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Category: Public Sector, Procurement & Privatisation

  • Fragmentation & Photo-Ops

    Education & Training, Public Sector, Procurement & Privatisation

    Fragmentation & Photo-Ops

    The Failures of Australian Skills Policy Through COVID
    by Alison Pennington

    Author

    Alison Pennington

    Senior Economist

    Media release



    New Research: Australia’s Skills System Continues to Crumble After COVID

    Selected media impact

    Strong vocational education and training (VET) systems are vital to the success of dynamic, innovative economies and inclusive labour markets. Australia’s VET system once provided well-established and dependable education-to-jobs pathways, but a combination of policy vandalism and fiscal mismanagement plunged the VET system into a lasting and multidimensional crisis.

    During the pandemic, the federal government has pursued further VET restructuring through the implementation of several wage and training subsidy programs at the cost of several billion dollars. This has deepened the “contestable market” experiment unleashed in the 2000s, by subsidising further decentralisation of course content, delivery and student recruitment to unaccountable for-profit training providers. Meanwhile, more TAFE institutes have been closed and enrolments have continued to decline.



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  • Putting a Cap on Community

    Public Sector, Procurement & Privatisation, Wages & Entitlements

    Putting a Cap on Community

    The Economic and Social Consequences of Victoria’s Local Government Rate Caps Policy
    by Dan Nahum

    Author

    Dan Nahum

    Economist

    Media release



    Victorian Rate Cap Policy Costs Economy Over 7,000 jobs and $890 million to GDP

    Selected media impact

    The Victorian Government’s policy of capping of local government rates revenue in Victoria is a regressive move on economic, social and democratic grounds. By arbitrarily tying the growth in total rates revenue in each local government area to price indexes, the state government restricts the ability of local governments to respond to the COVID-19 crisis with expanded, secure employment and service offerings.

    Rates on property are the largest single source of revenue to local governments in Victoria. Of total Victorian local government revenue in 2019-20 ($11.7 billion), rates accounted for $5.6 billion or almost half. Since 2016-17, the Victorian state government has capped the amounts local governments can collect from their ratepayers.

    New research by the Centre for Future Work, commissioned by the Australian Services Union, finds that the imposition of rate caps has cost up to 7425 jobs in 2021-22, counting both direct local government employment and indirect private sector jobs. They have also reduced GDP by up to $890 million in 2021-22. The costs of suppressed local government revenues, and corresponding austerity in the delivery of local government services, will continue to grow with each passing year if the policy is maintained.

    The rate cap policy becomes more restrictive as the overall economy slows, since the rate cap is tied to inflation indexes which tend to slow when the economy is weak.

    The local government sector in Victoria employs about 50,000 people in a wide range of services and occupations, including road planning and maintenance, home and aged care, waste disposal, libraries, childcare, school crossing supervision, maternal and child health, the State Emergency Service, and environmental management.

    The rate caps act as a brake on recovery and growth by embedding a dynamic of self-fulfilling fiscal restraint and austerity. Additionally, there has been a shift to other forms of local government revenue-raising that are less progressive and socially equitable, such as fees and fines.

    Rates bills are calculated based on relative property valuations – so even if local governments are collecting less from rates overall than they would in the absence of the cap, growth in a particular ratepayer’s payments may well exceed the overall cap.

    The rate cap policy inhibits a normal trend of expanding and improving local government services in line with population growth, rising living standards, and economic expansion – as well as interfering with the democratically-expressed preferences of local government voters.



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  • Funding High-Quality Aged Care Services: A Summary

    Public Sector, Procurement & Privatisation

    Funding High-Quality Aged Care Services: A Summary

    by David Richardson and Jim Stanford

    Authors

    David Richardson

    Senior Research Fellow

    Jim Stanford

    The Centre for Future Work has prepared a 4-page summary of our recent detailed report on funding needed improvements in aged care services in Australia, in the wake of recommendations from the Royal Commission into Aged Care Quality and Safety.

    The summary is based on a full 80-page research report, Funding Quality Aged Care Services, published in May and written by David Richardson and Jim Stanford.

    The summary report restates the key recommendations from the Royal Commission (including its emphasis on improving working conditions and job stability for aged care workers), highlights the ample fiscal capacity for the Commonwealth government to move ahead with implementing those recommendations, and then considers five specific revenue tools which could generate sufficient resources to pay for needed reforms. The most obvious (and perhaps fairest) would be for the Commonwealth government to cancel the planned ‘Stage 3’ elimination of the 37% personal income tax bracket: a move (already legislated) which would reduce revenues by at least $16 billion per year, but would deliver the vast majority of its ‘savings’ to the richest fifth of society. Surely, committing to the safe and respectful care of older Australians is a more important priority than further supplementing the take-home incomes of very well-off households.



