah-Baker, who is now president of the Australian Indigenous Doctors’ Association, or AIDA, says the Black Lives Matter movement has catapulted longstanding concerns into mainstream consciousness. “In Australia, we’ve had our own issues and debates around deaths in custody, and treaty, and reconciliation, right back to the Indigenous wars of independence,” he says. “By seeing those movements become mainstream in other Western countries, Australians start to question their own system.”

Weeks before our screens filled with the brutal images of a policeman’s knee on the late George Floyd’s neck, AIDA called out the racism Aboriginal and Torres Strait Islander people were experiencing in health services during the pandemic (for example, a patient who identified as an Aboriginal person was denied testing because priority treatment would only be offered to “real Aborigines”). AIDA also called for the early release of imprisoned First Nations people to prevent Black Covid-19 deaths in custody.

In April, the Australian Health Practitioner Regulation Agency backed AIDA’s concerns and encouraged Aboriginal and Torres Strait Islander people to lodge complaints if they had experienced racism or culturally unsafe care. “We will not tolerate racism particularly given the impact it has on community members accessing critical healthcare at this time,” said chief executive Martin Fletcher.

Just a few months later, non-Indigenous public health officials were warning Australians against attending Black Lives Matter marches, while remaining silent on public health threats such as police brutality and institutional racism. Indigenous health leaders spoke up strongly in response. The Centre of Best Practice in Aboriginal and Torres Strait Islander Suicide Prevention urged schools “to teach children about our history of racism, the social and historical determinants that underlie it, how this historical oppression continues, and what each of us can do to stand against racism.” NACCHO joined a broad coalition calling for the prime minister and opposition leader to support a bipartisan national anti-racism strategy.

Pat Anderson, chair of the Lowitja Institute, criticised the government’s lack of acknowledgement of the core concerns of Black Lives Matter. “We need to acknowledge that racism is deeply entrenched in Australia and is a public health emergency for Aboriginal and Torres Strait Islander people,” she said. But instead of taking urgent action on the Black Lives Matter concerns, “our government criticises us for our protests.”

In Melbourne, the chief executive officer of the Lowitja Institute, Narrunga Kaurna woman Janine Mohamed, a longstanding advocate for cultural safety, marched with her family and other colleagues working in Aboriginal health. As they walked, she later wrote, she thought about the linkages between punitive health and justice systems, and the stories of Ms Dhu, Naomi Williams, Tanya Day and David Dungay Junior and their preventable deaths. “So many of our people have been hurt and harmed by traumatising systems. Yet it took the death of an African-American man in the US to bring so many non-Indigenous Australians out on to the streets.”

At Wagga Wagga, in the NSW Riverina, Donna Murray, chief executive officer of Indigenous Allied Health Australia, joined hundreds of others in the Black Lives Matter march, where many wore masks and carried signs declaring “I can’t breathe.” She was moved by thoughts of the late Naomi Williams and her family, she tells me, and how little the mainstream health system had done to address the coroner’s findings. A descendant of the Wiradjuri nation of the Murrumbidgee River and of the Wonnarua nation of the Hunter Valley in New South Wales, Murray has spent decades working in Aboriginal and Torres Strait Islander affairs within government and community organisations.

What happens when all the non-Indigenous people go home? Indigenous Allied Health Australia’s Donna Murray. Honoring Nations/YouTube

On that day, she felt good to be on her Country and connecting with community after stressful months supporting members, many of whom were reporting increases in racism in their daily working and social lives as a result of the pandemic. “Fairly early on, it was quite obvious that it was going to be an issue to manage,” she says. Like other Aboriginal and Torres Strait Islander health workforce groups, her organisation ran webinars for members, stressing the importance of self-care and the cultural determinants of health as an antidote to racism.

Like Rallah-Baker, Murray believes that the increased global awareness arising from the pandemic and Black Lives Matter has created an opportunity to drive the anti-racism agenda. She would like a national process for tackling racism in health and education, including more support for Aboriginal and Torres Strait Islander people to make complaints about health services and health professionals.

She also wants non-Indigenous people and organisations to deal with racism. This is not the responsibility of Indigenous people and organisations, she says. “Our responsibility is to support our own people in caring for families and communities, and stay strong so we can keep identifying our priorities and find solutions through nation-building and self-determination.”

Murray suggests that I ask Speech Pathology Australia about why it came out in support of Black Lives Matter, one of a small number of mainstream health organisations to do so. When I question SPA national president Tim Kittel about this, he links the statement to other changes made by the organisation, including setting up an Aboriginal and Torres Strait Islander committee, making a formal apology to Aboriginal and Torres Strait Islander people for the profession’s history of causing harm, and encouraging members to undertake cultural safety training.

The SPA board is “firm” on the need to address the systemic discrimination and racism experienced by First Nations people, says Kittel. “There is so much more to do.”

At the end of the march in Wagga, Murray says she was left wondering: “When all those non-Indigenous people go home, what are they going to change and transform, so we don’t all have to keep coming back to march and speak out in another twelve months’ time, still in the same place, under the same dominant system? That’s always my question.”

Towards the end of a webinar hosted by the Australian Healthcare and Hospitals Association — coincidentally held the day after George Floyd was killed in Minneapolis — the AHHA’s strategic programs director, Chris Bourke, showed a complex “mud map” outlining multiple, overlapping ways that racism in healthcare is being dealt with through regulations and law.

It included the Australian Commission on Safety and Quality in Health Care’s implementation of new national healthcare standards released in 2017, race discrimination law, and the Australian Health Practitioner Regulation Agency’s work to embed cultural safety across healthcare.

Bourke, a Gamilaroi man, brings wide-ranging experience to this work, as Australia’s first Indigenous dentist and a member of the ACT Legislative Assembly from 2011 to 2016, where he held ministerial roles across portfolios including Aboriginal and Torres Strait Islander affairs, children and young people, disability, corrections, and education and training.

He says his father, an Aboriginal schoolteacher and principal, had a profound impact on his education. “I was incredibly lucky to be in such an environment and it protected myself and my siblings from many of the impacts of racism and discrimination that so many other Aboriginal and Torres Strait Islander people experience both in going to school and growing up.”

He studied dentistry because he liked science and doing things with his hands, and wanted to help people. He recalls working on Groote Eylandt in the Gulf of Carpentaria in the 1980s, when the dental clinic that served the non-Indigenous community was relatively well equipped but the one for local Aboriginal people “looked like something out of before the war.”

“There was no capability to do any fillings; you were there to take people’s teeth out. There wasn’t even an autoclave,” he recalls. “This was truly appalling ­— an example of a pattern of care, a model of care that’s been established as a result of institutional racism.”

Bourke says the concept of institutional racism recognises that organisations can serve some groups poorly because of the way they are run, managed, held accountable, resourced, located and staffed. It is about more than just staff behaviour, he says. Training and anti-racism courses will be ineffective if power structures don’t change.

Boards and management hold the key, but Bourke stresses the challenges involved. “It’s hard work. You have to play every note on the piano to get that change to happen.” But he is optimistic about “groundbreaking” developments in Queensland, where the state government, working with the Queensland Aboriginal and Islander Health Council and Indigenous academics, has drafted legislation to tackle institutional racism, including by requiring each hospital and health board to have at least one Aboriginal or Torres Strait Islander person as a member. With the pandemic constraining parliament’s operations, though, it’s not clear when the legislation will be debated, according to the office of Queensland health minister Steven Miles.

The South Australian health department is exploring a similar model, and is working with the AHHA on this. “That still leaves a number of other jurisdictions that could lean into this space and get some work done,” says Bourke.

In June last year, participants at the Lowitja Institute’s International Indigenous Health and Wellbeing Conference in Darwin outlined twelve priorities. “Colonialism and racism are determinants of ill health,” said one. “We call for comprehensive truth telling processes, and the acceptance of these truths, to dismantle colonial narratives and systemic racism in health research, policy and service delivery.”

While movements are growing for truth telling, as evidenced by the Uluru Statement from the Heart and, most recently, Victoria’s new truth and justice commission, the lived experience of many Aboriginal and Torres Strait Islander people shows a long road ahead.

__________

Tess Ryan writes:

Back in that waiting room I contemplate these developments, wearing all of my hats, including as president of the Australian Critical Race and Whiteness Studies Association.

My stomach churns reading again about Naomi Williams and her family. I think back to the time I spent with them, and the conversations we had about disconnections between cultural understandings of health and the health system. Recalling those days brings up all the anger and trauma, again. But this anger also fires us up to continue the fight.

We seem to be in a moment where change feels possible, and more commentary is recognising the many experiences of Black people and other people of colour. We are seeing very public denouncements of racism and an acknowledgement through numerous industries that those Black lives do matter. It is a powerful elixir to see allies also take on that work and young people in community wanting to carry the baton for changing these systems.

I want these developments to lead to systemic and structural change. It is the people within the system who need to see that change as necessary. At the micro or relationship level, I want to see behaviours shift in how we view various groups of people in connection with race. Rendering our bodies as statistical issues in health does nothing to change the paradigm of othering, and the focus on fixing the “condition” without having conversations about lived experience.

These developments are really only the beginning of the conversation we need to have. As an Aboriginal woman I will always want to work for that change, no matter how despondent I may feel. We look for the hope by looking backwards at all those who have advocated before us, and we look to the now and beyond in the strength of Black voices. We need to keep the momentum going, and for the policy changes to improve practice.

My hope is that I can walk into a medical clinic feeling like I am part of a team of people and professionals who will listen to my experiences, respect my different positions located in my identity, and work to build manageable solutions for better health and wellbeing. If I need a multidisciplinary team, then I expect them to work together with me and not sit in silos of their own discipline without connecting the dots to what can assist in better health.

I want to know that my mother is getting appropriate access to healthcare in her small town, that my brother doesn’t feel isolated from good health service delivery in a big city, and that a death like that of Naomi Williams won’t happen again. I want to see people like Kris Rallah-Baker supported and more Aboriginal and Torres Strait Islander people become ophthalmologists, or psychiatrists, or epidemiologists. We should see this as the norm and not the exception.

And I want other Australians to acknowledge and understand the hard work we do — as academics, professionals, policymakers, community members, commentators, digital media practitioners and artists — to try to educate you and open your eyes and ears and hearts. Our work, in navigating racism, informing people about discriminatory practice and working within institutional structures to create change, is immense.

We work to educate you in understanding difference, in pushing back against racial violence, in railing at the structures that think they can do better for us when we have our own solutions. Community-controlled health organisations have been doing exactly this during the pandemic, and these successes are regularly ignored.

Many Aboriginal and Torres Strait Islander people and communities have given decades of service to improve this country’s healthcare. It is time for other Australians to step up, take the responsibility and do the work, through your conversations and relationships as well as through changing policy and institutions and making yourselves accountable. We have been carrying you all this time without your even noticing. •

The publication of this article was supported by a grant from the Judith Neilson Institute for Journalism and Ideas.

The post The long road to healthcare justice appeared first on Inside Story.

In that capacity, Alston wrote a series of searing reports, including some highly critical of the United Nations itself, and its agencies. In one, he charged that “if the United Nations bluntly refuses to hold itself accountable for human rights violations, it makes a mockery of its efforts to hold governments and others to account.”

Alston’s most recent report to the UN Human Rights Council, The Parlous State of Poverty Eradication, is in similar vein. “The world is at an existential crossroads,” he writes, “involving a pandemic, a deep economic recession, devastating climate change, extreme inequality and an uprising against racist policies.” Underlying all these problems, he adds, is “the longstanding neglect of extreme poverty by many governments, economists and human rights advocates.”

Alston’s report challenges what he calls “the mainstream pre-pandemic triumphalist narrative” that “extreme poverty is nearing eradication.” Such claims rely on the World Bank’s international poverty line, he says, which is currently set at US$1.90 per day in 2011 prices and converted into other currencies with adjustments to reflect “purchasing power parity,” or PPP.

The World Bank’s poverty baseline is derived from the poverty lines used in fifteen of the poorest countries in the world (most of them in sub-Saharan Africa). For Alston, that represents a “staggeringly low standard of living, well below any reasonable conception of a life with dignity.” US$1.90 in 2011 prices is equivalent to A$2.31 in today’s Australian dollars (converted at PPP), or A$16.20 per week. That’s well below Australia’s Henderson poverty line of A$542.90 per week for a single person, for example, or A$1109.75 for a two-parent household with two children. And it’s less than half the former Newstart allowance of A$40 per day, which is regarded as inadequate across the political spectrum.

Alston is hardly the first to make this point. Ten years ago, for example, the Nobel Prize–winning economist Angus Deaton gave a lengthy and detailed critique of how the World Bank’s measure was compiled and how it is used in comparisons between countries (and especially between “rich” and “poor” countries). Three years ago, in a presentation to an event hosted by Oxfam at Tasmania’s Government House, I observed that the proportion of the world’s population living in poverty was much higher, and had fallen by much less, if one used higher (but still very low) poverty lines than the World Bank’s preferred measure (see Chart 1).

Alston makes the point, as I also did in 2017, that most of the claimed reduction in global poverty is attributable to China. Exclude its 1.3 billion people, he says, and “the global headcount under a US$2.50 line barely changed at all between 1990 and 2010.” And if all of East Asia and the Pacific are excluded, “the number of people living in poverty would have increased from 2.02 billion to 2.68 billion between 1990 and 2015 under a US$5.50 line.” (US$5.50 per day in 2011 prices is equivalent to A$6.70 per day, or A$46.89 per week, in contemporary Australian dollars.)

Source: The World Bank, Povcalnet.

Based on more realistic measures, Alston says, “the world is not even close to ending poverty.” More than that, he points to two reasons why the number of people living in poverty is likely to increase rather than decline.

The first of these is climate change, which the World Bank has acknowledged could “force more than one hundred million people into extreme poverty by 2030.” And the second, of course, is Covid-19, which the World Bank last month estimated could push between seventy-one million and one hundred million people into extreme poverty, using the US$1.90 a day benchmark (see Chart 2). Using more realistic benchmarks, the impact is much greater: at US$5.50, for instance, the estimated number of people pushed into poverty is between 177 million and 233 million.

If the UN’s first Sustainable Development Goal of “an end to poverty in all its forms everywhere” is to be achieved by 2030, Alston believes five things must be done.

First, he says, we need to “reconceive” the relationship between economic growth and the elimination of poverty. “In too many cases,” he argues, “the promised benefits of growth either don’t materialise, or aren’t shared.”

Second, he asserts that a “significant redistribution” of income and wealth within countries (as distinct from among them) is “indispensable” if “extreme inequality” is to be reduced. To back this up, he cites a recent World Bank working paper’s conclusion that “reducing each country’s Gini index” — a widely used measure of inequality — “by 1 per cent per year has a larger impact on global poverty than increasing each country’s annual growth [by] one percentage point above forecasts.”

