ISSN 1442-9519 Print Post Approved PP381667/01204 Issue 3 December 2000

Melbourne Institute of Applied Economic and Social ResearchThe University of Melbourne, Victoria 3010 AustraliaPhone: +61 3 8344 5330 Fax: +61 3 8344 5630 Email: melb.inst@iaesr.unimelb.edu.auWWW: http://www.melbourneinstitute.com

2000 The University of Melbourne, Melbourne Institute of Applied Economic nd Soci l Rese rch

News Melbourne Institute

Melbourne Institute Embarks on ‘HILDA’ Survey

In September the Federal Minister for Familyand Community Services, Senator Jocelyn New-man, announced that a Melbourne Institute-ledconsortium had been commissioned to conductone of the most comprehensive long-term stud-ies into Australian households ever undertakenin this country, the Household, Income and La-bour Dynamics in Australia (HILDA) survey.

Most leading industrial nations conduct suchhousehold-based longitudinal surveys, whichprovide a wide variety of information. Until nowAustralia has been a notable exception. The allo-cation of funding to this project by the FederalGovernment is thus to be welcomed.

The primary objective of the HILDA is to sup-port research questions surrounding the follow-ing three broad and interrelated areas.

First, income dynamics—focusing on low tomiddle income households and their responsesto policy changes aimed at improving financialincentives, and interactions between changes infamily status and poverty.

Second, labour market dynamics—focusingon low to middle income households (includingthe role of part-time and casual jobs in escapingpoverty), female participation and work-to-retirement transitions.

Finally, family dynamics—focusing on sepa-ration/divorce and social/economic status, and

on any links between income support and familyformation/breakdown.

Melbourne Institute Hosts Welfare Reform Conference

On 9–10 November the Melbourne Institute inconjunction with the Department of Family andCommunity Services hosted a two-day confer-ence on Welfare Reform at the University of Mel-bourne. The aims of this conference were:

• to facilitate participants’ understanding ofthe reforms proposed by the report of theReference Group on Welfare Reform;

• to provide a US, UK and OECD perspectiveon welfare reform and elicit implied lessonsfor Australia; and

• to provide interested parties with a forum todiscuss and debate both the findings andrecommendations of the recently releasedreport of the Reference Group on WelfareReform, and the issues surrounding welfarereform more generally.

Speakers at the conference included mem-bers of the Reference Group on Welfare Reform,international experts on welfare reform, and anumber of prominent Australian academics andrepresentatives of business and the communitysector.

On the first day Mr Patrick McClure, Chair-man of the Reference Group on Welfare Reformand CEO of Mission Australia, presented an over-view of the Final Report of the Reference Group.Professor Peter Saunders (University of NewSouth Wales) and Associate Professor AlisonMcClelland (La Trobe University) provided dis-cussants’ comments.

‘HILDA’ Survey and Welfare Reform Conference

(continued on page 4)

Senator Jocelyn Newman, Minister for Family and Community Services, addressing the Welfare Reform Conference. The Shadow Minister and the Leader of the Democrats also addressed the conference.

★★ Inside Stories ★★

• New staff. See page 3

• Melbourne Institute economic forecasts on track. See page 5

• R&D and Intellectual Property Scoreboard released. See page 6

• Report on November Forums on innovation and R&D policy. See page 7

(continued on page 4)

Forthcoming Events

(provisional dates)

•

Melbourne Institute Business Economics Forum

(Melbourne) on 29 March 2001

•

Melbourne Institute Business Economics Forum

(Sydney) on 5 April 2001

•

Melbourne Institute Public Economics Forum

(Canberra) on 4 April 2001

See page 7

Phot

o: M

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ilver

2

Introduction

I would like to take this opportunity to commenton some of the exciting developments in the Mel-bourne Institute since the last newsletter. I willalso make some remarks about some importantpolicy decisions that the Commonwealth Gov-ernment will be making soon.

Centre for Business Cycle Analysis Acclaimed

This year the Melbourne Institute’s Centre forBusiness Cycle Analysis was reviewed by a panelchaired by the University’s Professor John Free-bairn, who was joined by two external reviewers,Professor Alan Layton (QUT) and Mr Tony Cole(William M. Mercer). More details are providedon page 3, but it was a very pleasing report inwhich it was stated that ‘the Centre has been animpressive performer in recent years and espe-cially since 1998’. It made a particular point ofcommending the Centre on its economic fore-casting performance.

For those interested in the Centre’s latest eco-nomic forecasts, their outlook remains positive,albeit with some slowing in growth expected in2001. More details can be found in the fourthquarter issue of the

Mercer – Melbourne Insti-tute Quarterly Bulletin of Economic Trends

.

