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1
Institutional Foundations of Economic Reform and Integration
Bernard WonderHead of Office
Productivity Commission
Tokyo26 February 2007
2
Task
Working regionally to develop national capacities
3
What can we usefully do?
From the perspective of Australia’s Productivity Commission– the Australian Government’s principal
review and advisory body on microeconomic policy and regulation; and
– the institution most identified in Australia with microeconomic reform
4
Regional co-operation
Share experiences
Share institutional solutions
Share priorities for reform agenda
Focus on particular priorities
5
1. Share experiences
Number 1 (beginning of 20th century) in world per capita incomes
To Number 4 (of 23 OECD countries) in 1950
To Number 9 in the early 70s and16 by late 80s
6
Australia’s relative productivity performance
0.0
1.0
2.0
3.0
4.0
1950-1973 1973-1990 1990-2005
Australia OECD
GDP per hourAverage annual labour productivity growth
7
Why was this so? High cost manufacturing sector Low levels of innovation and skill
development Outmoded technologies Inflexible work practices High cost government provided
infrastructure services
8
Reform strategies that worked for Australia Opening the borders
Unilateral liberalisation
Gradual change
Reform on a broad front
Specific adjustment measures
9
Fall and rise of Australia’s economic ranking
Rank based on GDP per capita, in 2005 EKS$, 23 OECD countries1
3
5
7
9
11
13
15
17
19
21
23
1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002
Australia ranked 4th in 1950
Australia ranked 16th in late 1980s
Australia back to 6th in mid 2000s
10
2. Share institutional solutions to:
– Obstacles to structural reform; and
– Promoting and sustaining reform
11
Obstacles to structural reform Costs are concentrated. Benefits are
diffuse Potential winners poorly informed Bureaucratic structures aligned with
sectional interests Costs of reform front-loaded, benefits
long term Multiple jurisdictions
12
Promoting and sustaining reform
Neutralising vested interests
Building community-wide support
13
Productivity Commission Model
Well informed policy decision-making and public understanding on matters relating to productivity and living standards, based on independent and transparent analysis from a community-wide perspective.
GovernmentCommissionedprojects Competitive
NeutralityComplaints Office
PerformanceReporting
RegulationReview
SupportingResearch
14
What is it about the Productivity Commission model that makes it work (in Australia)?
Independent, transparent and economy-wide analysis
Well researched advice that is impartial Extensive public input Draft and final reports Opportunity for governments to respond to
Commission reports Wider awareness of the costs of existing
policies and the benefits from reform
15
3. Share priorities for reform Agenda
16
The future agenda Strengthening the national electricity market Enforcing ‘water allocation and trading regimes Delivering a more efficient freight transport
system Addressing costly regulation Addressing greenhouse gas abatement Improving consumer protection policies Reviewing the entire health system Examining vocational education and training
17
4. Focus on particular priorities
What might be a good example? – regulation
18
Growth in Australian Government regulation
0
10 000
20 000
30 000
40 000
50 000
60 000
1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s
Tot
al P
ages
Pas
sed
Estimated growth in pages of Australian Government primary legislation
19
The paper burden (a small business perspective)
20
Rethinking Regulation
21
Common regulatory problems
Unclear or questionable objectives Failure to target the regulation at the ‘problem’ Undue prescription and complexity Overlap, duplication and inconsistency Excessive reporting and paper work Unwarranted differentiation from international
standards
22
Recent decisions:New regulatory framework
Australian Government responded to the Report of Regulation Task Force and announced the 'New Regulatory Framework’ on 15 August 2006
23
What might be the product of regional focus? Principles of good regulatory
process? Better understanding of good
regulatory analysis Compliance Cost checklist Competition assessment checklist Sharing of national approaches to
regulatory assessment
24
25
Institutional Foundations of Economic Reform and Integration
Bernard WonderHead of Office
Productivity Commission
Tokyo26 February 2007