Third, he argues for taxation to be “front and centre in any set of policies to eliminate poverty,” both as “a symbol of solidarity and burden-sharing, and as a reflection of a deeper set of values.” In support of that aim, he suggests that governments “should publish income, wealth, and effective tax rates of top earners, and require multinationals to publish country-by-country reporting data.”

Source: Daniel Mahler et al., “Updated Estimates of the Impact of COVID-19 on Global Poverty,” The World Bank, 8 June 2020.

Fourth, he asserts the necessity of “large-scale debt forgiveness” (that is, waiving loans made by high-income countries and international financial institutions to low- and middle-income countries), especially in the wake of Covid-19. Members of the G20 (of which Australia is one) agreed in April to suspend until the end of this year debt service payments totalling US$11.5 billion on “official” debt owed by seventy-six of the world’s poorest countries. That doesn’t affect the US$13 billion owed to private sector creditors, however, and falls well short of outright forgiveness.

Finally, Alston calls for “universal social protection,” something he says is “incompatible with the ‘neoliberal’ policy prescriptions that shape the overall approach of the international financial and economic regimes” and at odds with the “austerity policies which have dominated much of the landscape since 2010.”

Rather than relying on the private sector to do all this — which Alston calls “a blind alley” — the role of government needs to be “centred.” He is particularly critical of the role played by “billionaire philanthropists,” claiming that they “jeopardise governments’ capacity to set priorities… and implement programs,” are “less likely to expose and tackle unjust underlying structures” and represent “a form of private political power… in which wealth can dictate policy without regulation or accountability.”

Instead, he says, “governments need to listen more attentively” to “people who have experienced poverty” rather than “shutting them out of policymaking processes.” An “urgent first step” would be to replace the World Bank’s poverty line with “the goal of realising the human right to an adequate standard of living,” as indicated by “a broad dashboard of multidimensional indicators that reflect modern expectations of a life free of poverty.”

Alston’s report is written with eloquence, reason and passion, but it doesn’t really say anything that hasn’t been said by many others before. And it is addressed to an organisation, the UN Human Rights Council, that has failed to do much more than “tick boxes,” as Alston implicitly acknowledges, has long been chronically mismanaged and, in the words of one observer, has become “a kind of refuge for officials involved in serious corruption cases.” It is difficult to conceive of the United Nations ever successfully tackling global poverty (or any other issue) if doing so runs counter to the perceived self-interest of one or more of the five nations possessing ultimate veto power.

But that’s not to say that Alston’s report won’t help change the way others think.

Earlier this month, eighty-three millionaires from seven countries (sadly, none of them from Australia) called on their governments to “raise taxes on people like us. Immediately. Substantially. Permanently.” This is necessary, they said, to solve problems “caused, and revealed, by Covid-19” that, in their view (like Alston’s), “can’t be solved with charity, no matter how generous.”

The OECD this month released new data highlighting “the misalignment between the location where profits are reported and the location where economic activities occur,” with multinationals in “investment hubs” reporting “a relatively high share of profits compared to their share of employees and tangible assets.” To some, that will be a (re)statement of the bleeding obvious: but it precisely fulfils Alston’s third recommendation and strengthens the evidence base for the OECD’s efforts to combat tax base erosion and profit shifting.

But it has long surprised me that one way governments could strengthen the revenue base of low- and middle-income countries is almost never mentioned by anti-poverty advocates. It is also conspicuously absent from Alston’s report. And that is to remove the longstanding barriers that face those countries’ exports to rich countries and abandon policies that artificially depress the prices they receive for the products they do manage to sell on global markets.

The East Asian states that successfully moved from low-income to middle- or high-income status by the end of the twentieth century did so largely through exports (Chart 3). One of the hallmarks of countries that have remained in the low-income category has been their inability to raise their national incomes — and thus the living standards of their people — in the same way. Indeed, the share of low-income countries’ GDP derived from exports of goods has been lower over the past five years than it was during the 1970s.

In some cases that’s largely the result of poor choices by the governments of those countries. But in many others it at least partly reflects rich countries’ restrictions on imports of the products that low-income countries specialise in, or rich countries’ subsidising of the production of commodities in which they don’t have any particular comparative advantage. Both practices have depressed the prices received by low-income producers on world markets.

Since 2009, according to the Centre for Economic Policy Research’s Global Trade Alert, rich countries have implemented almost 6000 measures considered “harmful” to international trade but fewer than 900 “liberalising” measures.

Note: “East Asian 7” are Korea, Hong Kong, Singapore, Malaysia, Thailand, Indonesia and the Philippines.
Source: The World Bank; author’s calculations.

While more of these harmful measures have been directed at China than at any other single country, Global Trade Alert says that more than 40 per cent of them are harmful to countries classified as low-income by the World Bank. Some 393 of them were directly harmful to India (which, it should be acknowledged, has been quite diligent in pursuing harmful trade policies itself); 236 were harmful to South Africa; more than one hundred were harmful to each of Honduras, Guatemala, Costa Rica and the Dominican Republic; and twenty-seven were harmful to Madagascar, one of the poorest countries on Earth.

According to OECD estimates, OECD member countries have spent US$2.4 trillion over the past decade subsidising agricultural production (of which the European Union accounted for US$1 trillion, Japan US$419 billion, the United States US$357 billion, Switzerland US$64 billion, Canada US$49 billion and Norway US$36 billion). This compares with US$1.4 trillion in official development assistance to developing countries by the governments of the twenty-four members of the OECD’s Development Assistance Committee.

One of the principal side effects of these massive subsidies is to push down the prices of subsidised products, especially when production exceeds what can be sold in rich countries and the surplus is dumped on global markets.

That, together with other discriminatory trade measures enacted by rich countries, deprives the governments of developing countries of revenue that they could have used to provide more or better services for their citizens. As Chart 4 shows, developing economies’ export earnings and their fiscal positions are strongly correlated.

And yet nowhere in his report does Alston call attention to the impacts that the trade and agricultural policies of rich countries have had in entrenching global poverty, or plead for major changes to those policies.

Note: Data are shown as six-month moving averages.
Source: Jonathan Anderson, MMT and Emerging Markets, Emerging Advisors Group, 14 July 2020.

He’s hardly Robinson Crusoe in that regard: nor does one ever see protesters outside gatherings of leaders or ministers of rich countries chanting or holding banners and placards demanding changes to the trade or agricultural subsidy policies that do so much harm to the world’s least-developed countries.

On top of this, there is a risk — which Alston doesn’t mention in his dire warnings about the likely consequences of Covid-19 — that rich countries will adopt trade policies even more inimical to the interests of developing economies in the name of “greater self-sufficiency” in “strategic products.”

It’s one thing for rich countries, including Australia, to want to reduce their dependence on a single supplier for personal protective equipment, or medicines. But that shouldn’t be used as an excuse to favour local production (which could be just as vulnerable to interruptions from natural disasters or industrial accidents, for example) over imports — especially from poorer countries. Nor should it be used as an excuse to take an unduly expansive view of what products should be designated as “strategic.”

Moreover, given the dire condition in which the pandemic (and the consequent recession) is likely to leave the public finances of rich countries, any success that rich-country governments are likely to achieve in mobilising public support for increases in taxation is likely to be applied to domestic needs rather than the needs of those in the world’s poorest countries — much as people of good will, including Alston, might wish it were otherwise. •

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New research from economists Atif Mian, Ludwig Straub and Amir Sufi shows that this cycle is fuelled by inequality. Wealthy people have cornered a greater share of national income, and are saving more. Less well-off people are receiving a smaller share of income, and borrowing more. The resulting decline in interest rates has kept the cycle going.

It sounds eerily similar to the situation in Australia, and it’s not the only cycle that’s increasing inequality. A lack of competition between firms is having a similar effect: transferring wealth from poor consumers to rich shareholders. Breaking these self-perpetuating cycles will be critical to Australia’s economic recovery.

The nub of the problem is that rich people have a nasty habit: they save too much and spend too little. This isn’t necessarily a problem if their savings are invested in expanding businesses, creating jobs and contributing to economic activity. Sadly, though, Australia’s well-documented increase in inequality hasn’t been accompanied by an increase in investment. Quite the opposite: while inequality has grown, investment has flatlined.

Mian, Straub and Sufi’s research shows that this “savings glut of the rich,” as they call it, is creating as well as financing the debts of the non-rich. Too much saving and too little investment has depressed interest rates; and lower interest rates are fuelling debt levels among non-rich households, which are borrowing to keep up. For the first time, this research shows, the rise in the share of income taken by the rich can explain almost all of the increased household debt of the non-rich.

We can see a similar cycle playing out elsewhere in the economy. In the Oxford Review of Economic Policy last year, Joshua Gans, Andrew Leigh, Martin Schmalz and I showed how market power is transferring wealth from poor people to rich people. The mechanism is straightforward: big companies have more power to increase their mark-ups, and so they do. That might be good for shareholders (who get higher profits), but it’s bad for consumers (who pay more to consume).

With poor people spending most of their income on consumption and owning few shares, and rich people spending a smaller proportion of their income but owning lots of shares, market power increases inequality. This is a serious problem in a country like Australia, where more than half of our industries are concentrated and, unsurprisingly, mark-ups have risen 60 per cent since 1980.

What to do? Australia’s inequality problem isn’t new, but we are becoming increasingly aware of just how damaging it is economically, politically and socially. More alarmingly, we are learning how the macroeconomic and competition effects are creating self-perpetuating cycles of inequality. The recovery from Covid-19 will require deep structural reform to lift growth, and also presents an opportunity to break these cycles through holistic reform of tax, welfare and competition.

The tax system is too generous to the rich, and the welfare system is too mean to the poor. Tax reform is an opportunity to remove the incentives for companies to borrow rather than seek new investors (by introducing a corporate equity allowance, for example) and to tackle the tax breaks that boost the savings of the rich (by reducing superannuation tax concessions, for example). It is an opportunity to broaden the tax base to fund public investment projects that boost productivity.

We can also change the welfare system to directly reduce poverty and thus inequality. Covid-19 hit households at a time when their debts were already high. Strengthening the safety net and boosting household incomes in a way that preserves incentives to work — such as through an earned income tax credit — would help repair household balance sheets and reduce the debt burden constraining consumption.

To boost competition, the government should reform the laws that shield many industries from competition — including those in airlines, pharmacies, coastal shipping, the legal profession and the medical profession. Opening up mature industries to fresh investment is a good way to reduce market power.

The laws regulating mergers and acquisitions should be tightened to guarantee more scrutiny of proposed mergers in industries that are already concentrated. And more can be done to make it easier for people to start new businesses, including the use of profit-contingent loans, the scrapping of non-compete clauses, and the release of appropriately zoned land by state governments.

Past epidemics have one thing in common: they made inequality worse. There’s no reason to think Covid-19 will be any different. The Australian economy can’t afford to snap back to old habits. •

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On this question the government could find itself between a rock and a hard place.

On the one hand, if it doesn’t provide funds, it might be back to the future, a repeat of amazing scenes in 1962 when Catholic schools in Goulburn closed and sent their students to government schools — which, of course, couldn’t cope. One non-government school principal, speaking on condition of anonymity, thinks that parents will be reluctant to change schools mid-year, but after that? The impact, he says, “could be really substantial.” Many of his colleagues are reported as agreeing.

On the other? If the government pays up without thinking through the consequences, it will compound a big and chronic problem. And, we should add, it will miss a golden opportunity.

One part of that big problem is financial. Australia’s dual system — a nationwide government school system and a nationwide non-government school system — is inefficient. Governments spend more than they should because there is so much duplication of facilities and services. A bad set-up is made worse by bad administration. Many non-government schools now get almost as much from the public purse as their government-sector equivalents (astonishingly, some actually get more).

Contrary to rhetoric, this generous public funding is used not to reduce fees and increase “choice and access” but to ice the cake and attract customers away from the government schools. Over the decades since the “Goulburn strike” forced the hand of government, Catholic schools have moved upmarket, effectively sending poor Catholic families to the government sector. Many independent schools have been turned into five-star resorts. It is at this point that the financial problem becomes a social, educational and governance problem.

Australian schools play by two very different sets of rules, to the advantage of one sector but at the expense of the other and of the school system as a whole. Schools that charge fees and parents who pay them are permitted to select and choose. Most of those that don’t pay fees can’t choose or select. The choosers usually opt for schools where their sons and daughters will find other students just like them. The chosen schools become more socially homogeneous, and so do the rejected schools. In the upshot Australian schools are among the most socially segregated in the Western world, and are segregated by religion and ethnicity as well. That undermines the work of schools as engines of social cohesion and sites of students’ social learning. The evidence suggests that segregation is also bad for academic performance.

There are unfairnesses as well, and they cut in both directions. On the one hand, most government schools and parents have limited access to choice and selection. But on the other, parents who can choose must pay to exercise that publicly endorsed right, and some of them can’t really afford it. Moreover, many parents who can afford to pay don’t because they use the real estate market or selective government schools to get for free what others pay for.

On top of all that, arrangements for governing and funding all this remain inordinately complex and incompetent, despite Gonski’s attempt at repair. Australian schooling as currently organised is incapable of tackling serious reform, including reform of any of the problems noted above, and is also stymied by chronic political conflict over the second-order question of sectoral funding shares. Tom Greenwell’s Canadian contrast is a nice reminder of just how bizarre and counterproductive our “system” has become.

The immediate problem is to ensure that the non-government system isn’t gutted and the government system isn’t inundated. The risk of that happening seems likely to grow, and to go on growing, along with unemployment, underemployment, and fear of debt. If it does, the cost of a quick fix will grow too, and that will compound the big problem.

The way out has three parts.

First, the government must help schools help parents, immediately. In doing so it should remember that government schools lean on parents to make “voluntary contributions,” often quite substantial ones; they’ll need help too. The government should establish a fund to which all systems, government and non-government alike, can apply, and it should commission an urgent analysis of the likely trajectory of the problem.

Second, it should make clear that this is an interim measure only. It should announce an in-principle intention to move to full public needs-based funding for all systems and independent schools willing to work within a common charter of rights and obligations. The core principles and objectives of that charter would include: no fees, the right to faith-based schooling, the obligation to reduce within-school segregation, and full transparency as to performance and compliance.

Third, it should set up the machinery to turn these principles into a well-designed proposal.

Is this pie in the sky? Or a left-wing plot?

On the funding side, no. The non-government systems like to claim that they save governments seven or eight billion dollars a year, something like 15 per cent of Commonwealth schools spending. The real cost of full needs-based funding would in fact be around 2 or 3 per cent. If public funding to schools that refused the charter were to cease, total public outlays would be reduced.

Governance? Existing authorities, government and non-government alike, would be left in place. The key difference would be in playing by common rules on a level field of funding and regulation. The National School Resourcing Board and the Australian Curriculum Assessment and Reporting Authority could be beefed up to monitor performance and ensure compliance. The Commonwealth would have to accept that the national interest is better served by a rules-based, transparent national system than by incessant federal interference and second-guessing of system authorities.