HILDA and the Value of Longitudinal Data

We are delighted to have secured the contractfrom the Department of Family and CommunityServices to design and manage the new survey ofHousehold, Income and Labour Dynamics inAustralia (HILDA) in association with the Aus-tralian Council for Educational Research and theAustralian Institute of Family Studies.

At our recent conference on Welfare Reformwe were also delighted to hear from the Ministerfor Family and Community Services and from theShadow Minister about how important they bothconsidered the HILDA initiative to be.

Most leading industrial nations now conducthousehold-based longitudinal surveys whichprovide a wide variety of information abouthouseholds and their individual members. Aus-tralia, however, is a notable exception. Austral-ian policy-makers and researchers thus do nothave access to a data set that is both representa-tive of the Australian population and provides in-formation on the dynamic nature of events andhow they interact in influencing the changing be-

haviour and fortunes of Australian households,families and individuals.

To quote a leading international expert on so-cial policy, Dr Nicholas Barr of the LSE, ‘the casefor gathering longitudinal data despite its costsis that it allows analysis of major policy prob-lems, which are intractable without it’. Barr pro-vided the following examples of the sorts ofpolicy-related research questions which longitu-dinal data can assist in analysing: Is poverty tran-sient or is it a long-term issue for many people?How do we help people get back into work?What are the incentive effects of income trans-fers? What factors determine choices about post-compulsory education and investment in humancapital?

The Importance of Research and Evaluation in Welfare Reform

HILDA promises to be a key source of data thatwill help policy makers in future years to evalu-ate some of the welfare reforms implementedfollowing the report of the Reference Group onWelfare Reform, of which I was a member. It wascertainly one of our main thrusts that, in theprocess of reforming welfare, research and eval-uation was a very important ingredient.

How relevant HILDA turns out to be in such aprocess will depend partly on the sample size es-pecially of low-income families. This issue isunder discussion at present. It would be wrong,however, to see HILDA as purely a policy evalu-ation tool. It has much broader aims than that.Further, evaluation of welfare reform will re-quire a battery of research techniques, includingpolicy ‘experiments’ or ‘pilots’, as well as behav-ioural micro-simulation modelling of the kindthat we are beginning at the Melbourne Institutewith the MITTS model (the Melbourne InstituteTax and Transfer Simulator).

Innovation and R&D

While the Commonwealth Government has beenconsidering its response to the McClure Report,it has also been considering what to do on inno-vation policy. After our two-day conference onWelfare Reform in November, our Business Eco-nomics Forum in Melbourne and our PublicEconomics Forum in Canberra focused on R&Dand innovation policy. We released the 2000

R&D and Intellectual Property Scoreboard

atthe forums (see pages 6 and 7).

Having become convinced that there is a verystrong case for government investing signifi-

cantly more in support services and incentivesfor people who are heavily reliant on incomesupport to engage more successfully in the la-bour market, I found Rod Maddock’s argument,at these forums, that the government should alsoinvest more in R&D quite persuasive. If his argu-ment is right, such investment would help Aus-tralia’s medium to long-run productivity andgrowth performance.

While it is hard to be certain about the exactsize of the benefits that flow from public supportof R&D, there is a strong case for reversing theapparent reduction in public support for R&D ofrecent years, in the light of evidence about thesocial rate of return to R&D.

Then, of course, there is the case for increas-ing public investment in education! It is just aswell that the economy has been performingstrongly, which is contributing to higher govern-ment revenue than projected. Given this, there isa credible case for increasing investment in R&Dand education to help sustain strong economicgrowth in the medium to long term. There is alsoa strong case for investing in welfare reform tohelp ensure that the benefits of growth are moreequally dispersed (and that the effective laboursupply is expanded, which will also help to sus-tain growth). Of course if all these things workthey will be mutually reinforcing!

The challenge for government is to respondeffectively to these arguments, while at the sametime satisfying financial markets that it is pursu-ing a prudent budgetary policy. At least if theMelbourne Institute’s growth forecasts are as ac-curate over the next two years as they have beenfor the last four, the challenge will be easier tomeet than if some of the more gloomy punditsturn out to be right.

1 December 2000

Hard Heads, Soft Hearts: Director’s Letter

Professor Peter DawkinsRonald Henderson Professor and Director

3

Positive Review of Business Cycle Centre

Earlier this year a review committee was estab-lished to undertake an independent review of theperformance and future plans of the MelbourneInstitute’s Centre for Business Cycle Analysis.

The Review Committee comprised ProfessorJohn Freebairn (Faculty of Economics at the Uni-versity of Melbourne), Professor Alan Layton(Queensland University of Technology), and MrTony Cole (William M Mercer).