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  • Funding High-Quality Aged Care Services

    Public Sector, Procurement & Privatisation

    Funding High-Quality Aged Care Services

    by David Richardson and Jim Stanford

    Authors

    David Richardson

    Senior Research Fellow

    Jim Stanford

    Media release



    New Research: Commonwealth Can Afford $10b for Aged Care Recommendations

    Implementing the recommendations of the Royal Commission into Aged Care Quality and Safety will require additional Commonwealth funding of at least $10 billion per year, and there are several revenue tools which the government could use to raise those funds.

    While the Royal Commission’s 148 recommendations were not explicitly costed, the Centre’s report shows that $10 billion per year (or around 0.5% of Australia’s GDP) would be the minimum required to move forward with the urgent reforms in regulation, employment practices, and quality benchmarks advised by the Commission.

    The report notes Australia’s public spending on aged care is much lower than other industrial countries with better records of aged care service. It also notes that Australia’s overall tax collections are also much smaller (by about 5% of GDP) than the OECD average, and have declined relative to Australia’s GDP in recent years.

    The Centre recommends that initial improvements in aged care funding should proceed immediately, even before new revenue measures are implemented. With the Commonwealth budget projected to incur major deficits for many years (due to the COVVID-19 pandemic and recession), it is neither necessary nor appropriate to fully ‘fund’ incremental aged care spending in the initial years of reform.

    Eventually, however, as economic and fiscal conditions stabilise, additional revenue sources will be important in underpinning high-quality aged care. The Centre’s report highlights five specific options for raising new funds – two of which were proposed by the respective Royal Commissioners:

    A 1 percentage-point medicare-style flat-rate levy (proposed by Royal Commissioner Briggs).
    A set of modest adjustments to personal income tax rates, preserving the existing progressivity of the system (similar to the proposal of Commissioner Pagone).
    Cancelling the legislated Stage Three income tax cuts scheduled to begin in 2024 (which deliver most savings to high-income households).
    Reforms in the treatment of capital gains and dividend income in the personal income tax system.
    Reforms to company taxes to eliminate loopholes and raise additional revenues.
    The government could use any one of these measures (or a combination of them) to support the implementation of the Royal Commission’s recommendations.



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  • The Choices We Make

    COVID-19, Public Sector, Procurement & Privatisation

    The Choices We Make

    The Economic Future of Tasmania
    by Dan Nahum

    Author

    Dan Nahum

    Economist

    New research by the Australia Institute’s Centre for Future Work analyses the economic effects of COVID-19 on Tasmania, and suggests how Tasmania can ‘build back better’ out of the COVID-19 crisis, making key recommendations to help Tasmania avoid the mistakes made at the Federal level. Ahead of Tasmania’s State Budget, set to be delivered on 12 November 2020, in this new report the Centre for Future Work has explored what the shape of Tasmania’s economy could look like, and how it can recover and reconstruct after this pandemic.

    Businesses and households will not simply ‘regain confidence’ and drive a full recovery themselves. Indeed, Tasmania’s proactive and protective fiscal response indicates that the state government already understands that major support from government is necessary. As a proportion of the state’s gross state product, Tasmania has committed the largest amount of funding of any state. Meanwhile, extremely low borrowing costs mean that there is no reason for the state government not to undertake a more proactive role in the economy than it has done historically, even if that means higher deficits.

    However, a short-term, counter-cyclic approach does not adequately respond to the full scope of the challenge. The underlying working machinery of the economy is not in good order. COVID-19 has highlighted existing vulnerabilities and created new ones, and it has also limited the scope of the private sector to respond.

    The state government in Tasmania will clearly be required to play a hands-on, leading role in job creation, investment and income generation for years to come, and it will need to borrow to do so. This fact should not be feared, but celebrated: large deficits are the flipside of the public investment that will be required to undertake Tasmania’s reconstruction. It will be necessary to mobilise economic resources, to meet human needs and to get Tasmanians working again—especially if the intention is to build a more resilient and diverse economy than the one that existed before COVID-19.