Ideology? The “level playing field” sketched above would essentially be a managed market, operated in the interests of greater equity, better performance, and more equally available access to school choice. For those who wonder what that might look like: consider the AFL (and Andrew Leigh’s discussion of its structure and success).

Feasibility? Some very difficult questions arise. What is meant by “diversity”? Would the same definition apply to every school? What about schools for Indigenous kids? Would all schools have the right to provide a “faith-based” education? By what means could selection be made more widely and more equally available?

There are no easy or perfect answers to these and many other questions. Some of the answers would have to be condensed into a suite of performance indicators going well beyond the current myopic focus on the formal curriculum, and that would be a technically challenging task. But coming up with answers worse than those in current operation would be hard.

And how would workable answers to these questions be found? Who would design a level playing field and map out a process of transition? One option would be a Gonski-style review, high-powered, well funded, with a small panel and a tight deadline (but this time headed by an eminent figure from the public sector rather than the private).

A final question: could a government long identified with non-government schools come at anything along the lines suggested? Three weeks ago the question would have been absurd. Now? Still probably not likely, but you never know.

On the one hand, the non-government systems, which have intimidated governments by campaigning on the “higher fees” slogan whenever funding decisions look like going against them, would not want to lose that leverage. Nor would they want to open their books to full public scrutiny. Low-fee independent schools would be glad to see the end of fees but wary of a charter’s contents and guarantees. High-fee independent schools would invoke big words about rights and taxpayer entitlement. Canberra bureaucrats would hate a larger role for statutory authorities and a smaller one for them.

On the other hand, government school systems would be generally supportive, though at least some (and in New South Wales particularly) would be leery about the implications for their selective high schools. And a level playing field for schools could be an electoral plus, popular with non-government school parents particularly, but also among government school parents attracted by a fairer system and more equally available choice.

Taken in sum, a clear-eyed look would reveal a lot in it for the Coalition and its base, but the miasma of ideology makes that unlikely. In which case, the federal opposition should pick up a gift on a platter. •

Thanks to Chris Bonnor for assistance in the preparation of this article. Comment to dean.ashenden@unimelb.edu.au would be welcomed.

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The package effectively doubles the rate of the new JobSeeker payment (formerly Newstart) for most people without children. Until now, a single recipient without dependants received a maximum of $565.70 per fortnight. Lone parents and people over sixty who have been on benefit for at least nine months got more, and each member of a couple got somewhat less. For the six months from 27 April the government will use a time-limited coronavirus supplement to boost the payment by $550 per fortnight.

Importantly, the extra $550 will go to all current recipients, including those who have been getting less than the maximum because they have assets or are in part-time work. It will also go to both existing and new recipients of the youth allowance, JobSeeker payment, the parenting payment, the farm household allowance and the special benefit.

Thanks to Monday night’s amendments, the list of recipients will also include full-time students receiving Abstudy, Austudy and youth allowance for students, bringing to as many as 1.3 million the number of people already on payments who will receive the special supplement.

Added to that — according to the government’s estimate — will be around one million new recipients, who will include permanent employees who are stood down or lose their jobs, sole traders, the self-employed, casual workers and contract workers, all of whom will need to have met the income tests and be jobless because of the coronavirus. Also included will be people who need to care for people who are affected by the coronavirus.

Some conditions will be relaxed. The assets test for three benefits — the JobSeeker payment, the youth allowance for jobseekers and the parenting payment — will be waived for the duration of the coronavirus supplement. The normal one-week waiting period will also be waived, as will the liquid assets test waiting period (which can be up to thirteen weeks). People already in this waiting period will be given immediate access to payments.

Importantly, the coronavirus supplement will be paid automatically. Current recipients will receive the full $550 on top of their regular payment without asking for it.

These changes significantly boost Australia’s working-age social security payments, at least temporarily, and push us up the global ranking. As this chart shows, Australia has been at the bottom of the pack compared with the “replacement rate” — the percentage of previous earnings covered by unemployment payments — in other OECD countries.

Courtesy of the Conversation

A number of countries have boosted their payments, at least temporarily, in response to the coronavirus. The chart below shows where Australia and New Zealand and France now sit, compared with the 2019 replacement rates of other countries. Australia has risen towards the middle of the pack, with our short-term earnings replacement rate climbing from 38 per cent to 68 per cent as a result of a near doubling of the base rate. (Replacement rates will be lower for higher-income workers who lose their jobs and higher for part-time workers and casuals.)

Courtesy of the Conversation

It is worth noting that other countries are adopting different approaches to target support. Denmark, for example, is providing a direct supplement of 75 per cent of wages to employers, up to a ceiling, on the condition that they don’t lay off workers. That’s less than Denmark’s current replacement rate of 84 per cent, but if it is successful it would effectively mean that Danish workers would continue to receive their normal salary (a 100 per cent replacement rate).

The Australian government has indicated that the stimulus package is “scalable,” meaning that it is possible to increase the dollar amounts even further and extend their duration. It has already fixed some gaps in its initial plan relating to students and newly arrived residents and temporary visa holders. Permanent residents will be eligible for assistance immediately and not subject to current waiting periods, which can be up to four years.

Reports suggest that special payments (and the coronavirus supplement) will be made available to temporary visa holders who lose their jobs or suffer “significant financial hardship” because of the coronavirus. It is unclear, however, whether this will apply to foreign students in Australia and New Zealanders. Another group whose status should be clarified urgently is made up of people who have applied for permanent residence and are still in that application process. A case exists for treating them as if they had already become permanent residents.

A remaining downside with potentially big unintended consequences is the failure, so far, to adjust the spouse income test, which will stop many potential recipients from receiving benefits and create a perverse “benefit cliff.” If a jobless person’s spouse is working and not receiving JobSeeker or equivalent payment, then his or her payment will be reduced by 60 cents for every dollar the partner earns over $994 each fortnight. If the working partner has an income of $1840 per fortnight, the recipient gets the full supplement of $550 per fortnight; if the working partner earns $1850 a fortnight, just $10 more, the recipient gets nothing. Single people face the same abrupt cut-off.

That ceiling on your partner’s earning, $1850 per fortnight ($925 per week), is right in the middle of the Australian income distribution. We calculate that, among two-earner couples aged twenty-five to fifty-four, about half the primary earners who lose their job will get the coronavirus supplement, but only somewhere between a quarter and a third of secondary earners will get it. (These are rough estimates based on Australian Bureau of Statistics income survey estimates of personal income distributions.) Given that in most couples the secondary earner is female, the different treatment has the potential to discriminate against women.

One way to eliminate the cliff would be to better integrate the coronavirus supplement into the income support system, so that people with spouse income above these cut-offs would continue to receive a reduced payment. The government has asked for power to fix this issue via regulation, but has not yet announced how it will tackle it.

An extra million recipients (according to the treasurer) will mean that the share of the working-age population receiving income support climbs from 14.2 per cent to 18.7 per cent. That’s an increase of 4.5 percentage points, bigger than the 3.5 and 3.8 percentage point increases during Australia’s two previous postwar recessions, in the early 1980s and early 1990s.

In both of those recessions, the unemployment rate shot up from under 7 per cent to near 10 per cent or higher within a year. This year’s job losses will occur in half that time, and won’t all be reflected in the unemployment rate. The non-participation rate is likely to rise as people decide to neither work nor look for work. The best measure to watch to track the labour market will be the reduction in hours worked.

International experience suggests that the reduction will be substantial. Service Canada is reported to have received more than 500,000 applications for employment insurance in the past week, twenty times the number recorded in the same week a year ago and equivalent to about 2.5 per cent of the labour force. Similar trends have appeared in the United States. In Australia, we are already seeing the payment system struggling under the load of new applications.

Our economic response to the coronavirus must have a key goal of sharing the economic costs. The government has made an excellent start in the package announced on Sunday and extended on Monday. But we have to be prepared to ramp up and expand support in the interests of fairness. •

This article draws heavily on a piece published yesterday in the Conversation.

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Epidemics of infectious diseases have continued to devastate affected groups in Australia. But these have generally been smaller (and often marginalised) populations, including Aboriginal and Torres Strait Islander people, injecting drug users and gay men. Except for brief periods, such as the early days of the HIV epidemic in the 1980s, mainstream Australia has largely been able to ignore these outbreaks. The viruses we have come to worry most about have been the ones on our computers.

Just like the Australian population, our health system has little experience in dealing with a crisis of this scale. The National Communicable Disease Plan, drawing on experience gathered by the Exercise Cumpston system test in 2006, has assisted in guiding the government’s response. But the realities of responding effectively to the virus have demonstrated the vulnerability of a fragmented, poorly coordinated and inequitable health system. The way it has met (or not met) expectations, so far at least, offers important lessons for our response to similar events in the future.

Health isn’t a solo event

Health policies and programs focus on changing individuals’ behaviour and treating disease and disability. But treating health much more as a team sport will be crucial to successfully combating the coronavirus pandemic. Developing strategies to halt the spread of this virus means thinking not only about how to protect our own health but also about how to work together to minimise its impact on the community.

A commitment to health equity is crucial. Like a soccer team with a poor defence, our abilities are only as good as our weakest players. A stockpile of hand sanitiser in the garage won’t protect you or your family if this means others will expose themselves to infection and become vectors of transmission.

It’s not just about being altruistic (although this is important). When it comes to health even the most selfish among us has an interest in helping others.

This perspective on health isn’t new, of course. It’s more than a decade since the World Health Organization’s Commission on Social Determinants of Health described the vital role in good health played by employment, class, social status, housing and other social factors. A commitment to acting on these issues was recently renewed by the WHO.

Yet, despite a multi-party Senate committee unanimously recommending that the federal government adopt the WHO report, Australia has not acted on any of its recommendations. In fact, some measures of inequity, such as wealth distribution, have worsened: the wealthiest one-fifth of Australians now own nearly two-thirds of all wealth, while the least-wealthy half own less than a fifth. Although there’s said to be “no better place to raise kids,” an estimated 1.1 million Australian children live in poverty.

Despite these inequities, the advice coming from health authorities seems oblivious to the circumstances of many Australians. People are asked to self-quarantine at home; patients arriving at hospitals are told to “return to their cars” and phone for instructions; it’s suggested that we stock up on two weeks’ food. No advice is provided for people who don’t have stable and safe housing, regular employment, a car, a mobile phone, internet access, the capacity to deal with a short-term lack of income, or the ability to purchase and store bulk foods. As lawyer Thalia Anthony points out in relation to prisoners, who are among the most marginalised populations in our community, this failure risks undermining the effectiveness of Australia’s response to the virus.

Fragmentation creates confusion

It goes without saying that viruses don’t respect borders. Cooperation and collaboration between the federal government and the states and territories is essential, but challenging when healthcare responsibilities are split.

For its part, the Commonwealth is responsible for primary healthcare, Medicare, regulation of therapeutic goods (including testing kits and protective equipment), aged care, the medical stockpile, and non-health policies including border control. The states and territories, meanwhile, have primary responsibility for the public hospital system, disease surveillance and quarantine (within their jurisdictions), ambulance services, and most community and social care.

Divided responsibilities inevitably cause gaps, fragmentation and confusion. Getting eight jurisdictions and the Commonwealth to agree on a joint approach can slow the response to a fast-moving and rapidly changing environment. As a 2004 Parliamentary Library research paper observed, “Overlapping Commonwealth/state responsibilities and divisions between clinical health practitioners and public health policymakers were identified as two broad problem areas in Australia’s national arrangements for responding to an infectious disease outbreak.”

During Australia’s response to the epidemic thus far, different governments have provided conflicting advice. People experiencing symptoms have been told to visit their GP, to call (but not visit) their GP, to ring Healthdirect, to self-monitor, or to go to a public hospital for testing. Communication between governments, GPs and hospitals has been inadequate, with GPs receiving inconsistent information about testing protocols and facilities.

“To take one example,” says the president of the Royal Australian College of General Practitioners, Harry Nespolon, “there has been confusion about the type of face masks that GPs need to wear… We are also getting different advice from the states and territories on the tests for coronavirus and who should be taking them — should they be done by a GP in a clinic or should they be done in a hospital in a negative-pressure room?”

This fragmentation is not just a practical problem. It also adds to the confusion and anxiety in the community and reduces trust in governments’ ability to coordinate an effective response to the pandemic.

Coordinated primary care must be a priority

Even if every other part of the health system worked perfectly (which of course they don’t), a primary healthcare sector — GPs and other frontline practitioners — that is under-resourced, poorly coordinated and not always accessible will seriously undermine the effectiveness of our response.

Over the past month it has become clear that Australia’s primary care system is poorly prepared to respond to a major public health threat. This is not the fault of the profession or a reflection on individual doctors and their staff, who are generally highly dedicated professionals doing their best under extremely difficult circumstances. But their efforts have been challenged by a flawed system inadequately resourced by successive governments.

Despite this neglect, governments have counted on GPs to deal with patients concerned about their symptoms or potential exposure, and to provide advice on testing and deal with other enquiries, all on top of their normal workload. Governments’ first advice to people concerned about the virus or experiencing symptoms was to “call your GP,” but their unrealistic expectations of what GPs can and can’t do have exposed the vast gap between the government’s idea of general practice and the reality.

Most GPs are either small businesses or employed by profit-driven companies. They have neither the resources nor the incentive to carry additional capacity — such as quarantine rooms and stockpiles of equipment — to deal with crises. Expecting a local general practice to meet the increased demands for healthcare during a pandemic is like expecting the corner shop to supply everyone’s food and household goods.

“I don’t know of any GP practices that would be capable of testing or seeing a suspected case,” Sydney GP Richard Nguyen told the Guardian earlier this month. “In our practice we have four consulting rooms plus a procedure room. We’d have to dedicate one room as an isolation room. And then you’d have to clean and disinfect the room — logistically it’s just impossible for several reasons, including that we don’t have the physical space.”

In the short term, our primary healthcare system can probably muddle its way through this crisis, largely because of the professionalism and dedication of GPs (and their practice staff). But it won’t be ideal. GPs will take risks, as healthcare workers often do with infectious diseases, and some will undoubtedly get sick. This is not fair to these doctors or to their patients.

Solving this problem means tackling the fragmentation and variability built into the present system and better integrating primary care with other parts of the health system. For years experts and health groups have advocated exactly this kind of reform. The 2009 National Health and Hospitals Reform Commission, for example, called for “strengthened primary health care services” and “the development of Comprehensive Primary Health Care Centres and regional Primary Health Care Organisations… to support service coordination and population health planning.”

Successful examples already exist, including innovative private practices and Aboriginal Community Controlled Health Organisations, and could serve as models for reform. Learning from them and building on the existing (but limited) Primary Healthcare Network infrastructure would strengthen the capacity of the primary healthcare sector to manage future public health threats.

Effective communication is vital

The Communicable Disease Network Australia’s National Framework for Communicable Disease Control was supported by health ministers from all jurisdictions after it was released in 2014. One of its key conclusions was that identifying “a credible and trusted leader” and providing timely, effective and consistent communications were vital during a health emergency.