In presenting their findings to the MelbourneInstitute the Review Committee applauded theCentre’s impressive performance in recentyears. In particular, the Review Committeepraised the Centre’s macroeconomic forecasts:

The Centre was one of the very few economic fore-casters to forecast the robust performance of theAustralian economy during the period of the Asianeconomic meltdown and subsequently. In part thiswas an outcome of the development and use of re-cently developed econometric techniques in con-junction with the use of previous tools of leadingand coincident indicators.

The Review Committee also applauded theCentre’s state-of-the-art business cycle analysisand strong commercial focus. ‘The Centre isclearly at the forefront of Australian analysis’, theCommittee stated in their report.

New Business Cycle Centre Staff

• Lei Lei Song joined the Melbourne Institutein December and will be working with theCentre for Business Cycle Analysis. Lei Lei’smain research interest is in applied macro-economics and applied econometrics. LeiLei has almost completed a PhD in econom-ics at the University of Melbourne and mostrecently worked in the Economics Depart-ment of the University of Melbourne on a re-

search project on long-term forecasting ofthe Chinese economy, and as a tutor.

• Duy Tran joined the Melbourne Institute inDecember and will also be working in theCentre for Business Cycle Analysis. Duy’smain interests are both theoretical and ap-plied econometrics. Duy recently completeda bachelor of agricultural economics degreeat the University of New England and fromJuly until November worked as an associatelecturer in Economics at the University ofQueensland.

Visiting Professor

Professor Derek Bosworth, from the Universityof Manchester Institute of Science and Technol-ogy (UMIST), visited the Melbourne Institute inthe week commencing 20 November. ProfessorBosworth is a participant in the Melbourne Insti-tute’s Enterprise Performance Research Pro-gram. During his visit he discussed futurepossible collaboration with the Melbourne Insti-tute on research into the economics of innova-tion and intellectual property.

Professor Bosworth presented a seminar atthe University of Melbourne on IntellectualProperty, Innovation and Company Perform-ance.

He was also a discussant at the Melbourne In-stitute Business Economics Forum in Melbourneon 21 November.

Other New Staff

The Melbourne Institute is pleased to announcea number of other new staff appointments.

• Nicole Watson was appointed as the SurveyManager for the HILDA project and joinedthe Melbourne Institute in October. Nicolehas an honours degree in statistics and in-

formation technology from the University ofWestern Australia. Prior to joining the Mel-bourne Institute she worked at the Austral-ian Bureau of Statistics in Canberra and theDepartment of Human Services in Mel-bourne.

• Joanna Sikora joined the Melbourne Insti-tute in August, working on the InternationalSocial Science Survey, Australia project. Sheis primarily involved with putting togetheran international database on income in-equality, the International Economic SurveyUnit-Record Database (IESUD). Joanna waspreviously employed with the Australian Bu-reau of Statistics and has recently submittedher PhD on public attitudes to governmentownership in several countries.

• Dr Guyonne Kalb will join the Melbourne In-stitute in January 2001 and will be involvedprimarily in research related to the econom-ics of social policy. Guyonne has a PhD ineconometrics and was most recently em-ployed at Monash University in modellinghousehold labour supply and welfare partic-ipation.

News on Staff and Other Developments

Ms Nicole WatsonHILDA Survey Manager

Ms Joanna SikoraResearch Officer

Business Cycle team from left: Anne Leahy, Penny Smith, Duy Tran, Don Harding, Matt Hammill and Peter Summers

4

The Government has set aside $7 million overfour years for the HILDA survey. The project willinvolve surveying around 8000 households andthe project leader is Mark Wooden of the Mel-bourne Institute.

HILDA is presently at the planning stage. Dur-ing the first half of calendar year 2001 pilot test-ing will be undertaken in order to establish andrefine the methodology to be used and to test thequestionnaire to ensure its effectiveness. Thefirst surveys will be undertaken over a four to sixmonth period during the 2001–02 fiscal year,with the preliminary results from these surveysto be presented to the Commonwealth Govern-ment at the end of that fiscal year. The surveyswill then be repeated in the following two years.

The two other leading research organisationsinvolved in the project are the Australian Councilfor Educational Research (ACER) and the Aus-tralian Institute of Family Studies (AIFS). Allthree members of the consortium have extensiveexperience in survey design and implementationand bring together a unique blend of relevantskills and experience to design, develop, andmanage the HILDA survey.