    The Tasmanian economy will not have the same shape as it did before the pandemic. Tasmania can and must think differently about what is possible. Our purpose in this research paper is to add momentum to Tasmania’s conversation about its economic, and social, future. As a result of COVID-19, Tasmania could push itself forward into the next stage of its economic development, or it could, alternatively, spiral into a depression, scarring lives and communities. It cannot afford that. Tasmanians, moreover, deserve far better.

    The report recommends:

    • the Tasmanian Government make a larger investment in public housing
    • the State Government also expand public sector investment into the health, aged and disability care sectors
    • outsourced public sector functions should be returned to direct provision by Government wherever possible, to improve cost, accountability and quality
      • doing so will also provide the State Government with a lever to improve wages and conditions across the economy, especially in sectors dominated by women
    • the Tasmanian Government should also support and co-invest in several strategic industries, including manufacturing and renewable manufacturing, tourism and hospitality, arts and entertainment, food production, and higher education.



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  • Public Service in Challenging Times

    Public Sector, Procurement & Privatisation

    Public Service in Challenging Times

    The Economic and Social Value of Public Sector Work in Queensland
    by Dan Nahum

    Author

    Dan Nahum

    Economist

    Media release



    480,000 Jobs Rely on QLD Public Service, Cuts Would Deepen the State’s Recession

    In times of crisis, governments have a responsibility to their citizens to maintain and expand their role in the economy – for both economic and social reasons. This responsibility has never been clearer than during the current COVID-19 pandemic, and its associated economic downturn. Australians are counting on their governments to protect them from the pandemic, support them through the resulting recession, and play a leading role in rebuilding a stronger, healthy society in the aftermath of this unprecedented catastrophe.

    Moreover, the economic benefits of providing those essential services spread throughout the state economy, supporting jobs and incomes including in the private sector.

    In the context of the upcoming Queensland election, research from the Centre for Future Work shows that in addition to some 331,000 direct jobs providing broader state-funded public services, 150,000 private sector positions depend on the economic stimulus provided by public sector work. In total, some 480,000 positions are supported, directly and indirectly, thanks to the provision of state-funded public services in Queensland. In particular, regional and remote Queensland depends on the public sector as a crucial source of decent, socially valuable jobs, performed by well-qualified people, earning (and spending) middle-class incomes in their regional communities.

    Cutting public sector jobs and wages not only directly affects their own economic fortunes, but also negatively impacts the broader economy through spillover reductions in demand, spending, and production. To dramatise these broader economic consequences, this report describes simulations of two possible three-year austerity scenarios:

    • A one-year ‘freeze’ in aggregate public sector payrolls (considering both wages and staff levels).
    • A one-year 5% ‘cut’ in aggregate public sector payrolls (effected through some combination of wage and staff cuts).

    Over three years, the ‘freeze’ scenario reduces total GDP by a cumulative total of over $9 billion: including the loss of incomes for state public servants, and the resulting loss of income and output in the whole range of consumer goods and services industries which depend on the consumer spending of public sector workers. This decline in GDP translates into the loss of 20,000 person-years of employment in the private sector industries which are hurt by the freeze. Over a similar three-year period, the ‘cut’ scenario would reduce cumulative GDP by $15 billion, and eliminate some 35,500 person-years of employment in private-sector goods and services industries.

    In this unprecedented moment, the maintenance of public services (and supporting the jobs that depend directly and indirectly on those services) is surely a more urgent priority than cutting government spending in pursuit of some illusory fiscal target.



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  • Pay Equity in Community Services

    Gender at Work, Public Sector, Procurement & Privatisation

    Pay Equity in Community Services

    The Consequences of Federal Budgetary Decisions
    by Jim Stanford

    Author

    Jim Stanford

    Media release



    New Analysis: 12,000 Community Service Jobs at Risk Due to Funding Uncertainty

    The failure of the Commonwealth to confirm that it will maintain funding for community service organisations could threaten up to 12,000 jobs in that sector, at a moment when those services are critical to Australia’s pandemic-damaged economy.

    That’s the conclusion of new research on the economic importance of Commonwealth pay equity funding, conducted by the Centre for Future Work at the Australia Institute.

    The federal government has been stalling on whether it will continue $576.5 million in supplemental funding for federally-supported community services, currently set to expire in the current (2020-21) financial year.

    The special funding was part of the Commonwealth government’s legislated 9-year timetable to phase in pay equity wage adjustments in community services.