During this crisis the government has failed to meet this goal in a number of ways. Information has been inconsistent, patchy and sometimes contradictory; key details about the virus and its threat to the community are perceived to have been withheld from the general public; and positions have shifted significantly on some key issues (travel bans, border control, the financial impact of the epidemic) within days and sometimes hours of official announcements.

Political leaders and health authorities have fumbled when answering simple questions and struggled to explain in precise language the reasons for seemingly conflicting advice. When the Council of Australian Governments announced that non-essential gatherings of more than 500 people should be cancelled, the prime minister stated that this did not apply to workplaces, childcare centres, schools, university lectures, public transport, airports “or things of that nature.” The most important messages about behavioural changes required to limit the impact of the epidemic (washing hands, minimising social contact) risked being lost in the confusion.

Efforts by the government to communicate with health professionals have been similarly inadequate. Doctors working at the frontline of the epidemic have described the government’s dealing with them as a “shambles.” The Australian Medical Association has called for authorities to start “singing from the same song sheet” and the Australian Nursing and Midwifery Federation urged the federal government to send “clear and consistent messages to the community in order to contain the rapid spread of the coronavirus (Covid-19) and ease growing anxiety, confusion and concern about this public health emergency.”

Compounding this problem has been the seemingly contradictory behaviour of political leaders. At the same time that the prime minister announced the ban on non-essential gatherings of over 500 people he also said he would be going to a rugby league match. People in hazmat suits cleaned the Parliament House office of home affairs minister Peter Dutton after he tested positive, yet chief medical officer Brendan Murphy said that the prime minister and other cabinet members who had been in contact with Dutton needn’t be tested or self-isolate. Despite the recommendation to adopt social distancing, the PM continued to be seen in close contact with other political leaders, journalists and advisers.

This degree of inconsistency is a serious problem for a government trying to persuade people to change their behaviour in ways that can seriously limit their freedoms. Advice that seems contradictory or frankly impractical (staying 1.5 metres from other people on public transport, for example) or that is not being followed by political leaders themselves undermines the credibility of the message and the authority of the government, and risks people ignoring it altogether.

Of course, communicating in this complex and rapidly evolving situation is challenging. Both under- and overreacting carries significant potential costs. Maintaining a balance between encouraging sensible concern among the community and preventing public hysteria is crucial.

It is understandable that the government focused on avoiding panic. As health promotion expert Daniel Reeders has pointed out, panic encourages a range of ineffective behaviour: it encourages panic buying; it can prevent people from processing what they read or hear, making it much harder to convey accurate information; it puts people in a “me-and-mine first” frame of mind at a time when collective action is required; and it can cause people to dismiss “emotionally dissonant” messages — such as health experts giving calm, measured advice — in favour of hyper-emotive rumours and conspiracy theories.

But it is also important to acknowledge the limitations of the authorities’ knowledge about health threats. As the WHO’s guide to Communicating Risk in Public Health Emergencies puts it, public communications “should include explicit information about uncertainties associated with risks, events and interventions, and indicate what is known and not known at a given time.”

“My biggest concern is people are not talking to their populations like adults,” says the WHO’s Bruce Aylward. “They’re cherry-picking the best possible survival rates [and] outcomes, the lowest possible incidences. You’re just going to compromise confidence of your population.”

These problems are not just a failure of communications but a failure of leadership, which is an essential component of effective risk communication. According to the US Environmental Protection Agency’s Seven Cardinal Rules of Risk Communication, trust and credibility are a spokesperson’s “most precious assets” when communicating risk information. “Long-term judgments of trust and credibility are based largely on actions and performance. Trust and credibility are difficult to obtain. Once lost they are almost impossible to regain.”

This is bad news for a government in Canberra already struggling with criticism over its handling of the recent bushfire season. The trust and credibility that it will lose as a result of its poor response in the early days of the coronavirus pandemic may prove impossible to regain.

Health literacy matters

Part of the communication challenge facing governments is the low level of health literacy in the Australian population. Good health literacy helps people make decisions that maximise their own health and that of others. Poor health literacy makes communicating complex messages and trying to effect behaviour change in a stressful environment even more difficult.

Data on health literacy in Australia isn’t great (which is a problem in itself) but the indications are that it is pretty poor. The most recent national data available from the Australian Bureau of Statistics, which dates from 2006, shows that only 41 per cent of adult Australians were sufficiently literate about health matters to meet the complex demands of everyday life. This rate was even lower for older Australians, with only 28 per cent of people aged sixty to seventy-four considered to have adequate levels of health literacy.

Among the health stakeholders who have recognised this problem is the Australian Commission on Safety and Quality in Health Care. It says that low health literacy can significantly drain human and financial resources and may be associated with extra healthcare costs of 3 to 5 per cent. The problem has been evident in the seemingly irrational response of many in the community to the pandemic, such as avoiding Chinese restaurants.

One of the greatest challenges has been to explain the urgency of slowing the transmission of the virus (or “flattening the curve”), a desired outcome of government policy but a difficult concept to explain.

Also important is health system literacy. When a system is experiencing dramatic increases in demand, it helps if people know where to go for information, advice and care. Talkback radio calls have made it clear that many Australians lack even a basic understanding of our health system. Callers described calling the national Australian Medical Association office for information about where to access telehealth consultations in their local communities, contacting their state health department for information on Medicare-funded services, and being frustrated when their local pharmacies didn’t provide testing services.

The public health system will always bear the burden

Despite the government’s (and the media’s) obsession with private health insurance, this crisis has made clear that it is the public health system we rely on when serious health risks emerge.

The coronavirus pandemic is the greatest health crisis our country has faced for a generation, and private health insurance is basically missing in action. Our annual investment of around $11 billion into this sector does not appear to have strengthened our overall capacity to respond to the pandemic in any respect. At all stages it has been the public health system that has stepped up to manage our response to the virus.

Our public universal insurer, Medicare, is funding bulk-billed and telehealth consultations for people at risk or showing symptoms of coronavirus. Public health microbiology laboratories developed the capability and capacity to detect and confirm cases following publication of the genome sequence for the virus at a publicly funded research institute. In Victoria, testing centres have been established at nineteen hospitals and health services, not one of which is private; nationwide, public hospitals are performing Covid-19 tests as well as treating people who are seriously ill with the virus, all at no out-of-pocket costs to patients.

Far from the “Better Cover, Better Access, Better Care” promised by the private health funds, people with private insurance are being left high and dry by their funds. Anyone who purchased private insurance under the illusion that a policy named “Security” or “Ultimate Health Cover” would be useful in the context of a major health threat would now be experiencing a major reality check.

As one reader of the health policy blog Croakey wrote, “I have maintained private hospital cover for many years because of a suspicion that the Lib-Nats would do away with Medicare if they could. Today I rang the largest, most modern private hospital in Perth and asked what they could do for me if I came down with Covid-19. The answer? Nothing, sorry, you’ll have to go to a public hospital, you can go as a private patient, we don’t have the facilities.”

International experience in responding to the coronavirus pandemic indicates that the countries with strong universal public health systems are having more success than those with a privatised and less equitable approach to healthcare. The message from this pandemic is that private health insurance is (at best) an optional add-on that doesn’t merit the resources it currently receives. If Australians ever needed convincing of the benefits of a strong and well-functioning public health system, this pandemic should be more than sufficient to persuade them. •

Many thanks to Dr Ruth Armstrong for her help with this article.

Jennifer Doggett is Chair of the Australian Healthcare Reform Alliance and an editor of Croakey.

The post Covid-19’s six lessons for Australian healthcare appeared first on Inside Story.

If this new payment does feature in the second stimulus package, the government will be following the advice of economists from both the left and the right. Conservative economist Greg Mankiw, for example, who chaired George W. Bush’s Council of Economic Advisers, says that “fiscal policymakers should focus not on aggregate demand but on social insurance.” His counterpart in Barack Obama’s White House, Jason Furman, agrees:

Do as much as possible using existing structures and previous laws. For paid leave, you need to invent something new because there is no structure there. But for almost everything else, you can use unemployment insurance, the SNAP program, Medicaid. Once you get through everything on health and everything targeted, you still have two problems: One is you potentially have tens of millions of people in great need who aren’t eligible for one of those programs. Second, the total amount, even if you max out on health and targeted [programs], just isn’t as large as what could be helpful economically. So the third thing I’d do is get people cash.

In many Western countries, most people are eligible for generous unemployment insurance that is paid automatically when employed people find themselves unable to work. But Australia’s system of social protection is quite different, and singularly unsuited to filling the income gaps that come with widespread illness and possible economic collapse. The federal government’s new payment may fill part of the gap — but will it go far enough? Are other countries acting in ways we should consider?

Most other countries have a combination of unemployment insurance for people who lose their jobs (typically paid for between six months and two years) and a social assistance payment for those who are entering the labour force but yet to find work, are leaving casual employment, or are unemployed for a longer period. Unemployment insurance typically provides a significant fraction of the individual’s normal earnings, though for a limited period. As well as helping people cope with unemployment it is a significant part of the “automatic stabilisers” that help maintain demand in the face of recessionary shocks.

By contrast, Australia’s JobSeeker payment (which replaces Newstart today) is a means-tested benefit paid at a very low rate — less than 40 per cent of the minimum wage. When assistance with housing costs is taken into account, it is the lowest jobless benefit relative to wages among the twenty-seven OECD countries. Moreover, the means-testing and waiting periods built into the system can stop people with working spouses or accessible savings from receiving any support whatsoever.

For the 37 per cent of the Australian workforce without paid sick leave, support during illness (or self-quarantine) is also very limited. In fact, when it comes to sick leave, we’re not much better prepared for coronavirus than the United States, although the government has recently said it will relax the current one-week waiting period for payments.

WHAT ARE OTHER COUNTRIES DOING?

In New Zealand, the country whose social security system is most like our own, the government announced a stimulus package totalling 4 per cent of GDP earlier this week. Among NZ$2.8 billion in initial income support and stimulus measures are a permanent weekly across-the-board NZ$25 increase in benefits from 1 April, a doubling of the Winter Energy Payment for 2020, and the removal of the hours test from the in-work tax credit.

A new Covid-19 leave payment scheme will provide support through employers (and to sole traders and the self-employed) for people unable to work because they are sick, in self-isolation or caring for dependants in either of these circumstances. Employers will still be expected to meet all of their sick leave and other employment entitlements. For those who are self-isolating, the entitlement period will be fourteen days; those who contract Covid-19 will be covered for the entire period of illness.

Full-time workers will receive NZ$585 per week under the scheme — close to 90 per cent of New Zealand’s minimum wage and an increase of 167 per cent on normal rates of support. (Although existing jobseeker support is only NZ$214 per week after tax in New Zealand, its accommodation supplement provides much higher levels of support for housing costs.) The scheme is open to all firms, and to the self-employed and contractors, but not to those who can work from home.

The scheme will initially run for eight weeks, at which point the government will reassess. Employers will have to declare that they meet the criteria for receiving this funding, and the government has made it clear that any false declaration would constitute fraud.

Ireland is also introducing a Covid-19 Pandemic Unemployment Payment for employees and self-employed people who lose their jobs or are changed to part-time or casual work. The payment has a simple one-page application form — a striking contrast with the thirty-five-page claim form for Australia’s existing Australian Sickness Allowance (now being phased out) — and will be paid at a flat rate of €203 per week, or more than half the minimum wage, for up to six weeks. Recipients will be required to use that time to apply for the normal jobseekers payments.

France’s government announced last week that it would use the established principle of “technical unemployment” to enable workers to retain their jobs if they are not able to work because of self-isolation. Under the rules, workers will receive 84 per cent of their usual net salary. Companies wanting to be part of the scheme will receive a response from the ministry of work “within forty-eight hours.”

In an address to the nation earlier this week, French president Emmanuel Macron declared that France was “at war” and indicated that “for entrepreneurs, traders, artisans, a [new] solidarity fund will be created, funded by the State, and to which the prime minister will also propose that the regions contribute.”

Denmark announced a three-month period, until 9 June, during which the government will pay 75 per cent of employees’ salaries up to a maximum of DKK23,000 (US$3300) per month, with companies paying the remaining 25 per cent. Employees will be obliged to take five days of vacation or time off before receiving the payments.

“If there’s a big drop in activity, and production is halted, we understand the need to send home employees,” prime minister Mette Frederiksen told a press conference on 15 March. “But we ask you: Don’t fire them.”

Canada has also announced an emergency aid plan of more than 3 per cent of GDP. For households, assistance includes:

• a temporary boost to Child Benefit payments, delivering about CA$2 billion in extra support

• a new Emergency Care Benefit of up to CA$900 per fortnight for up to fifteen weeks, to provide income support to workers, including the self-employed, who have to stay home and don’t qualify for paid sick leave or employment insurance

• a new Emergency Support Benefit to provide up to CA$5 billion to workers facing unemployment who are not eligible for employment insurance

• a six-month, interest-free reprieve on student loan payments

• a doubling of the homeless care program.

WHAT SHOULD AUSTRALIA DO?

Like other countries, Australia is facing both a health crisis and an economic crisis. Large sections of the economy are likely to be shut down, and widespread unemployment is likely. Dramatic responses are called for, and transfer programs to cushion these shocks should play a central part.

With the exception of New Zealand and Ireland, the other countries we’ve mentioned are building on their social insurance models by providing an insurance payment to those who are unexpectedly losing their job. If the Australian government provides similar forms of assistance to the new job losers, Australia will move closer to a social insurance model of unemployment insurance (albeit temporarily). This would better cushion people who might lose their jobs but still leaves payments for the long-term unemployed and those entering the labour force at below poverty-line levels.

Whatever its apparent virtues, the social insurance model is losing its relevance in the modern labour market. It assumes that most workers have a long-term attachment to a job; but this is becoming less and less common. Moreover, as more and more people are moving in and out of different jobs the distinction between job loss and failure to gain a job becomes less important. Especially in hospitality and entertainment — industries particularly affected by Covid-19 — many people who are working in one week will be jobseekers the next. When industries start to close down, those looking for work will be just as much affected as those losing their job.

So, while the government’s plan to introduce a temporary social insurance–type payment as a vital part of its crisis response is welcome, it should be accompanied by more adequate support for the most disadvantaged in our community. Some early indications suggest that the government might make concessions by increasing the rate of Newstart’s successor, the JobSeeker payment. As it stands, though, it is less than 40 per cent of the minimum wage. The budgetary constraints usually given as the reason for not increasing support for the unemployed should no longer apply during the crisis of 2020. •

The post Social protection and the viral recession appeared first on Inside Story.

Some have claimed that saving to be anything up to $8 billion in recurrent funding each year. But the reality, at least in the case of two-thirds of non-government schools, is that government funding produces no savings at all. Why? Because those schools are now funded at the same or higher level as similar public schools.

Since 2011, in fact, governments would have come out ahead if all new school enrolments had gone to public schools. That would have involved capital expenditure, of course, but even the capital savings created by competing school sectors are less than a third of the amounts frequently claimed.