Melbourne Institute Embarks on ‘HILDA’ Survey (continued from p. 1)

David Butler, from Manpower DemonstrationCorporation in New York, presenting the US ex-perience; Mr Alan Duncan, from the Universityof Nottingham, presenting the British experi-ence; and Mr Tim Maloney, from the Universityof Auckland, presenting the New Zealand experi-ence.

The second day of the conference com-menced with a presentation by the MelbourneInstitute’s Director, Professor Peter Dawkins,which looked at the options for reforming the in-come support system in Australia, with a partic-ular focus on increasing work incentives andachieving a simpler and more integrated system.

Peter Dawkins was followed by ProfessorAnna Yeatman (Macquarie University), who dis-cussed the issues surrounding mutual obliga-tion, and Professor Mark Lyons (University ofTechnology in Sydney), who discussed servicedelivery issues and social partnerships.

Senator Jocelyn Newman MP, Minister forFamily and Community Services, addressed theconference as did Mr Wayne Swan MP, ShadowMinister for Family and Community Services andSenator Meg Lees, Leader of the Democrats. Itwas clear that there is widespread political sup-port for welfare reform involving measures ofvarious kinds, many of which were canvassed inthe McClure report, albeit with some differentemphases.

Other discussants to respond and stimulatedebate on the critical issues being addressed atthe two-day conference included Professor BobGregory (ANU), Mr David Kalisch (Departmentof Family and Community Services), ProfessorBob Goodin (ANU), Professor Judith Sloan (Pro-ductivity Commission), Dr Bruce Bradbury(University of New South Wales), Ms Elizabeth

Morgan (Morgan, Disney and Associates), MrIan Spicer (National Disability Advisory Coun-cil), Father Nic Frances (Brotherhood of St. Lau-rence), Mr David Thompson (Jobs Australia),Dr Rod Maddock (Business Council of Aus-tralia), and Mr Michael Raper (ACOSS).

With in excess of 350 attendees at the two-dayconference, largely from business, governmentand non-profit organisations, the high level ofinterest in the issue of welfare reform in Aus-tralia is very evident. The quality of the discus-sion involving people from many differentbackgrounds and perspectives was a feature ofthe conference.

By the time this newsletter is released the Fed-eral Government is expected to have released itsresponse to the Report, outlining how it plans toproceed with welfare reform.

Literature Review on Unemployment

The Melbourne Institute recently published acompendium of five working papers which rep-resent a literature review on unemployment inAustralia. These papers are the result of workbeing undertaken as part of a collaborative re-search program entitled ‘Unemployment in Aus-tralia: Economic Analysis and Policy Modelling’.

The project is being supported by the Austral-ian Research Council and other collaborativepartners which include the Department of Fam-ily and Community Services; the Department ofEmployment, Workplace Relations and SmallBusiness; and the Productivity Commission.

The working paper titles are listed below.

•

Labour Market Models of Unemploymentin Australia

by Jeff Borland and Ian Mc-Donald

•

Disaggregated Models of Unemploymentin Australia

by Jeff Borland

•

Cross-Country Studies of Unemploymentin Australia

by Jeff Borland and Ian Mc-Donald

•

The Labour Market in MacroeconomicModels of the Australian Economy

by JimThomson

•

Labour Market Analysis with VAR Models

by Peter Summers

The papers are available individually, or as acompendium with an executive summary by Pro-fessor John Freebairn of the Department of Eco-nomics at the University of Melbourne. (See lastpage for further details.)

Labour, Social and Fiscal Studies

From left: Mr Peter Scherer (OECD), Mr David Butler (Manpower Demonstration Corporation, New York), Mr David Kalisch (Department of Family and Community Services) and Professor Bob Goodin (ANU) at the Welfare Reform Conference

This was followed by a number of speakerspresenting an international overview of welfarepolicy developments. These were Mr PeterScherer, from the Organisation for EconomicCooperation and Development (OECD), pre-senting a broad international perspective; Mr

Melbourne Institute Hosts Welfare Reform Conference (continued from p. 1)

5

Reading on the Economy

The economic environment continues to be achallenging one for those in the business of ex-plaining the present and forecasting the future.This is particularly so when the past is subject tocontinual, and sometimes major, revision. At theMelbourne Institute we have met this challengewith a forecasting model built by Peter Sum-mers.

As Don Harding showed in issue 2.00 of the

Mercer – Melbourne Institute Quarterly Bulle-tin of Economic Trends

the forecast errorsmade using this model have been of the samesize as the revisions in the ABS data that arebeing forecast.

The March and June quarter National Ac-counts elicited considerable press commentabout the failure of economic forecasters to getanywhere near the mark. The year-end growthrates were 4.4 per cent in March and 4.8 percent in June. Forecasters were a long way underthe March quarter growth number and thenover-predicted the June number. In the event,the Melbourne Institute’s forecasts of 4.3 percent and 5.4 per cent growth in the four quartersto March and June respectively were not far fromthe mark.