    If that funding is not renewed (either by incorporation into a higher level of core funding for affected organisations, or through the extension of explicit pay equity supplements), the resulting funding shortfall will undermine and reverse the progress that has been made toward pay equity since the 2012 pay equity order.

    The loss of federal pay equity supplements would inevitably produce some combination of staffing cuts and wage cuts, as organisations respond to such a significant loss of funding.

    If experienced fully through staff cuts, the end of federal supplements would result in the loss of close to 12,000 jobs in federally-supported community organisations.

    Alternatively, if the brunt of the funding cut is experienced through effective wage reductions (achieved through a range of potential channels described in the paper), it will reduce annual incomes for federally-funded community service workers by as much as $15,000 for full-time staff.

    The implementation of pay equity in community services has made a measurable difference to Australia’s (slow and uneven) progress toward closing the gender pay gap.

    The Centre for Future Work report found that the health and social services industry (which includes these community service organisations) has reduced the gender pay gap by more than any other industry in the years since the pay equity reform was announced. Those past gains will be undermined and reversed unless federal funding consistent with new pay equity norms is quickly confirmed



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  • Precarity and Job Instability on the Frontlines of NDIS Support Work

    Insecure & Precarious Work, Public Sector, Procurement & Privatisation

    Precarity and Job Instability on the Frontlines of NDIS Support Work

    by Donna Baines, Fiona Macdonald, Jim Stanford and Jessie Moore

    Authors

    Donna Baines

    Fiona Macdonald

    Acting Director, Centre for Future Work

    Jim Stanford

    Jessie Moore

    The national roll-out of the NDIS holds the prospect of a significant enhancement in both the resources allocated to disability services in Australia, and the autonomy and flexibility of service delivery for people with disability. But it also constitutes an enormous logistical and organisational challenge. And the market-based service delivery model built into the NDIS is exacerbating those challenges, by unleashing a widespread fragmentation and casualisation of work in disability services.

    In this new report, researchers document the experience of front-line disability service workers under the NDIS based on first-hand qualitative interviews.

    The report was a joint initiative of two leading academic researchers (Prof. Donna Baines, formerly of the University of Sydney, and Dr. Fiona Macdonald of RMIT) and the Centre for Future Work. Researchers conducted detailed face-to-face interviews with 19 front-line disability service workers, mostly in the Newcastle, NSW region. (Newcastle was one of the locations chosen for NDIS trials, so workers in the region have more experience with the reality of NDIS delivery problems.)

    The interviews indicated 8 major problems negatively affecting the stability, quality and sustainability of work for disability support workers:

    1. The new system is not providing sufficient support for participants with intellectual and other cognitive disabilities, including in designing and managing individual programs of care;
    2. DSWs are experiencing increased instability and precarity in their jobs, elevated levels of mental and physical stress, and irregular hours and incomes;
    3. New workers joining the disability services sector are often less skilled, less trained, less experienced, and sometimes reluctant;
    4. DSWs experience particular challenges working in the private realm of NDIS clients’ homes;
    5. The informal and inconsistent provision of transportation and other necessary functions to NDIS clients results in a significant shift of costs and risks to workers;
    6. DSWs are experiencing increased levels of violence in their work;
    7. Relationships with managers have changed dramatically under the new system, undermining effective supervision, coaching, and training; and
    8. Worker turnover, given the insecurity of work and income and the challenging conditions of work, is extreme.

    The deterioration in job stability and working conditions under the NDIS will inevitably impact on the quality of service experienced by NDIS clients; it will also exacerbate the overarching challenge of recruitment and retention facing disability service providers as they try to attract the 80,000 new full-time equivalent workers required to operate the scaled-up NDIS.

    The researchers conclude with several policy recommendations to improve the quality and stability of work for disability support workers, and the quality of care for participants.



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  • Messing With Success

    Public Sector, Procurement & Privatisation, Wages & Entitlements

    Messing With Success

    Victoria’s Puzzling Turn to Austerity
    by Troy Henderson and Jim Stanford

    Authors

    Troy Henderson

    Jim Stanford

    The Centre for Future Work has released new research estimating the negative impacts on wages and spending power of the Victoria government’s proposed 2% cap on wage increases for the state’s large public sector workforce.

    In recent years, Victoria’s economy has consistently been the strongest in Australia: with the most new jobs, the fastest growth in wages, and the biggest expansion in output. The state government has been both a key cause of that growth, and a major beneficiary of it. New expenditures on expanded public services and infrastructure have been crucial engines of the state’s growth. In turn, that strong growth generated huge fiscal dividends for the state government, through a robust, diversified and growing revenue base.