Australia will always have both government and non-government schools; they provide an element of choice and in some cases educational diversity, and any fundamental shift would be politically fraught. But we need to ask hard questions about funding. How has a partially subsidised choice of schools become, in two-thirds of schools, a fully funded choice? What are the educational, equity and social consequences? And if governments are funding government and non-government schools at similar levels, should their obligations also be similar?

Crude measures of how much governments save by encouraging private schools simply subtract government funding from those schools’ total spending. What’s left is largely income from fees, and this figure is presented as the saving to taxpayers. The combined claims made by Catholic and independent schools add up to around $8 billion.

To unpack such claims we need to know more about the annual costs of educating students in the government, Catholic and independent sectors, which is not easy. The most common claims are that governments (state and federal combined) provide $9350 for each independent school student, $11,180 for each Catholic school student and $17,530 for each government school student. But the most recent school finance data on the My School website, for 2017, shows an average of $9600, $11,508 and $13,339 respectively.

Why the difference? Catholic Schools NSW, among others, has cautioned that the first set of figures, compiled by the Productivity Commission, measures funding for the public and private sectors in different ways. The second set of numbers — which use consistent measures across the sectors — comes from the Australian Curriculum, Assessment and Reporting Authority.

ACARA’s numbers certainly narrow the average public funding gaps. But using averages creates an additional problem. As My School’s school-level data shows, the three sectors serve students with measurably different rankings according to the Index of Community Socio-Educational Advantage, or ICSEA. Independent schools have the highest ICSEA average, at 1065. Catholic schools are next on 1045, followed by government schools on 981. (An explanation of school ICSEA values is available at My School.)

Lower ICSEA students cost more to educate, and this is reflected in per-student public funding levels. On average, the government sector will always be funded at a higher per-student rate, and any authentic comparisons must take those differences in student needs and costs into account.

Comparisons become more accurate, of course, if schools enrolling students with similar backgrounds are compared. When this is done, the per-student funding differences between the sectors shrinks considerably. The funding data for schools in the narrow 1000–1049 ICSEA range, for example, shows each independent school student receiving an average of $12,136, Catholic school students receiving $12,906 and government school students receiving $14,492.

But there is yet another problem created by the use of averages. Even a “like” group of schools will include big schools, small schools and everything in-between. Averages are distorted by big and small numbers. In the ICSEA range 1000–1049 for example, the per-student public funding (in rounded figures) for government schools ranges from $8500 to $30,000. These figures contribute to the average figure of $14,492.

Using the median, or “middle,” of a set of numbers can reduce these extremes and reduce the distortions they often create. For schools in the 1000–1049 ICSEA range, the median funding figures are $12,046 (per student in independent schools), $12,274 (Catholic schools) and $12,148 (government schools). The public funding differences between the sectors in that ICSEA range all but disappear — to the point where some non-government schools are being funded more per student than are their government counterparts.

But the 1000–1049 ICSEA range represents only a quarter of all students. How similar is the public funding of schools that a majority of students attend?

Schools in the larger ICSEA range of 950–1099 — basically middle-range schools on this measure — enrol just over 60 per cent of students. The average measures for this much larger group of schools reveal that non-government schools in 2017, depending on their ICSEA, received between 83.4 per cent and 104.9 per cent of the public funding going to government schools enrolling students with similar levels of advantage. The median measures show that non-government schools received between 96.9 per cent and 106.9 per cent of the public funding going to government schools enrolling similar students.

Not surprisingly, the public funding of non-government schools since 2011 has increased at around double the rate of increases to government schools. Adjusted for inflation, the public funding differences widen further.

In financial terms, a majority of non-government schools have become “public” — often receiving even more public funding than similar government schools. Hence the question: to what extent does public funding of non-government schools represent any saving to the public purse? And another question: if most Australian schools are publicly funded, shouldn’t they all have the same obligations to the public that funds them?

What would be the recurrent cost to government if all existing non-government school students were funded at the same level as government school students with similar levels of advantage and needs? Finding an answer using My School data involves grouping schools with similar others across all ICSEA ranges, then calculating — for each ICSEA range — the median per-student spend by governments on Catholic and independent school students. This figure is then compared with the equivalent spend on students in government schools. Tables showing these calculations are available in our full report, The School Money-Go-Round.

This exercise reveals a total additional recurrent cost to governments of around $1.1 billion if all existing non-government school students were funded at the same level as similar government school students. This is made up of around $170 million extra to fund Catholic school students and around $900 million extra to fund independent school students. The $1.1 billion to notionally “transfer” all non-government students in this way still comes at a cost, but nowhere near the $8 billion commonly claimed. It is just 2.4 per cent of existing government recurrent spending on schools.

There are good reasons why these calculations may still be inflated:

• The recurrent funding of each sector may change in the future — but current trends are unlikely to reverse. On the contrary, funding changes such as the supplementary funding for non-government schools, announced in 2018, are likely to see previous increases in non-government school funding continue.

• Economies of scale from merging schools and bringing them under one authority are not included. Some economies of scale are implicit, but not calculated.

• Other costs directly or indirectly carried by all three levels of government are not counted.

The “savings” calculation assumes that governments would fully fund all students. The reality, as evidenced in comparable countries overseas, is that a percentage of families would continue to seek private schooling without governments subsidising the cost. If this became reality, an unsubsidised fully private sector in Australia would likely enrol between 5 and 8 per cent of all students; the cost to governments of funding these students would reduce to zero. Taking these students out of the calculation would reduce annual cost to governments by around $0.6 billion.

To this point we have focused on the recurrent funding of schools and how the cost to governments has been spread over the public and private sectors. But what might have been the cost to governments if, over time, the growth of student enrolments had instead been accommodated in the public sector?

We know more from work by Lyndsay Connors and Jim McMorrow for the Australian Council for Educational Research. In their 2015 report, they found that if new enrolments in non-government schools between 1973 and 2012 had instead gone to government schools, the recurrent cost saving to governments over this period would have been approximately $7.4 billion.

My School data lends itself to a similar analysis. The total recurrent cost to governments of the additional enrolments across both sectors between 2011 and 2017 was $11.4 billion. However, the per-student cost varied considerably between the two main sectors:

• The 231,333 additional enrolments in the government sector cost $4516 per student in combined federal and state recurrent funding.

• The 102,020 additional enrolments in the non-government sector cost $5697 per student in combined federal and state recurrent funding.

If the additional non-government school students had enrolled in the government sector, the annual cost to governments over the seven years would have been $460.7 million rather than the actual cost of $581.2 million. This represents an overspend, by governments, of $120.5 million each year. Private schooling cost — rather than saved — taxpayers’ dollars over this period.

But there is a catch, which is revealed if state and federal recurrent funding are considered separately.

It cost the states around $2850 each year for every additional student in a government school. If those students had attended a non-government school the figure would be much lower, at $929 per student. The states did save money. It is hardly surprising that they have been willing to provide funding to the non-government sector, especially if they also reduced funding increases to their public schools.

This odd situation helps explain the current tardiness of the states in bringing their school funding up to the agreed 80 per cent of the Schooling Resourcing Standard, or SRS. It also undermines the push for schools in each sector to be funded to their SRS entitlement. As one analyst has revealed, public schools across Australia can’t and won’t get there.

But this is only half the story. Over the seven-year period, it cost the federal government $1666 for every new government school student, but $4705, around three times as much, for every new non-government school student. This much higher spend delivers just one outcome: greater school choice for some families. Arguably, while economics drives state government spending decisions, the ideology of unfettered choice underpins decisions made by federal governments of all political colour. One solution, which requires close scrutiny, might be found in the recent call by Martin Parkinson, former head of the Department of Prime Minister and Cabinet, for the federal government to get out of school funding altogether; at the very least, school funding has to come out of one agreed pot of money.

What about capital funding? Raw figures show that governments do save by not having to meet the capital costs of non-government schools. In 2017, governments paid $234 million towards these costs — still $2.9 billion short of the almost $3 billion capital spend by non-government schools.

But why would governments be obliged to spend this much? The total (from all funding sources) per-student capital investment in 2017 was $738 for government schools, $1794 for Catholic schools, and $3230 for independent schools. Increasing enrolments in any sector require additional capital investment, but the question asked about recurrent funding also applies here: why would governments spend so much more per student?

This is a particularly relevant question to ask of independent schools. Two-thirds of their total capital funds (from all sources) are spent in the most advantaged schools, those above ICSEA 1100. In 2017 this averaged $4763 per student — over six times the per-student rate in government schools. Would governments be expected to match this largesse?

At the government school rate of $738 per student, the additional capital cost to governments would be $966 million, just a third of the $2.9 billion capital spending by non-government schools out of their own funds.

Clearly, in capital as in recurrent costs, the existing high spend in non-government schools doesn’t represent the likely cost to governments if all students attended public schools. This is especially the case given that, when similar ICSEA schools are compared, a much larger per-capita recurrent and capital spending in such schools has little if any impact on measurable student achievement.

Any proposal made fifty years ago to fund a public education system and a competing private system equally would have been greeted with disbelief and derision. Yet we are almost there. It has been slow and incremental, characterised not by any defining agreement or legislation but by an accumulation of deals and dalliances engineered by politicians and sectoral interests.

The shift hasn’t been accompanied by any serious redesign of the operation, accountabilities and obligations of schools to reflect the extent of their public funding. School education is not alone in being “outsourced” in this way, but the wider educational and social consequences of our divided school system are becoming too obvious to ignore. And the creep towards fully funding non-government schools has been accompanied by increasing growth in inequity, something which disadvantages all Australians by restricting overall educational system quality.

There’s a possible silver lining, though. The fact that governments fund most schools roughly equivalently has the potential to open the door to new and productive structures. Shouldn’t governments now insist on matching obligations and service provision from all schools? This would certainly level the playing field and reduce the very evident social and educational segregation. Shouldn’t funding be tied to each school’s commitment to serving a diverse range of families? Wouldn’t we also save by reducing the duplication of schools in so many communities? Shouldn’t restructuring in these directions be at least trialled across some levels/stages of schooling?

Little will happen unless we put aside the slogans and catchcries that have resonated over many years of debate about schools and funding. The belief that funding competing sectors saves public money no longer reflects reality. My School funding data shows that we now have, at the very least, two equivalently funded school systems, one of which is significantly advantaged by additional and unregulated private funding while enjoying fewer rules and obligations. This isn’t working: it is now time for a much better school settlement. •

This article draws on the authors’ new paper, The School Money-Go-Round, released today.

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On a special edition of Radio National Breakfast from Bateman’s Bay on 30 January, Bega MP Andrew Constance gave an emotional account of the plight of those around him. The inadequacy of responses tied to bureaucratic procedures, he said, reflected an underlying failure to grasp the urgency and scale of human need. “Middle-tier bureaucracy doesn’t get it. The charities don’t get it. This is not business as usual. We’ve got to think differently and outside the square.”

Just how differently? The loss of so many homes and livelihoods this summer confronts us with the urgent challenge of reasserting the fundamental economic rights of citizens.

For three decades we have inhabited an economy that invests in the corporate sector, allowing the major players to recycle profits into greater profits while drawing on our natural resources and taking advantage of our infrastructure at knockdown tax rates. Now the consequences are confronting us. It’s no longer a matter of “which side of politics” we support; it’s a stark question of whether we can survive without a fundamental transformation in our political economy.

If we are indeed in the business of thinking differently, consider how a basic income scheme could transform the situation of people and businesses in bushfire-ravaged communities. Basic income is an idea that has yet to gain traction in Australia: the Pressenza press agency’s major documentary on the topic, released in September, featured exponents from a dozen countries around the globe, none of whom were Australians. Have we become so embroiled in political wrangles about minor changes to our tax system that we are incapable of entertaining any genuinely transformative economic idea?

The unfolding events of recent months should force us to break the deadlock. We need to find a real alternative to the absurdity — and cruelty — of expecting people who have lost their houses to fill in application forms for very modest one-off grants, or offering them loans that will only add to the financial anxieties they face in the longer term.

Think how different the situation would be if a basic income scheme provided every adult citizen with $1000 a month. No loans or repayments involved, no application process, no fraught determinations of eligibility, no delays — a guaranteed, ongoing payment, regardless of circumstance.

The sum might seem inadequate — at $1000 a month it would be less than Newstart — but its aggregate effect would be significant. Individual recipients would gain immeasurable psychological and social benefit from the knowledge that it was also there for family members, neighbours, and those trying to keep essential businesses and services going in their area. In small towns such as Rappville, Mogo or Mallacoota, the entire local economy would be underpinned.

Of course, basic income is not a replacement for the major infrastructure costs of rebuilding civic amenities, nor is it meaningful compensation for those who have lost homes, or for capital losses suffered by farmers and other businesses. Such needs should be addressed separately. But where commercial and civic premises need to be rebuilt, it is vital to have some confidence that they will be able to thrive again. A guaranteed income across the local population would enhance the value of major reinvestments by fuelling an increase in commercial activity.

In this way, basic income could enhance community bonds and regional cultures. The most hopeful aspect of the crisis response so far has been how people have come together to help each other. Frustration at the failure of governments and charities to respond to the needs of those in bushfire areas is countered by stories of mutual generosity and collaborative survival strategies. As Constance testified, “I’ve seen the most beautiful outcomes in terms of people working together, regardless of backgrounds… Unity in survival, unity in recovery.”

This should be the optimal social environment for basic income, which is associated with the ancient principle of the commons as a “first estate,” a form of land rights as birthright. Through the idea of the “common wealth” of shared natural resources, the commons principle asserted an entitlement to subsistence. Providing a monetary allocation is a reinterpretation for a post-industrial society. A basic income would serve as a substitute for the entitlement to land use, keeping the principle of sharing work and responsibility to make the communal economy function.

A basic income is not a “handout” that would discourage people from working, as some critics claim. An aversion to receiving handouts runs deep in Australian culture, especially in the bush, and even those most drastically affected by the fires may feel conflicted about receiving government assistance. A payment of $1000 a month is about half what most adults need to afford food, rent and other essentials. It should be seen not as a substitute for paid work but rather as a subsidy for work that does not pay for itself through the generation of commercial profit.

Building on the socioeconomic infrastructure created by a basic income scheme would enable human work to move away from the profit-driven corporate sector towards community and environmental forms of service. In the aftermath of this summer of disaster, those forms of service are of the utmost importance and urgency.

Nor, in comparison with other recovery schemes, would it be a costly exercise. With funds pouring in from the Firefight Australia concert and other major donation schemes, surely this is one of the fairest and most effective ways to invest in social and economic restoration? It would save expenditure on clumsy administrative schemes for compensation on a case-by-case basis. To the plus side of the equation we should add increased economic activity and employment. In human terms, the reduction in stress and consequent improvement in mental health would have immeasurable benefit.