As expected, given the uncertainty surround-ing the impact of the introduction of the new taxsystem on 1 July, monetary policy has been onhold since the Reserve Bank last raised rates inearly August.

Those who at the end of 1999 sought an accu-rate guide to macroeconomic performance dur-ing the implementation of the GST would havebeen well served by adopting Peter Summers’forecasts and simulations of alternative scenar-ios in the 4.99 issue of the

Mercer – MelbourneInstitute Quarterly Bulletin of EconomicTrends

. Most notably, the Melbourne Institutepredicted the reduction in the unemploymentrate as well as the underlying inflation rate,which remained in the RBA target range in Sep-tember 2000.

The economy should continue to performstrongly in the coming quarters, althoughgrowth is expected to start slowing in the firsthalf of 2001. The

Westpac – Melbourne Insti-tute Indexes of Economic Activity

for Octobersupport this view. While the leading index pointsto a slowing in growth below trend in the next sixmonths, after making adjustments to take ac-count of the distorting effects of the tax changes(on the building sector in particular) the leadingindex indicates only a modest slowdown in

growth. The coincident index also suggests thatgrowth remained strong in the September quar-ter.

Arguably, however, the risks to this scenariohave increased in recent months. In particular,and as discussed in the above mentioned report,the risks on the inflation front would have ap-peared to have increased, with the Australiandollar reaching new lows against the US dollar,oil prices remaining high and an escalation oftensions in the Middle East. The last two factorsalso threaten to lower world growth.

Monitoring the GST

The new tax system has now been in operationfor four months and the last of the MelbourneInstitute’s series entitled

Monitoring the GST

was released at the start of October. The initialreport in this series, which was produced in lateMay, and its five updates provide valuable infor-mation about consumer attitudes to the July 1 taxpackage prior to its implementation and duringthe early months of its operation. Monthly sur-veys of 1200 households provided the basis forthese reports.

In the pre-GST period there was significantuncertainty about the effect of the GST on peo-ple’s personal situations and on the situation ofthe nation as a whole. People also generallyoverestimated the effect of the GST on price in-flation and underestimated the amount of com-pensation they would receive in the form of taxcuts and increased benefits. This uncertainty wasreflected in weaker than expected consumerspending in the first five months of the year.

In June, however, spending rebounded aheadof the introduction of the GST. Meanwhile, inJuly the Melbourne Institute’s index of consumersentiment also rebounded in the wake of thesmooth transition to the new tax system, reflect-ing a reduction in the level of anxiety about thenew system.

However, uncertainty about the effects of thetax changes remained significant in September,when the last of the

Monitoring the GST

surveyswas undertaken. In the September survey some82.7 per cent of respondents reported some un-derstanding of the tax changes, up just 5.2 per-centage points from 77.6 per cent ofrespondents in the April 2000 survey. Looked atanother way, in September most people re-ported that they did not fully understand thechanges: only 28.4 per cent reported a full un-derstanding of the impact of the changes on theirpersonal situation; and only 17.2 per cent re-

ported a full understanding of the national impli-cations.

The surveys provide a guide to the possibleimpact of the tax changes on household saving.In the April survey 73 per cent of respondentsreported that they would spend all of the in-crease in after-tax income and benefits resultingfrom the tax changes. However, by the Septem-ber survey 43 per cent of respondents said thatthey would save all the tax cuts. This develop-ment reflects consumers’ initial underestimationof the increase in after-tax income and benefitsthat would occur under the new system. This im-plies that the overall tax package may have a lessexpansionary effect on the economy than previ-ously expected.

In September 42 per cent of respondents re-ported price increases of 10 per cent since June;this overestimation along with responses toother inflation-related questions indicates that alarge part of the population remained confusedabout the impact of the GST on inflation.

With widespread volatility in retail sales andbuilding activity data in recent months associ-ated with the tax changes, employment data havebeen the best indicator of the strength of the Aus-tralian economy during the transition period ofthe tax package, as expected.

Business Economics Forums

The June 15 Melbourne Institute Business Eco-nomics Forum provided a useful opportunity todiscuss the likely impact of the GST on the econ-omy. Peter Summers presented the latest fore-casts for the economy and Don Hardingdiscussed the Melbourne Institute’s survey-based work in this regard and the usefulness ofthese findings to the Melbourne Institute’s fore-casting during the implementation of the new taxsystem. Bill Evans from Westpac and Paul Brad-dick from the ANZ were the respondents.

