Institutions to promote pro productivity policies logic and lessons_Gary Banks_Productivity Summit_ 6-7 July 2015_ Mexico
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The document discusses the importance of pro-productivity policies for economic growth, detailing barriers to reform and institutional requirements for success. It highlights the role of independent institutions, such as Australia’s Productivity Commission, in promoting structural reforms through transparency and public engagement. The potential economic gains from successful productivity-enhancing reforms are also addressed, suggesting significant improvements in household income and GDP.
Institutions to promote pro productivity policies logic and lessons_Gary Banks_Productivity Summit_ 6-7 July 2015_ Mexico
- 1. Institutions to Promote Pro-Productivity Policies Gary Banks OECD Global Dialogue on the Future of Productivity 7 July 2015 Mexico City
- 2. Intergenerationally, productivity matters most the most 2 -9.8 3.3 -14.6 17.0 -10.7 1.2 -3.1 0.5 -2.2 3.9 -20 -15 -10 -5 0 5 10 15 20 GDPpercapita2049-50 comparedwithIGRforecast (%) Participation rate Productivity rate Hours Per week Unemployment rate Working Age share BestWorst BestWorst“Best”“Worst” “Best”“Worst” “Best”“Worst” 2.0%1.2% 3.57%63%55% 3430 86%81%
- 3. Dual origins of national productivity growth • ‘Innovation’: value-enhancing changes within organisations − in processes, products, people or technology. • ‘Creative destruction’: displacement of poorly performing organisations (and industries) by the ‘fittest’. 3
- 4. Policy drivers and enablers of productivity Reason to be more productive Incentives Competition, regulation, budgetary assistance Ability to be more productive Flexibility Capabilities Workplace and other regulation, red tape Skills, infrastructure provision, organisational capital 44
- 5. Pro-productivity policies can be challenging • There are technical challenges (what to do) – very few policies are ‘ready made’ to meet specific needs. • But the political challenges (getting enough support to do it) can be much greater. 5
- 6. “There is nothing more difficult to carry out … than to initiate a new order of things. For the reformer has enemies in all who profit from the old order, and only lukewarm defenders in those who would benefit from the new.” (Niccolò Machiavelli, The Prince, 1513) 6 The age-old reform conundrum 6
- 7. ‘Asymmetric’ pressures that can confound structural reforms • Concentrated losses; diffuse benefits. • Short term ‘pain’; long term gain. • ‘A bird in the hand…’ • Administrative structures aligned with sectoral and sectional interests. 7 Odds loaded against much pro-productivity reform
- 8. Four desirable institutional requirements 1. Solid research and analytical skillbase 2. A national interest mandate 3. Independent governance 4. Transparent, consultative processes 8
- 9. How do existing institutions measure up? 9 Skills Mandate Independence Transparency Privately funded Think Tanks Publicly funded Think Tanks Trade tribunals Competition Authorities Audit bodies Regulatory gatekeepers Departmental research bureaus Reserve Bank research units Advisory Councils Ad Hoc Taskforces Standing Inquiry Bodies
- 10. Case study: Australia’s Productivity Commission • An independent government research and advisory body on structural reform/policy − that conducts in-depth ‘public inquiries’. • Expressly designed as an informational ‘counterweight’ in the public interest. 10
- 11. Three core design features • Independence −government funded, but arm’s length from the Executive −under own legislation (role, powers, tenure) • Transparency −public processes of engagement and feedback −published outputs • Economy-wide decision criteria −‘to promote policies yielding higher living standards for the Australian nation’ 11
- 12. Remit covers the policy drivers and enablers of productivity growth • Industry assistance, intellectual property and trade policy • Regulatory frameworks for public utilities and infrastructure • Human capital development • Competition regulation • Labour market regulation and programs • Social and environmental regulation • ‘Red Tape’ reduction 12
- 13. Stages in the Public Inquiry process Reference from Cabinet PC calls for submissions Initial consultations and Issues Paper First round of hearings or roundtables Draft Report publicly released Second round of submissions and hearings/roundtables Final Report to Government (subsequently publicly released) Cabinet submission by relevant Minister Decision and implementation 13
- 14. Some recent inquiry topics • Regional Trade Agreements • R&D Support • Regulatory impediments in key industries • Urban Planning and zoning • Water policy and regulation • Airport regulation • Carbon ‘pricing’ comparisons • Education workforce • Aged Care policy framework • Labour regulation framework (current) 14
- 15. A post-reform surge in productivity and innovation Average MFP growth Business R&D share of market value added 1.2 2.3 0.90.7 0 0.5 1 1.5 2 2.5 1984-85 to 1988-89 1988-89 to 1993-94 1993-94 to 1998-99 percent 0 0.2 0.4 0.6 0.8 1.0 1.2 1968 1976 1984 1992 2000 2.0 1.4 1.6 1.8 2008 15
- 16. Estimated gains from productivity-enhancing microeconomic reforms • Average household income $7500+ higher. • Infrastructure reforms alone yielded 2.5% extra GDP. • ‘National Competition Policy’ reforms in total projected to raise GDP by 5%+. • Second wave of ‘human capital’ and other reforms estimated to generate another 5-6% of GDP. 16
- 17. Lessons from Australia: (i) ad hoc reviews • Ideal for ‘complex and contentious’ issues • Timing can be crucial (electoral cycle) • So can leadership and governance arrangements • Public consultation is crucial and requires special skills to be done well. • But not too many at once: ‘less is more’!
- 18. Lessons from Australia: (ii) standing bodies • Formal independence has been fundamental • ‘Portfolio affiliation made a difference • Block funding by government also helped • In-house research capacity was integral • Effective public consultation has been key − especially via ‘draft reports’ for public scrutiny 18
- 19. What scope for interjurisdictional learning about ‘pro-productivity’ institutions? 19 • All countries face similar policy challenges/obstacles • These need a deliberate institutional response. • No ‘one size’ could be expected to fit all. • But there is scope for all countries to create institutional arrangements that ‘tick the boxes’ − and to learn from each others’ experiences (OECD)
- 20. Institutions to Promote Pro- Productivity Policies Gary Banks OECD Global Dialogue on the Future of Productivity 7 July 2015 Mexico City