Introducing a basic income across the whole Australian population would be a complex matter involving comprehensive changes to the national economy. A restricted approach, concentrated in areas worst affected by the fires, would test how well such a plan might work more broadly. Comparative studies in several such locations would provide valuable insights into where and how basic income provides benefits, and what kinds of problems arise. If it proves more successful in some communities than in others, there is an opportunity for focused identification of the factors involved.

Basic income is a big idea, calling for an enlargement of public imagination. While it is embedded in principles with a deep cultural history, it is a fundamentally transformative economic proposition whose time may have come as we enter the crisis-ridden third decade of the twenty-first century.

Australia has not so far played a major role in international debate on its implementation, but that is set to change. The 20th Basic Income Earth Network Congress is to be held in Brisbane on 28–30 September, jointly hosted by Basic Income Guarantee Australia, the School of Social Science and the Faculty of Humanities and Social Sciences at the University of Queensland, and the School of Public Health and Social Work at Queensland University of Technology. •

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One of Lee’s duties hadn’t been mentioned when he was hired. Twice a day, after dark, he would tow a big tank of chlorinated hydrocarbon residue from the factory to the nearby Bayou d’Inde. After making sure he hadn’t been seen, he would back up the buggy, check the wind, and turn the tap. The pressure inside would propel the thick, noxious fluid into the marsh.

Years later, Lee confessed what he’d done to a roomful of angry locals who relied on the area’s waterways for their livelihoods. By now, PPG and other factories in the state had propelled Louisiana to the top of the country’s hazardous-waste league table. Authorities were warning that fish from the Bayou d’Inde should be eaten no more than twice a month and humans should avoid any direct contact with the waters.

Lee had been fired by the company after an accidental drenching with chlorinated hydrocarbons sent him on sick leave for eight months. Not altogether surprisingly, his experiences had turned him into an ardent environmentalist — but an environmentalist, Hochschild discovered, who also supported the Tea Party, a movement that wanted the Environmental Protection Agency abolished and companies freed of red tape.

This seeming paradox was the starting point of Hochshild’s book, Strangers in Their Own Land. What she learned from four years of visiting Lousiana — where just 14 per cent of white voters supported Barack Obama in 2012 — is that Tea Party supporters, many of whom became part of the Trump “base,” feel quite differently about the world from the people she mixes with back in San Francisco. They feel that way for a complex mix of reasons, some of them particular to the southern United States — a prickly resistance to northern liberal attitudes, for instance, that dates back through the civil rights movement to the civil war — and some that would resonate in Europe, Russia and even Australia.

Out of Hochschild’s attempt to scale what she calls the “empathy wall” came a “deep story” that attracted a great deal of attention when her book was published. She concluded that the Tea Party supporters she met in Louisiana — “white, older, Christian, and predominantly male, some with college degrees, some not” — felt like they were standing in a queue that was moving extremely slowly. Ahead was the American Dream, “the goal of everyone in the line,” and behind were people of other races, young and old, often poor.

This line had always existed, but what had changed was the feeling that other people were cutting in ahead — black people, propelled by affirmative action programs, as well as “women, immigrants, refugees, public sector workers — where will it end?” And who was helping these queue-jumpers? It was Barack Obama, who seemed more sympathetic to the people pushing in than he did to the ones patiently waiting. “You feel betrayed,” Hochschild writes, addressing her informants. “The president is their president, not your president.”

This feeling is essentially why the people Hochschild came to know, and in many cases like, happily voted for Donald Trump, a man who vilified anyone who wasn’t white, who flouted the conventions of public discourse, who didn’t understand the difference between public and private interests, and who seemed to understand how they felt about being forced to stand stationary in the queue.

Political scientist Ivan Krastev and New York University law profesor Stephen Holmes also use a striking metaphor to explain the current political mood, though theirs is applied more boldly, and perhaps less successfully, across a wider canvas.

The Light that Failed is structured around the idea that Western history since 1989 has been shaped by three waves of imitation. First, the newly liberated countries of Central and Eastern Europe and the Soviet Union set out to imitate the fabled West that they’d envied for so long. Then, after Russia’s failed transition to Western-style democracy, Vladimir Putin created an authoritarian system that cynically imitated many of the features of Western democracy and began parodying America’s international interventions. And finally, taking a lead from Putin and other would-be despots, Donald Trump renounced America’s claim to exemplary behaviour and injected a dose of Russian-style authoritarianism into the US system.

“The future was better yesterday,” begin Krastev and Holmes. “The geopolitical stage seemed set for a performance not unlike George Bernard Shaw’s Pygmalion, an optimistic and didactic play in which a professor of phonetics, over a short period of time, succeeds in teaching a poor flower girl to speak like the Queen and feel at home in polite company.” But it soon became clear that the East’s integration into the West wasn’t unfolding quite as expected. “It was as if, instead of watching a performance of Pygmalion, the world ended up with a theatrical adaptation of Mary Shelley’s Frankenstein.” Worse than that, the process of imitation had begun moving in the opposite direction.

Among the people of Central and Eastern Europe, the post-1989 euphoria fuelled hopes of dramatic improvements in living standards and general wellbeing: “Some thought it would suffice for communist officials to quit their posts for Central and East Europeans to wake up in different, freer, more prosperous and, above all, more Western countries.” When that didn’t happen, people began to leave for the West in an exodus that quickened once Poland, Hungary, the Czech Republic, Latvia and other countries joined the European Union in 2004. Since 1989, two million East Germans — more than one in eight — have moved to West Germany. Latvia has lost a staggering 27 per cent of its population, Bulgaria almost 21 per cent. More than two million Poles, or one in eight, have left for the West. After the process accelerated again during the global financial crisis, more people left these countries than would later arrive as a result of the war in Syria.

As the historian Timothy Garton Ash wrote recently, “Emigration is the region’s real problem, but immigration is its imagined one.” The Light That Failed describes the psychic impact of that exodus on those who stayed behind — and how it fuelled fears of more broad-scale emigration — and suggests that loss helps explain support for parties pledged to restore the kind of ethnic makeup that had prevailed in 1989.

Something similar was going on in Russia — vast numbers of people leaving, Western-inspired economic reforms backfiring, disillusion turning to nostalgia — but with an important difference. The countries of Central and Eastern Europe had thrown off Moscow’s control, and now resented the feeling they were expected to exchange that subjection for another set of rules, these ones imposed by the West. Russia, on the other hand, was coming to terms with the fact that it had lost the cold war, and with it, territory and stature. Democratic reformers made less headway there, and its tissue-thin copies of Western practices and institutions — elections, parties, a constitutional court — were masking deep economic changes taking place with little or no public support.

Putin, now in control, preserved these “Potemkin” institutions but started planning for the future. Even at a time when the economy was doing well and his popularity was high, he blatantly rigged elections to display his strength and prepare for a time when sentiment might not be so favourable. Rather than having to look fair, the elections were designed to showcase his ability to “manipulate the accreditation, nomination and voting process in an orderly and predictable way and thereby, paradoxically, to demonstrate his authoritarian credentials as a man who can get things done.” Landslide victories, part real, part manufactured, were the result.

After relations with the West soured and the Russian economy hit the rocks, Putin’s strategic imitation of the West became more internationally assertive. The hypocrisies of American foreign policy — especially the humanitarian interventions that were actually designed to preserve strategic interests — became a template for Russian forays into neighbouring countries, most notoriously Crimea and Syria.

When Putin announced Russia’s annexation of Crimea he used whole passages from speeches in which Western leaders had sought to justify freeing Kosovo forcibly from Serbian control. “Just as NATO violated the territorial integrity of Serbia in 1999, so Russia violated the territorial integrity of Georgia in 2008,” write Krastev and Holmes:

Just as the American administration has blacklisted some prominent Russians, preventing them from entering the US, so the Kremlin has blacklisted some prominent Americans, preventing them from entering Russia. Just as the Americans and Europeans celebrated the dismantling of the Soviet Union, so Russians now celebrate Brexit and the dismantling of the EU. Just as the West has supported liberal NGOs inside Russia, Russians are financing far-right and far-left groups in the West to undermine NATO, block US missile defence programmes, weaken support for sanctions and European unity. Just as the West (in Moscow’s view) lied brazenly to Russia about its plan for NATO expansion and about the UN-sanctioned attack on Libya, so Russia lies brazenly to the West about its military incursions into Ukraine. And just as the US is aiding the military of Ukraine (traditionally in Moscow’s sphere of influence), so Russia is aiding the military of Venezuela (traditionally in Washington’s sphere of influence).

“Contagious imitation,” as the authors call it, didn’t end there. Far-right parties in Western Europe used the same fears to capture greater support (though never anywhere near majority support) and, depending on the local electoral system, translate it into control or at least bargaining power.

The third element of the imitation trifecta came with Donald Trump’s arrival in the White House. The Russians undoubtedly meddled in the election that put him there, but their main aim, say Krastev and Holmes, was to show that they were a power to be reckoned with. Supporting Trump was simply the easiest way to disrupt their ideological enemy.

Trump saw Putin’s calculating cynicism as refreshingly free of the hypocrisy he believed was limiting America’s ability to exercise power. For the new American president, being a great country didn’t mean being a beacon of freedom and democracy; it meant being a winner. He saw Putin — along with Hungary’s unashamedly illiberal Viktor Orbán — as winners, and hence as guides to how a leader could and should behave.

There is so much that is original and challenging in this book that it seems ungrateful to quibble about its overarching theme. But I’m not sure that Krastev and Holmes’s three varieties of imitation — Central and Eastern Europe’s post-1989 Western-focused euphoria, Putin’s retaliatory foreign policy imitation, and the illiberal copying by Trump and the far-right parties of Western Europe — fit together as neatly as that summary might appear.

In their discussion of the third of these trends, for instance, the authors challenge those who see the roughly simultaneous rise of “reactionary nativism” in the United States and Western Europe as more of a coincidence than a trend. Responding to their own question — in that case, why today? — they write: “One possible answer is ‘contagious imitation.’” That’s certainly a possible answer, but they have already given us the ingredients of another, more plausible, explanation for the simultaneous rise of the extremist right in Western Europe and the United States (and the illiberal turn in Central and Eastern Europe). This was the interaction of the global financial crisis with decades of bottled-up disaffection — in many countries, including the United States, fuelled by decades of stagnant incomes — which combined to produce an electoral rebellion.

The disaffection was driven by a mix of factors, some common across the West, others particular to different locations. Emigration was a longstanding problem not only in Central and Eastern Europe and Russia, but also in parts of the United States and Western Europe, where it left regions and even whole countries with an older and more conservative population. The problem persists: Putin spent much of his recent state of the nation address outlining measures to encourage more births; Hungary has begun offering free in vitro fertilisation on top of its existing pro-birth polices; and Poland, Lithuania and Bulgaria are among the other countries using incentives (usually unsuccessfully) to try to lift birth rates.

Life expectancy was another canary in the mine. In Hochschild’s Louisiana, life expectancy at birth is three years lower than the United States’s not very impressive national figure of 78.6 years (and falling), which itself is four years lower than Australia’s 82.6 (and rising). In Britain, gains in life expectancy have stalled nationally and the figure is falling in some regions.

Although the point gets sidelined by their imitation thesis, Krastev and Holmes do acknowledge the impact of population ageing and decline in Central and Eastern Europe. “In a country where the majority of young people yearn to leave, the very fact that you have remained, regardless of how well you are doing, makes you a loser,” they write. “It also readies you to cheer anti-liberal demagogues who denounce copycat Westernisation as a betrayal of the nation.” Without the reference to “copycat Westernisation,” that passage could be referring to Louisiana, or to many other regions experiencing population decline in the United States, Britain or Western Europe.

Those population-related statistics are part of an alternative explanation for why the light failed. If a country is ageing unusually quickly — because of fewer births, more deaths or departures exceeding arrivals — then the shift in sentiment in those countries is at least partly a shift in demography. The views of particular individuals needn’t change in order for the balance of opinion within a country or region to shift. The political impact of that shift can be magnified by the electoral system and how it is administered. In some countries, electoral laws are used to discourage younger or poorer voters from voting; in some of the same countries, and in others, the system is weighted towards older, rural and more conservative voters.

In the United States, the second phenomenon is bad and getting worse: “By 2040,” political analyst Ezra Klein wrote recently, “70 per cent of Americans will live in the fifteen largest states. That means 70 per cent of America will be represented by only thirty senators, while the other 30 per cent of America will be represented by seventy senators.” With the presidential electoral college system following a similar trajectory, says Klein, Republicans “represent a shrinking constituency that holds vast political power. That has injected an almost manic urgency into their strategy. Behind the party’s tactical extremism lurks an apocalyptic sense of political stakes.”

In what are essentially two-party systems, the behaviour and leadership of the parties also matters when demography and other factors shift sentiment. Britain is still basically the country that elected Tony Blair three times; the United States is still the country that elected Barack Obama. The fact that British voters failed to elect Jeremy Corbyn prime minister and enough American voters in enough states knocked back Hillary Clinton doesn’t necessarily the country has changed fundamentally. In the case of the United States, the Democrats have won the popular majority in all but one of the seven presidential elections since 1992, including the one that brought Donald Trump to power.

One other factor was present in Russia and Central and Eastern Europe though not to anywhere near the same extent in the other countries discussed in The Light That Failed. That’s the sheer speed and intensity of change after 1989, propelled (especially in Russia) by Western-backed “shock therapy.” Within a few years, the political and economic system of every iron-curtain country had changed almost out of recognition, and maps had to be redrawn to show the new boundaries of the diminished giant on its eastern edge.

Demographic change and suspicion of elites have long been at work in Hochschild’s Louisiana, too. At around the time Lee Sharman came clean at the meeting of local fisherfolk, he also joined a tiny environmental organisation called RESTORE. It was hardly the kind of group that the big polluting businesses had much to fear from, but it seems to have come to the attention of at least one of the companies operating in the area.

One day, a schoolteacher who no one knew joined the group. Strange things began to happen. At first he seemed helpful, but then, on a shopping expedition for the group, he bought two GPSs and then told other members that Lee had bought them for himself with the group’s money. Left alone with the computer holding RESTORE’s records, he installed spyware. When this was discovered, there was a confrontation and the group fell apart. It later emerged, via a sworn deposition from a senior company executive, that chemical manufacturer Condea Vista had hired former Special Forces agents to infiltrate the group.

Yet, after all his experiences of the big polluters — the after-dark chemical dumping, the peremptory sacking, the infiltration — Lee still preferred the companies (and the state government, which had long been in cahoots with the companies) to the federal government, as did his fellow Tea Party members. How could this possibly be the case? It’s worth quoting Hochschild’s answer at length:

Lee’s biggest beef was taxes. They went to the wrong people — especially welfare beneficiaries who “lazed around days and partied at night” and government workers in cushy jobs. He knew liberal Democrats wanted him to care more about welfare recipients, but he didn’t want their PC rules telling him who to feel sorry for. He had his own more local — and personal — way of showing sympathy for the poor. Every Christmas, through Beau-Care, a Beauregard Parish nonprofit community agency, he and his wife, “Miss Bobby,” chose seven envelopes off of a Christmas tree and provided a present for the child named on the enclosed card…

Two events further soured him on the IRS [the US government’s tax office]. In one, he got a part-time job to earn a little extra money, but worked more hours than federal rules allowed, got caught, and had to wait a year to get back on Social Security… More enraging was the second event. “I made a date with a clerk at the IRS office to collect a tax refund of a certain amount, and nothing about the meeting did I like,” Lee explains. “The gal wore a see-through blouse, to distract me. Then she asked for every possible receipt, tallied the amount up wrong, and gave me less than I had coming. She cheated me. I needed the money, but I never cashed that cheque.”