At the October 13 Business Economics Forumin Melbourne the special topic for the meetingwas industrial relations reform. The Minister forEmployment, Workplace Relations and SmallBusiness, The Hon. Peter Reith MP, was the lead-ing speaker. Mark Wooden of the Melbourne In-stitute provided an assessment of the extent ofreform and the prospect for further reform.Meanwhile Ross Garnaut from the ANU provideda broader perspective on the issue of industrialrelations reform.

Both meetings were strongly attended. TheNovember 21 Business Economics Forum is dis-cussed on page 7.

Business Cycles and Forecasting

6

R&D and Intellectual Property Scoreboard 2000

The

R&D and Intellec-tual Property Score-board 2000

waslaunched on 21 and 28November at the Mel-bourne and CanberraBusiness EconomicsForum and Public Eco-nomics Forum respec-tively (see last page fordetails). It is in itsthird year of produc-

tion and provides the most comprehensive as-sessment to date of the innovative activities oflarge Australian enterprises. It is produced bythe Melbourne Institute in association with IPAustralia and IBIS Business Information.

The

Scoreboard

collates information on fourdifferent measures of innovation: expenditureon R&D, and the number of applications for pat-ents, trademarks and designs.

The data on large Australian firms included inthe

Scoreboard

are taken from the IBIS data-base. In 1998 the database included financial in-formation, including R&D expenditure, for 2240firms. Patent, trademark and design applicationdata come from IP Australia.

The

R&D and Intellectual Property Score-board 2000

provides rankings (by absoluteamount and intensity) of the top 50 firms foreach of the innovation measures. In 1998–99,the latest year for which data are available, over-all expenditure by business on R&D fell for thethird year in a row. However, for six of the topten firms R&D spending rose in 1998–99.

This publication also includes an innovationindex to identify Australia’s most innovativefirms. This index incorporates a firm’s R&D ex-penditure, patent, trademark and design appli-cations into a single measure. Firm size iscontrolled for by taking account of a firm’s as-sets. This more comprehensive measure of inno-vation produces a very different top-ten list tothat produced by looking at R&D expenditure.

Enterprise Performance Research Continues

Further Melbourne Institute research examiningthe performance of Australian enterprises is out-lined below. This research is part of a greaterbody of research funded by a three-year Aus-tralia Research Council (ARC) SPIRT grant.

Management and Industrial Relations Practices in Australian Workplaces

Poor industrial relations performance can becostly to firms. In particular, employee resigna-tions, employee absence, industrial action andsubstandard relations between management andemployees can all have a detrimental effect onthe performance of a firm. Joanne Loundes hasused the 1995

Australian Workplace and In-dustrial Relations Survey

(AWIRS) to examinehow particular human resource managementtechniques and industrial relations settings caninfluence the industrial relations outcomes ofAustralian workplaces. Her analysis indicatesthat unions have played an important role in af-fecting workplace performance outcomes. Italso suggests that while particular human re-source management techniques can also influ-ence workplace performance, there is not asingle bundle of human resource managementpolicies that will apply across workplaces to af-fect all measures of performance in the sameway. The results of her analysis are reported in aworking paper entitled

Management and In-dustrial Relations Practices and Outcomes inAustralian Workplaces

. (See last page for de-tails.)

Diversification and Firm Performance

The issue of the optimal level of firm diversifica-tion has been of interest to management analystsfor some time. It has been argued in both Aus-tralia and the United States that in the 1960s and1970s many firms failed to ‘stick to their knit-ting’ and that those that did focus on key compe-tencies achieved a higher performance. Inassessing such propositions many case study

analyses have reviewed a relatively small numberof firms. Mark Rogers has analysed the associa-tion between diversification and firm perform-ance in a sample of up to 1449 Australian firmsover the period 1994 to 1997. Firm perform-ance is measured by profitability and, for pub-licly listed firms, market value. Results from thefull sample do in fact show that more focusedfirms have higher profitability. This result con-trols for firm-specific effects and other determi-nants of performance. However, this associationis not found in sub-sample regressions that usea dynamic panel model, or when market value isused as a performance measure. The detailedfindings of this study are yet to be published.

Training for the Skilled Trades

This project aims to document and analyse fac-tors affecting the attraction, retention and careerprogression of people through the metals, con-struction, vehicle and electrical trades in Aus-tralia during the past 10 to 15 years. Specificallyit considers the extent to which training-linkedcareer paths have developed in Australia overthis period.