    Given this positive history, it seems inexplicable that the state government would now mimic tools of fiscal austerity that have been implemented, with negative and unintended consequences, in other Australian jurisdictions. The government has imposed a stringent cap on public sector wage increases: 2% per year over the coming four-year period. That cap falls well below relevant benchmarks: including growth rates for state GDP, state revenues, overall state wage growth, and Reserve Bank targets for both wage and price inflation. It also falls far below what the state’s elected representatives will receive in their own wage increase this year – including, in particular, the Premier and Treasurer, who have been awarded an 11.8% salary increase.

    The wage cap would artificially suppress total state public sector compensation by over $3 billion over the coming four years – compared to normal compensation patterns. It would short-circuit a badly-needed recovery in wage growth that is just taking hold in Victoria’s broader labour market. It would damage consumer spending, exert a chilling impact on private sector wage settlements, and do particular damage to regional communities which depend especially strongly on public sector jobs and incomes. The negative spillover effects of this unnecessary cap would extend throughout Victoria’s economy, totalling far more than the direct $2 billion hit to wages.

    The wage cap would be exacerbated by a secondary, equally puzzling austerity measure announced in the state’s 2019-20 budget: an increase in the so-called “efficiency dividend,” to take effect form 2020-21, that would impose an effective and homogeneous budget cut on departments and programs. This expanded “efficiency dividend” is justified as a tool for eliciting greater efficiency in service delivery; in practice it amounts to a mindless, across-the-board cut in expenditures, service delivery, and potentially employment.

    There is no fiscal problem that justifies either of these austere measures. The state government is not experiencing a deficit; it plans to generate consistent annual operating surpluses over the next four years. Its total revenues will continue to grow strongly. Financial analysts and debt rating agencies are unanimous that the state’s net debt and interest payments are fully manageable, and the government’s net worth remains strongly positive.

    In sum, the Victoria state government enjoys a healthy and enviable fiscal position; there is no fiscal argument at all for the imposition of these unnecessary forms of fiscal austerity. The government’s flirtation with austerity, despite the proven success (both economic and political) of its previous, more expansive approach, is puzzling and concerning. And it will undermine the positive economic success which explains why Victoria currently leads Australia in employment, growth, and incomes.

    The state government in Victoria faces no fiscal challenges that could justify either of these forays into the realm of austerity. The paper concludes with five key recommendations:

    1. The state government should abandon the imposition of a wage cap on state public sector workers.
    2. Instead, the state government should enter into normal negotiation of enterprise agreements in all broader public sector enterprises and agencies. The state’s fiscal outlook is obviously a relevant and important factor in those negotiations, but it does not justify the imposition of direct wage controls.
    3. The state government should abandon the proposed increase in the annual “efficiency dividend,” which has proven to be a blunt and ineffective budgetary strategy.
    4. Instead, the state should undertake an open-ended program review of departments and agencies. The goal of this review should be enhancing genuine efficiency – defined as improving the effectiveness and quality of public service delivery – rather than attempting to attain a target budget cut.
    5. Finally, the state should commit to no forced redundancies during the course of that program review. Any identified redeployments (motivated genuinely by improving service and better allocating existing resources) should be attained through relocation, retraining, and voluntary severance.

    Please read the Centre’s full report, Messing With Success: Victoria’s Puzzling Turn to Austerity, by Troy Henderson and Dr. Jim Stanford. The report was commissioned by CPSU Victoria.



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  • The Economic Importance of Public Services in Regional Communities in NSW

    Employment & Unemployment, Public Sector, Procurement & Privatisation

    The Economic Importance of Public Services in Regional Communities in NSW

    by Troy Henderson

    Author

    Troy Henderson

    Public sector austerity has become a “policy fad” in Australia, at all levels of government. Its hallmarks are unnecessary public sector wage caps, outsourcing, downsizing, privatisation and the imposition of so-called “efficiency dividends” which allegedly drive productivity growth but in reality cut spending and reduce the quality of public services. These policies of austerity are not justified by economic theory, especially not in conditions of chronic macroeconomic weakness, unemployment, and underemployment (such as characterise most areas of Regional NSW). They may be politically convenient for political leaders positioning themselves as “tough on deficits,” but in reality they impose a wide range of harmful economic and social consequences. At best they represent lazy thinking in policy; at worst they constitute deliberate attempts to erode the public sector and the critical services it provides.



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