AUG 7 — At the International Monetary Fund (IMF) and World Bank Annual Meetings in Bali, Indonesia in October 2018, a treasury working paper by the macro-economic group of the Australian Treasury was presented which examined Australia’s period of economic reform in a way that was intended to be useful both for Australian policymakers thinking about future reform, and for other countries considering their own reform programmes, while acknowledging their circumstances might be quite different to those in Australia.
Since 1992, Australia has experienced a period of sustained economic growth and prosperity without interruption.
A country’s growth without even a slight recession is unprecedented. Considering that Australia is a federation of six states and that no Australian state has experienced a recession is even more remarkable.
Even so, the diversity of circumstances and experiences of reform across countries makes it difficult to draw universal conclusions about how best to undertake reforms. However, broad insights from Australia’s reform story may still be drawn.
A number of factors that contributed to the success of Australia’s programme of reform were identified.
First, the sequencing of reforms. The order in which Australia undertook economic reforms was said to be unusual. A standard approach might be to improve the efficiency of the economy before exposing it to international competition. To some extent, Australia did the reverse.
Second, consensus building. This was critical, particularly because the reforms pursued in Australia typically benefited the many over a vocal minority.
Third, persistence in pursuit of reform. Australian policymakers were mostly persistent, did not give up in the face of adverse outcomes or events and, most importantly, appeared to learn from past mistakes.
Malaysia could learn from the above, particularly the second and third factors.
On consensus building, the authors of the working paper (Laura Berger-Thomson, John Breusch and Louise Lilley) wrote as follows:
“Australia’s reforms have largely been implemented with substantive efforts to gain public support. Mostly, they have been implemented with support from the major political parties as well as business groups and the labour union movement, which is unusual when compared with the experience of similar countries.
“Even those groups in society that were net losers from the reforms were not as vocal in Australia as they were in some other countries. This is notable since the types of economic reforms Australia introduced during this period typically benefited the majority while disadvantaging a small minority, which can often lead to vocal opposition by vested interests.
“While seeking support may have incurred some costs, most notably by delaying reform, it is also likely to have significantly reduced costs in other areas, for instance by reducing days lost to strike action.
“As such, it is likely an important reason why Australian governments were successful in pursuing reform over a relatively long timeframe and were able to push ahead even when faced with conditions that could have set back the reform agenda.”
Successive Australian governments were noted to have worked hard to build support for reform.
For instance, in an economic summit in 1983 the then government brought together union and business leaders to build consensus on the need for change.
In other cases, support was sought by using simple messaging to communicate complex economic problems.
An example is the warning in 1986 that Australia risked becoming a “banana republic”. Controversial it might be, but Australia’s Treasurer warning at the time raised public awareness about threats to the country’s standard of living.
Another example was the Goods and Services Tax (GST). After failing to win support during the 1980s and early 1990s, a GST finally came into force in 2000 after gaining voters’ backing through a federal election and following extensive consultation about implementation.
Some reforms required consensus around implementation, especially where different levels of government were involved which spanned both federal and state jurisdictions.
The importance of fairness alongside efficiency and growth is also a recurring theme of Australia’s reform story.
Many reforms included measures to ease transitional pain, particularly where a policy change adversely affected particular groups.
Doing so was considered not only appropriate on fairness grounds, but politically savvy.
Finally, governments in Australia have repeatedly drawn on independent advice to build consensus for reform.
Independent advice lends much-needed credibility to the case for change — credibility that is founded upon both technical expertise and independence.
Experts, free from political or vested interests, can identify challenges, sift through proposed responses, and recommend the best way forward — whether or not it accords with the government’s own views.
On the third factor, the authors wrote of how perseverance with reforms is a feature of Australia’s experience, that governments have generally stuck by reforms, even in the face of some “failures” and political backlash.
The authors highlighted that while reforms typically benefited the majority and therefore imposed transitional costs on certain groups which were often criticised, instances of major policies being scrapped or scaled back were relatively few.
In short, there were few reversals or flip-flops.
I thought the above presents lessons for the Unity Government.
Care to read and do the same, PMX? The working paper entitled “Australia’s Experience with Economic Reform”, Treasury Working Paper October 2018 is available here.
Pursue reforms the Madani way, if you like.
But rise above the bitterness and wrath and anger and clamour and slander along with all malice (Ephesians 4:31) that the on-going state election campaigns have generated.
As the Sultan of Perak, Sultan Nazrin Shah said at the launch of “Buku Siri Titah II Sultan Nazrin Muizzuddin Shah” at the World Trade Centre (WTC) on Saturday, the nation “requires leaders who embrace inclusivity, showing determination and wisdom in uniting the diverse elements into a strong and harmonious whole.”