I’m not sure whether Lee could ever be persuaded that federal welfare funds are always well spent, but even liberals can sympathise with his response to tight, zealously enforced rules and seemingly arbitrary decision-making.

So would his counterparts in Central and Eastern Europe. As Timothy Garton Ash writes, “All current European populisms feed off anger at the way in which liberalism was reduced after 1989 to one rather extreme version of a purely economic liberalism, without the ‘equal respect and concern’ for all citizens that the philosopher Ronald Dworkin identified as essential to a modern liberalism.”

It’s easy to forget the upsides of a different kind of liberalism from the version that has had the upper hand since the governments of Ronald Reagan and Margaret Thatcher — a kind of liberalism that combines pluralism, tolerance and generous help for people in need, and needn’t have neoliberalism as its necessary end-point. You might call it social democracy — which, as the New Statesman’s Jeremy Cliffe wrote recently, “might seem like an anti-climactic suggestion” but brings together, in theory at least, “redistributive taxation, social insurance, universal public services, non-market mechanisms of coordination (such as trade unions) and a strategic role for the state where the market falls short.”

For their part, Krastev and Holmes are optimistic in a characteristically idiosyncratic way: “We can endlessly mourn the globally dominant liberal order that we have lost or we can celebrate our return to a world of perpetually jostling political alternatives, realising that a chastised liberalism, having recovered from its unrealistic and self-defeating aspirations to global hegemony, remains the idea most at home in the twenty-first century.” •

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As marketing, Morrison’s line may have worked; as public policy it simply doubled down on what was already an abject failure. Over the past twenty years, the Commonwealth has massively ramped up funding for non-government schools. And still, every summer, as reliably as Christmas and the Boxing Day Test, reports of steep increases in private school fees surface in the nation’s newspapers, along with stories of parents struggling to cope and principals struggling to explain. Now figures from the My School website, encompassing every school in Australia and incorporating all sources of revenue, confirm what the anecdotal evidence has long suggested.

The data for the seven years from 2011 to 2017, collected and published by the Australian Curriculum, Assessment and Reporting Authority, reveals the sheer scale of the expansion of government funding to non-government schools. For context, between 2011 and 2017, inflation averaged 1.9 per cent annually, compounding to 12 per cent. Over the same period, recurrent government funding to non-government schools increased by around three times as much, with an average per-student increase of 37 per cent at independent schools and 35 per cent at Catholic schools. Funding to state schools grew by just 18 per cent per student.

Despite the huge boost in public funding, private schools didn’t reduce their fees. In fact, the price of entry continued to rise rapidly. Between 2011 and 2017, the average tuition fee at non-government schools grew from $3600 to $4700. By 2017, fees averaged $2290 at primary schools, $5700 at secondary level and $8560 at combined K–12 schools. Private school principals and lobbyists often point to rising costs, but this increase equates to an average annual hike in tuition fees of 4.5 per cent, more than twice the rate of inflation.

What this makes clear is that more public spending on private schools has not put downward pressure on fees; it has merely compounded the resource advantage enjoyed by those who can afford a private school education. Net recurrent income per student increased by 29 per cent to just under $20,000 at independent schools and by 33 per cent to more than $16,000 at Catholic schools.

When the Howard government presided over a substantial increase in federal funding to non-government schools at the start of this century, John Howard went on Melbourne radio to predict that fees would soon fall as a result. The headmasters of  Scotch College and Wesley College confirmed that fee cuts were imminent, and the executive director of the Independent Schools Council disclosed that many schools were “poised to move very quickly” to reduce costs to parents. Howard’s lieutenant, education minister David Kemp, claimed that “the new arrangements will particularly extend choice to low-income families.” “Choice in schooling is now a reality for working-class Australian families,” Minister Kemp told parliament.

Two decades later, the My School data reveals a very different story. Far from making school choice a reality for low-income families, the policies pursued by Dr Kemp and his successors have had the opposite effect. In 2018, 36 per cent of students at public schools came from the most disadvantaged quartile of Australian society. Only 17 per cent of students at Catholic schools came from the same group. The proportion of very disadvantaged kids at independent schools was even less, at just 14 per cent.

In August, Haileybury College in Melbourne was identified by the ABC as one of the four richest schools in Australia, which together managed to spend more on new facilities than Australia’s poorest 1800 schools combined. Haileybury clocked up over $100 million in capital expenditure between 2013 and 2017. At the same time, it enjoyed nearly 40 per cent growth in recurrent Commonwealth funding, an increase from $4300 to $6000 per student per year. Haileybury didn’t use the additional public funding to extend choice to low-income families: it increased its fees from $18,700 in 2011 to $22,700 in 2017. Unsurprisingly, the already small proportion of kids from disadvantaged families at Haileybury shrank even further: the proportion of children from the bottom half of the Australian population, according to income and educational attainment, collapsed from 16 per cent to 5 per cent in just seven years.

Haileybury might not be a typical non-government school, but it is representative of the national trend. The same pattern of rapid fee rises, declining enrolments from low-income families and substantial growth in taxpayer funding replicates itself throughout towns and suburbs across the country. Exactly the same dynamic can be found at St Bede’s College in the Melbourne bayside suburb of Mentone; or at St Gregory’s College in Campbelltown; or at Ignatius Park College in the Toowoomba suburb of Cranbrook: in all of these schools, fees increased despite steady increases in government funding, and the proportion of students from Australia’s most disadvantaged families decreased by half or more.

It may once have been plausible to claim that more public funding would improve choice and affordability. Today, such assertions amount to a refusal to face reality; or, worse, an attempt to obscure it. Federal governments have been conducting this experiment for two decades and the results speak for themselves. Twenty years since John Howard declared that private school fees would fall, we are still waiting.

Government funding has increased so much that non-government schools now enjoy similar public funding to state schools. By 2017, Catholic schools received, on average, annual government funding of $13,000 per student, while independent schools received around $11,000 per student. That’s 81 per cent and 69 per cent respectively of the average per-student funding that goes to state schools. The difference narrows even further when we account for the much larger share of expensive-to-educate students at state schools (such as kids in rural and remote locations, and children with disabilities or from other disadvantaged groups). Comparing like with like, non-government schools receive around 90 to 95 per cent of the public funding that government schools do — and yet fees continue to rise rapidly.

Why don’t private schools cut their fees in response to this ever-growing taxpayer contribution? The most important reason is very simple. They don’t have to. Education is not like many other products in the marketplace: price is seen as a signal of quality, exclusivity is often a selling point, and the uncertainty and anxiety surrounding our children’s wellbeing leads parents to grin and bear high fees and even wear them as a badge of honour. And cutting fees generally could let in a greater number of disadvantaged students, who are typically more expensive to educate. So there’s rarely a business case for cutting fees. Fee reductions and improved affordability won’t happen until governments require it — by imposing caps on fees, demanding a minimum number of scholarships or creating an obligation to enrol local students, for instance.

If we really want to improve choice, it’s not enough to just keep handing over more taxpayer dollars. Non-government schools have to assume public obligations that are commensurate with the public funding they receive. In Australia, the NSW Secondary Principals’ Council has proposed a public charter that would establish a common regulatory environment for all schools in receipt of public funding. There are plenty of models to draw on: church schools are part of public systems in Canada, Britain, the Netherlands and other European countries. In New Zealand, religious schools were integrated into the state system over four decades ago.

We could draw on these examples to expand genuine school choice, while balancing it with other imperatives like equity, quality, efficiency and social cohesion. It’s possible to create free, inclusive schools that also reflect a variety of different worldviews. But first we need a government that really believes in choice in education — for all and not just for some. •

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The British sociologist Michael Young, on the other hand, was appalled by the reception for his best-known book. The Rise of the Meritocracy, published in 1958, warned of a new fetish that assumed IQ + effort = merit. Young believed that rigorous testing for the most talented children, early coaching to compete in exams, and merit-based appointments to high office would produce a highly stratified society, stable but stifling, with citizens classified early in life and then held firmly in their assigned stations.

Far from sparking alarm, the idea of meritocracy suited the times. In business, politics and the law, university-educated young people were challenging the hereditary right to office. Merit seemed a better guide than class, a chance for the talented to rise without the old barriers. Young offered a dystopia, a 1984 for a new generation, but his neologism became the program for a new government-proclaimed Britain in which ability rather than wealth or birth decided outcomes.

Michael Young lamented the fate of his prophecy for the rest of his life, reports Yale law professor Daniel Markovits in The Meritocracy Trap. Markovits returns to that original warning, and argues that meritocracy — now our unchallenged way of organising economic and political life — has indeed proved a snare. It has fostered a new elite, once again closed to those born without advantages.

This time the terrain is the United States not Britain, and there is little irony on offer. Markovits provides copious evidence that America is dominated by a tiny elite — the 1 per cent with access to privileged kindergartens, to schools that train their children to sail through exams, and to Ivy League universities that promise a direct and reliable conduit to high-status jobs in finance and the law. The charts and surveys in the latter sections of the book can be hard to correlate with the text — the format apparently works better on Kindle — but the point is clear: far from opening opportunities to talent from all quarters, meritocracy privileges the few. It has promoted both a meritocratic “caste” and a resentful, listless middle class that knows the American promise of social mobility through hard work has become a “moral insult.”

This is an ambitious thesis. It proposes that populism in America arises from resentment at a growing gap between the wealthy and the rest. Curiously it was a rich man, Donald Trump, who mobilised this “repudiation of the incumbent elite” to his electoral advantage, creating a conservative rather than radical “new politics.” Markovits applies this analysis across generations, from the shared prosperity and relative social equality of the 1950s, through the wages stagnation that began in the 1970s, into the growing divide from the 1990s, when a tiny group of tech and finance leaders made themselves immensely wealthy before passing on their advantages to their children, above all through elite education.

To impose coherence on such a sweeping narrative, Markovits veers surprisingly close in places to a Marxist reading. The elite’s embodied human capital makes them wage slaves, to be understood through a labour theory of value. Elite families resemble a factory, a site of production for the next generation. Meanwhile the middle class is impoverished by new technologies, stripped of their sense of possibility, and pushed ever closer to the working class. By the final pages the metaphor becomes complete; the book closes with a call for the 99 per cent to rise up against the meritocracy, with nothing to lose but chains and a whole world to win.

Despite the stirring rhetoric, the conflation of inequality and merit does not entirely persuade. Markovits is at his best taking apart the outrageous exclusivity of the Ivy League, where half of his students in first-year law hail from families in the top 1 per cent of American income. He traces the arrival on Wall Street of physics graduates who invent new bond techniques far beyond the quantitative skills of the middle managers who previously dominated American finance. We hear, over and over, about the investment meritocratic families make in their children to ensure they too have elite skills to sell into the labour market.

Much is missing from this picture. Politics for one, and especially the massive concentration of wealth made possible by Congress’s tax cuts for the most affluent Americans, a failure to apply anti-trust rules to tech giants, laws that make workplace organisation difficult, and campaigns to drive unions from many industries. Technology too has differential consequences, limiting choices for many without qualifications. Markovits is keen to stress the importance of human capital, and so rejects arguments offered by economist Thomas Piketty about how other forms of capital rebuilt the ultra-wealthy stratum in America familiar from the nineteenth century but briefly disrupted in the twentieth century by war and progressive tax regimes.

Also fascinating, though not compelling, is an argument that the meritocratic are victims too. Selling labour, even elite labour, requires hard work. Successful lawyers are measured at 2400 billable hours a year, equating to twelve-hour days, six days a week. Markovits stresses the absence of free time in an elite dominated by position and income, and the loss of childhood innocence for those who must be schooled from birth for the never-ending competition ahead. The world has been inverted so the rich must work much longer hours than the poor. Alexey Stakhanov reborn would be a banker.

So how do Americans who miss out on places at Yale throw off their chains? Here Markovits offers only tepid suggestions. Private schools and universities should lose their charity status if they don’t increase enrolments from outside the 1 per cent. Payroll tax should be reformed to reward companies that create middle-class jobs.

These are interesting ideas, but no match for the urgency and concern that Markovits expresses through his book. He describes how massive and growing inequality is distorting an entire society yet offers responses that would change outcomes for only a small number of Americans. A more logical conclusion would be to suggest offering entry to elite education by lot. A ballot would also transform those political offices that have the potential to change American society.

Alternatively, Markovits might argue for radical political interventions to discount existing advantage, much as affirmative action programs seek to level otherwise unfair contests. He might have suggested that exam results be discounted by the wealth of the school, that fines and penalties be levied not as fixed sums but as a percentage of personal wealth, that death duties ensure each generation begins from a more equal place. Outraged by contemporary inequality, Marx proposed to overthrow the entire existing order, by revolution if necessary. Markovits expresses a similar anger at gross injustice only to suggest minor tax concessions.

Like many critiques, the analysis offered in The Meritocracy Trap is more compelling than the proposed solution. Markovits sums up his thesis as “economic inequality begets political inequality, and meritocracy undermines democracy.” An argument that society must think again about its most fundamental arrangements deserves considered debate — and more compelling alternatives. •

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At least, that’s how the story usually goes. In reality, state aid had already started flowing to some church schools years before the “Goulburn strike.” On 10 July 1956 the Canberra Times reported acting prime minister Arthur Fadden’s announcement that capital works in church schools in Canberra would be subsidised. The news was welcomed by the local Catholic and Anglican bishops, but critics argued that the money was needed more urgently by public schools. They pointed to the dire state of Telopea Park High School, where there were “eight classes without classrooms, a final examination class housed on a verandah-end” and “four teachers teaching 300 girls home management in one small, ill-equipped room.”

Even to motorists speeding along nearby Athllon Drive, the contrast with the school north of the footpath is clearly visible.

The subsidy for church schools was justified as a way of guaranteeing to public servants — who were moving to the capital in significant numbers — the same amenities they were used to in their home states. As the historian Michael Hogan has observed, Menzies also appreciated the significance of creating a precedent for financing non-government schools. With support from his government, numerous new church schools sprang up in Canberra in the late fifties and, when the Woden Valley opened up in the sixties, Menzies’s program helped create a Catholic boys school on Marr Street in the new suburb of Pearce.