Obstacles and barriers inhibiting the forma-tion of appropriate skills were widely discussedand debated in Australia during the late 1980s.Common issues included the heavy reliance onapprenticeship for many areas of skill forma-tion, the inaccessibility of apprenticeship tomany workers, the lack of modular trainingcourses, lack of recognition of prior learningand the narrow definition of skill clusters. Eliza-beth Webster, with assistance from several Mel-bourne Institute staff, is currently assessing howfar these barriers have been removed.

The study also considers the relative attrac-tiveness of working in the skilled trades by com-paring how much extra financial and non-financial satisfaction people get from undertak-ing skilled vocational training compared withother schooling or qualification options. Workon the effects of vocational training on work sat-isfaction is limited and studies which try to quan-tify the financial rewards are also few in number,especially in Australia.

Finally, the study looks at the perennial ques-tion of attrition from the trades. Specifically,whether the provision of additional forms oftraining affects attrition from the trades.

The findings from this research will be pub-lished by the National Council for Vocational Ed-ucation Research late in 2000.

Enterprise Performance

R&D and Intellectual Property Scoreboard

Research Fellow Ms Joanne Loundes working on the Management and Industrial Relations Practices Project

7

•

Melbourne Institute Business Economics Forum (Melbourne)

7.30am – 9.00am Thursday 29 March 2001, Melbourne

The focus of this meeting will be a presentation of the Melbourne Institute’s outlook for the Australian and world economies. Speakers are yet to befinalised.

•

Melbourne Institute Business Economics Forum (Sydney)

Lunchtime Thursday 5 April 2001, Sydney

This inaugural Sydney Forum will include a presentation of the Melbourne Institute’s outlook for the Australian and world economies. Mr Glenn Stevens,Assistant Governor of the Reserve Bank, will be one of the speakers. Mr Bill Evans of Westpac will also be a commentator.

•

Melbourne Institute Public Economics Forum (Canberra)

12.00am – 1.45pm Wednesday 4 April 2001, Canberra

The special topic to be addressed at this briefing will be higher education policy. Guest speakers and respondents are yet to be finalised.

For information on Melbourne Institute Forums, please contact Karen Roe on (03) 8344 7885.

Forthcoming Events (provisional dates)

At the November Business Economics Forum inMelbourne and the Public Economics Forum inCanberra the

R&D and Intellectual PropertyScoreboard 2000

(see page 6) was launchedand a stimulating discussion was held on inno-vation and R&D policy.

Dr Rod Maddock (Chief Economist and As-sistant Director of the Business Council of Aus-tralia) made the case for increasing the taxconcession for R&D expenditure back to itsformer 150 per cent deductibility level. Hispaper (originally published in

BCA Papers

) wasreprinted in the fourth quarter issue of the

Mer-cer – Melbourne Institute Quarterly Bulletinof Economic Trends

.Discussants at the Melbourne forum were

Professor John Freebairn (University of Mel-bourne) and Professor Derek Bosworth (a lead-ing international expert on the economics ofinnovation) from UMIST in the UK. John Free-bairn argued that direct subsidies linked to R&D

expenditure probably were more rational thantax concessions because of the wide variety oftax liabilities that companies faced. Derek Bos-worth argued that rather than a higher tax con-cession for all R&D, there was a strong case fora tax concession for increments to R&D.

Discussants in Canberra were Mr Gary Banks(Chairman of the Productivity Commission) andDr Mike Nahan (Institute of Public Affairs). TheProductivity Commission (and one of its prede-cessors, the Bureau of Industry Economics) hasbeen the main source of Australian research onR&D policy and Gary Banks gave the Canberraaudience the benefit of the accumulated wisdomof this analysis as well as his assessment of thepros and cons of Dr Maddock’s argument and

various policy approaches. Mike Nahan pre-sented some useful international comparisonsand commented on the balance between publicand private sector R&D. He provided some sup-port for the idea of the tax concession policy, butstressed that regulatory impediments to innova-tion in the market place were major obstaclesthat needed to be addressed.

IP Australia was also represented at these fo-rums by Dr Ian Heath (Director General) andMr Rick Gould (Deputy Director General) at theCanberra and Melbourne forums respectively.They presented information on trends in patentsand trademarks and commented on issues relat-ing to intellectual property policy, another veryimportant aspect of innovation policy.

November Forums on Innovation and R&D Policy

Dr Rod Maddock (Business Council of Australia) speaking at the Canberra Forum

From left: Professor Peter Dawkins (Melbourne Institute), Dr Mike Nahan (Institute of Public Affairs), Dr Rod Maddock (Business Council of Australia), Dr Michael Keating (ANU and Co-Chair of the Melbourne Institute Public Economics Forum), Mr Gary Banks (Productivity Commission) and Dr Ian Heath(IP Australia)

Phot

o: Ir

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The Melbourne Institute operates three Fo-rums. The

Business Economics Forum(Melbourne)

and,

from 2001, the

BusinessEconomics Forum (Sydney)

are held quar-terly and focus on the economic outlook and arange of special economic topics. The

PublicEconomics Forum

is oriented towards publicpolicy and held each quarter in Canberra.