A couple of years later, a co-educational public school opened next door. Side-by-side not far from Parliament House, separated only by a few gum trees and a footpath, the two schools represented the hybrid education system that Menzies had established, with its two distinct kinds of government-funded schools. As this system expanded under Menzies’s successors (not least Labor’s Gough Whitlam, who introduced recurrent Commonwealth funding for non-government schools), the two schools also grew. Today, Marr Street in Pearce becomes clogged with school buses and SUVs every weekday morning as nearly 2500 students arrive to attend either of the two schools. Over half a century later the pair, so closely connected with the origins of state aid, provide an insight into the consequences of Menzies’s innovation.

A microcosm of Australian schooling

On the south side of the footpath, the public school enjoys a strong reputation in the local community, and people try to buy into the surrounding suburbs to enrol their kids there. In recent years, the front of the school has been painted, roofing renewed and the oval, long renowned as an ankle-breaker, reseeded. But even to motorists speeding along nearby Athllon Drive, the contrast with the school north of the footpath is clearly visible.

Expanding across some fifteen hectares, the Catholic school features an Australian Rules football oval, a rugby union pitch overlooked by a state-of-the-art stadium, and numerous soccer fields. “Visitors typically comment on the lawns, gardens, trees and landscaping which give the school an atmosphere of orderliness, beauty and peace,” the school’s website says, as well as the “impressive collection of sculpture and other artworks.” Earlier this year, the school’s Jubilee Building was officially opened, with industrial arts workshops, visual arts studios, renovated prayer space, a senior common room and a new grandstand overlooking one of the many ovals. And this is not the only major new building erected in recent years.

If the visual contrast between the two schools is striking, other differences may matter more. Some 58 per cent of students at the non-government school come from the most privileged quarter of Australian families. When the ACT’s senators at the time, Zed Seselja and David Smith, attended the opening of the school’s new Jubilee Building at the beginning of this year, the college magazine proudly noted that they both did so as parents of boys at the school. Next door at the public school, the proportion of similarly privileged students is less than half (28 per cent). There, 16 per cent of students come from the most disadvantaged quarter of Australian families; at the Catholic school, only 1 per cent of students fit this description.

The difference between the kids at these schools might be pronounced, but the gap between the two of them and the schools in neighbouring suburbs is even more revealing. From the back of Pearce, it’s possible to climb Mount Taylor and, at the summit, turn back and look in a northerly direction to Parliament House and beyond. Turn to the south, and you are looking over the district of Tuggeranong — or “God’s country” to the locals. At the southern foot of the mountain are the suburbs of Kambah and Wanniassa, each of which is home to public schools that begin in preschool and go through to Year 10.

While they are only a few kilometres from the two schools in Pearce, these two schools serve a very different group of children. A third or more of their students come from the most disadvantaged quarter of Australian families. More than 10 per cent of their students are Indigenous (the figure is only 1 per cent at the Catholic boys school in Pearce), and the two schools have almost three times the number of students, proportionally, from language backgrounds other than English than their counterparts in Pearce.

In fact, the social disadvantage among students at the Tuggeranong schools is greater than at the average Australian school, let alone the average Canberra school. On the Index of Community Socio-Educational Advantage, or ICSEA — the policymakers’ measure of how lucky our home circumstances are — the average Australian school gets a score of 1000. The scores assigned to the public schools in Kambah and Wanniassa are 980 and 983 respectively. In Pearce, the government school’s ICSEA is 1049 and the non-government school’s is 1132.

Does Mount Taylor mark a major socioeconomic divide in Canberra, with the schools simply reflecting their respective suburbs? Not really. Kambah and Wanniassa are not quite as affluent as Pearce, but the difference is only one of degree. The Australian Bureau of Statistics’s Index of Relative Social Advantage and Disadvantage places Pearce in the top tenth of Australian postcodes, but Kambah and Wanniassa are in the second-highest tenth, not far behind. The differences between the suburbs are nowhere near enough to explain the differences between the schools. In fact, if the students at these four schools represented a cross-section of their local communities, they would look pretty much like each other.

Instead, they exemplify how Australia’s hybrid system of government-funded schools, with its independent, Catholic and public sectors, sorts children into different schools on the basis of their social background, dramatically exacerbating variations in social geography. In 2011, 32 per cent of children at public schools came from the most disadvantaged quarter of Australian families. By 2018, that figure had grown to 36 per cent, more than double the proportion at Catholic schools (17 per cent) and independent schools (14 per cent).

It turns out that the hills and footpaths separating these four Canberra schools wind their way through our country’s education system, increasingly separating young Australians into schools characterised by concentrated privilege or concentrated disadvantage. To understand the marked variations between the backgrounds of kids on either side of Mount Taylor — and on either side of the footpath in Pearce — is to gain an insight into a pattern that repeats itself again and again across the country, from Western Sydney to Wagga Wagga and Alice Springs to Albany.

Levers of segregation

The first clue to this understanding lies in the fact that the problem is getting worse. As the fees at the Catholic school in Pearce increased by a hefty 40 per cent between 2011 and 2017, the divergence between the student populations at the two schools on Marr Street sharpened appreciably. As the proportion of disadvantaged children at the Catholic school fell from 5 per cent to 1 per cent, the proportion of similar students next door grew from 11 per cent to 16 per cent. In effect, a bunch of kids from challenging backgrounds was transferred from one side of the footpath to the other. The shift vividly illustrates how our hybrid system, in which some schools receive public funding but are permitted to charge fees at whatever rate the market will bear, drives the segregation of Australian school students.

The steep fee increases at the Catholic school occurred despite a significant and growing taxpayer contribution. In fact, the school has enjoyed faster growth in government funding this decade than the government school next door. And, once again, the two schools encapsulate what is happening across the country. While we were supposed to be entering an era of needs-based funding — and even though we know more disadvantaged students than ever attend public schools — the non-government sectors have enjoyed much greater increases in government funding.

Between 2011 and 2017, combined federal and state government funding increased by 35 per cent for Catholic schools across the country, 37 per cent for independent schools, and just 18 per cent for public schools. When the Morrison government cut another special deal with the non-government sectors in September last year, it labelled the largesse the Choice and Affordability Fund. The reality is that our current policy settings are delivering neither. Just as it has become harder for poor Catholics — and others — to attend the Catholic school in Pearce, the concentration of disadvantaged children in public schools across the country has increased.

At the same time as those fees have become increasingly prohibitive, the school has been able to marshal more resources than ever to attract those who can afford them. On its website, the school claims that it is “fortunate in having facilities which are second to none,” but also observes, sagely, that “the climate, tone and spirit of a school are far more important than any of its physical aspects.” Buildings do matter, though, not least because, as educational economist Trevor Cobbold points out, “the lavish facilities… serve as status markers in marketing strategies to attract enrolments from rich families.” (Cobbold was responding to revelations in August that four exclusive private schools spent more on renovations and new facilities than Australia’s poorest 1800 schools combined.) And successfully recruiting students from well-educated, high-income families makes establishing the climate, tone and spirit of a school an awful lot easier.

In addition to its impressive facilities, Pearce’s Catholic school also enjoys a significant advantage in recurrent revenue over the public school next door. By 2017, it received a public subsidy of $10,100 per student, more than one-and-a-half times the needs-based resourcing allocation it’s entitled to. Combined with revenue from fees and other sources of income, this meant it had $3200 more to spend on each of its students annually than the school on the other side of the footpath. Better positioned than ever to offer the diverse curriculum and rich array of extracurricular activities that are critical in competition for enrolments, the Catholic school’s share of students from the most advantaged quarter of Australian families jumped from 47 per cent to 58 per cent between 2011 and 2018. Next door, the number of students in this group declined correspondingly.

While resource advantages help some schools pull privileged students in, and high fees push children from low-income families away, the increasingly segmented character of Australian schooling is also attributable to the power of non-government schools to pick and choose whom they enrol. When an elite Sydney private school expelled eight boys for smoking dope in 2014, then NSW education minister Adrian Piccoli condemned the decision as simply shifting the problem to another school. Controversial cases attract attention, but less noticeable and more pervasive forms of problem-shifting are embedded in the structures of Australian schooling.

Numerous parents and educators in Tuggeranong told me about incidents where a child’s Year 3 NAPLAN results were considered as part of their application to attend a non-government school. In some cases, the child’s test results were deemed acceptable and they were admitted; in other cases, the enrolment was rejected or delayed. This practice was documented in the recent national NAPLAN reporting review, and government research also made it clear that parents expect schools to use NAPLAN results for marketing purposes.

In this atmosphere, NAPLAN morphs from a diagnostic tool that can enable a candid conversation between parent and school into a de facto entrance examination used by non-government schools to skim the cream. Long before teenagers are ejected from certain schools over an illicit puff, primary schoolers can be rejected for slipping up on a NAPLAN test. As Piccoli told the ABC in August, “It is the ability of schools to select their students that creates inequity which is one of the structural weaknesses of Australian education.”

We tend to view the performance of schools in isolation, but in reality schools exist in delicate relation to each other, like the elements of an ecosystem, and decisions at one school profoundly affect the life of another school. This was vividly portrayed to me by a principal at a highly disadvantaged school in which there was a dearth of natural role models among the student group. The principal and his staff laboured like Sisyphus to build kids up to be leaders among their peers, only to eventually find that they would lose those very kids to better-resourced, more exclusive schools.

The children left behind

In his book about inequality in Australia, Battlers and Billionaires, economist and Labor MP Andrew Leigh compares the Australian Football League and the English Premier League. The AFL shares television revenue evenly among its clubs; lower-ranked teams have first pick when new talent is drafted; and salary bills are capped. In English football it’s more like the law of the jungle: salary budgets are uncapped and clubs that finish higher up the ladder receive more of the earnings from TV rights. Strong Premier League clubs get even stronger, making it a much more uneven competition than the AFL. It’s a lot easier to predict the clubs that will end the season at the top of the ladder.

But imagine a sporting competition in which some clubs were regulated like AFL clubs while others were treated like Premier League teams; in which, every week, teams made up of star talent lured from around the world by enormously lucrative contracts trounced clubs constrained by salary caps and restricted to recruiting from their local area. This, in essence, is the structural imbalance at the heart of Australia’s education system, in which some schools are fee-charging and selective (in numerous ways) while others are free and comprehensive.

In practice, school choice in Australia means that some schools choose their students, while the others are dominated by social disadvantage. If only 1 per cent of students at the Pearce Catholic school are from tough backgrounds, then there have to be very high proportions of these kids at the other schools in the area. The result is not one-sided football matches but educational outcomes that, almost a decade after the Gonski report, are increasingly “the result of differences in wealth, income, power or possessions.” Young Australians are consequently getting less and less out of the education we are providing them than they did five, ten or fifteen years ago.

For this story, I spoke to numerous parents and educators in school communities where a disproportionate number of children come from families with experiences of unemployment, unstable and transient housing, and social dysfunction. They told me of any number of innovations to address children’s learning needs, from introducing the Cambridge international curriculum to developing a Stephanie Alexander kitchen garden. One educator spoke of the joy of working with a student with an intellectual disability who swore volubly and uncontrollably but, with weeks of patient guidance and goal-setting, learnt to control his language and more effectively manage friendships. Another referred to the alacrity with which colleagues dig into their own pockets to meet resource shortfalls.

But no matter how good the teachers or inspiring the school’s leaders, the educational task facing schools with concentrated social disadvantage is incredibly challenging. Significant numbers of students with significant learning and behavioural difficulties, and a lack of the necessary parental support, inevitably affects teacher morale and staff recruitment and retention. When there are a significant number of children with troubling behaviours in the same school or classroom, the risk is that they will dictate the culture and set the patterns of behaviour for their peers.

Educational researchers call the impact of classmates on an individual student’s educational outcomes “peer effects.” They make a big difference. In fact, in its analysis of the performance of Australian school students in the OECD’s PISA tests, the Australian Council for Educational Research found that “the social composition of schools had just as strong an impact on the likelihood of being a low achiever as a student’s own family background… Disadvantaged students in average socioeconomic level schools, for example, are almost a year of schooling higher than those in disadvantaged schools.”

Our dual system catalyses a self-perpetuating process: it engenders schools with a disproportionate number of disadvantaged kids; and that, in itself, causes the concentration of disadvantage to grow over time. The process is fuelled by an often simplistic debate about variations in school “quality” and a tendency for the reputation of schools to long outlast any basis in reality.

Parents with the means to pay for schooling are placed in an invidious position. Many want their children to be part of the local community and to be able to play and learn with kids from diverse backgrounds. But they also understand that it is very difficult to provide a rich educational experience when there isn’t a critical mass of children with the disposition and know-how to learn, and they recognise when a school is confronted with a preponderance of challenging behaviours with which it struggles to cope. Sometimes a decision is finally made for them when their child comes home one day and says he or she can no longer cope with the behaviour issues and the disruption. Over time, children, particularly from middle-class families, trickle away from disadvantaged school communities.

In Tuggeranong, this movement manifests itself as a desire to get up the valley, over Mount Taylor into Woden and the leafy suburbs of Canberra’s inner south, mirroring the centripetal energy flowing through all our major cities. In addition to exclusive non-government schools, the destination is the sought-after public schools in the affluent parts of town that often have a long queue of out-of-area applicants, affording them a degree of discretion over whom they enrol.

The end result was described to me by a Tuggeranong parent. Flicking through the Year 6 yearbook at her son’s primary school, she took in the photos of the students in the graduating class, accompanied by their personal stories, including the high school they were heading to the following year. From a capacity Year 6 class, about half the students were proceeding to non-government schools. The other half were going to out-of-area public schools. Only one student was continuing on to the local public high school.

Then and now

As an origin story, the tale of the “Goulburn strike” conveys a number of morals that continue to underpin the way we think about our schools today. When Catholic parents and educators in Goulburn demanded that their children no longer be relegated to second-class schools, they asserted both the right to educate their children by their own lights and a claim to sector-blind government resourcing. Their success was critical to improving the marginalised status of Catholics in Australia and ending the nasty sectarian bigotry that accompanied it. It also helped establish a de facto consensus that, when it comes to the role of religion in education, parents should be able to decide what is right for their children, and that all schools deserve public support. After all, as the school closures in Goulburn in 1962 graphically illustrated, fee-paying parents helped reduce pressure on the public purse… at least at the time.

Today, the Canberra schools where state aid actually started symbolise how little the truths of the Goulburn strike continue to apply. Public funding doesn’t keep the Catholic school on Marr Street open, or buy it toilets it could not otherwise afford, or induce it to lower the fees it charges parents. Just as kids from poor Catholic families can’t access the Catholic school in Pearce, the majority of poor Catholics in Australia don’t attend Catholic schools. Government funding to non-government schools might once have served to facilitate choice, but it no longer does today.

Far from being sector-blind or a cost-saver, government funding to non-government schools has grown to the extent that many receive more public funding than comparable government schools. If all Goulburn’s Catholic schools closed today and the students were forced to attend public schools, governments would actually save money. While massive taxpayer support is provided to non-government schools, they continue to be able to enrol, expel and charge fees as they please — and our schools have become more and more characterised by either privilege or poverty. •

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