Different packages of benefits are availableto members of the Forums. Three levels ofmembership are available to Forum members,Gold, Associate and Individual, each contain-

ing a different package of benefits. All mem-berships include attendance at the quarterlyeconomic briefings and a copy of the

Mercer –Melbourne Institute Quarterly Bulletin ofEconomic Trends

. The total package of poten-tial benefits is summarised below.

• invitations to quarterly economic briefingsheld in Melbourne and Sydney or thequarterly luncheon forums held in Can-berra

• publications of the Melbourne Institute

• discount registration at public conferences(two per year are planned)

• access to consulting by Melbourne Insti-tute researchers

• other benefits negotiable

For further information on either theMelbourne Institute Business EconomicsForums or the Melbourne Institute Pub-lic Economics Forum, please contactKaren Roe on (03) 8344 7885.

Melbourne Institute Business and Public Economics Forums

Journals

The Australian Economic Review

(Australia’s leading economic policy journal; quarterly)

Australian Social Monitor

(6 issues per year)

Mercer – Melbourne Institute Quarterly Bulletin of Economic Trends

Macroeconomic and Social Indicators

Westpac – Melbourne Institute Indexes of Economic Activity

(monthly)

Westpac – Melbourne Institute Survey of Consumer Sentiment

(monthly)

Melbourne Institute Survey of Consumer Inflationary Expectations

(Sponsored by the Reserve Bank; monthly)

Westpac – Melbourne Institute Survey of Consumer Sentiment: NSW, Vic., Qld, WA

(quarterly)

Mercantile Mutual – Melbourne Institute Household Saving Report

(quarterly)

Melbourne Institute Wages Report

(quarterly)

Poverty Lines: Australia

(quarterly)

Recent Working Papers

Most of our working papers can be down-loaded from the Melbourne Institute website. Alist of the most recent working papers follows:

11/00

Modelling the Impact of Environmental

Regulations on Bilateral Trade Flows: OECD, 1990–1996

by Mark N. Harris, László Kónya and László Mátyás

12/00

Management and Industrial Relations Practices and Outcomes in Australian Workplaces

by Joanne Loundes

13/00

Habit Persistence in Effective Tax Rates: Evidence Using Australian Tax Entities

by Mark N. Harris and Simon Feeny

14/00

The Effects of Wages on Aggregate Employment: A Brief Summary of Empirical Studies

by Elizabeth Webster

15/00

Labour Market Models of Unemployment in Australia

by Jeff Borland and Ian McDonald

16/00

Disaggregated Models of Unemployment in Australia

by Jeff Borland

17/00

Cross-Country Studies of Unemployment in Australia

by Jeff Borland and Ian McDonald

18/00

The Labour Market in Macroeconomic Models of the Australian Economy

by Jim Thomson

19/00

Labour Market Analysis with VAR Models

by Peter Summers20/00 Foreign Ownership, Foreign

Competition and Innovation in Australian Enterprises by Craig Lofts and Joanne Loundes

21/00 Consumer Sentiment and Australian

Consumer Spending by Joanne Loundes and Rosanna Scutella

22/00 A Dynamic Panel Analysis of the Profitability of Australian Tax Entitiesby Simon Feeny, Mark N. Harris and Joanne Loundes

23/00 The Determinants of Relative Wage Change in Australiaby Elizabeth Webster and Yi-Ping Tseng

Books, Monographs, Reports

Melbourne Institute Annual Report and Outlook

How Big Business Performs: Private Performance and Public Policy (contact Allen & Unwin)

R&D and Intellectual Property Scoreboard 2000: Benchmarking Innovation in Australian Enterprises

The Contours of Restructuring and Downsizing in Australia

Policy Implications of the Ageing of Australia’s Population (contact the Productivity Commission)

The Economics of Intangible Investment (contact Edward Elgar)

For further information or a copy of thepublications brochure please contactLara Hammond on (03) 8344 5330.

Melbourne Institute Publications

Enquiries relating to the Melbourne Institute may be directed toMelbourne Institute of Applied Economic and Social Research

The University of Melbourne, Victoria 3010 AustraliaPhone: +61 3 8344 5330 Fax: +61 3 8344 5630 Email: melb.inst@iaesr.unimelb.edu.au

For further information on the Melbourne Institute and its products and services, log on to http://www.melbourneinstitute.com