A Blueprint for the National Cabinet

Blueprint Institute

Blueprint Institute 1 About Blueprint Institute About this paper

Every great vision starts with a blueprint – to get This paper will focus on the genesis of the you from the idea to the action. National Cabinet, elements that have helped make it successful, and how it can continue to Blueprint Institute exists to inspire reform with fulfill the expectations of the Australian public bold ideas, honest conversations and evi- during the COVID-19 recovery. dence-based research. We offer fresh thinking to help leaders to take a step back from the Future Blueprint papers in coming months will day-to-day and see the bigger picture. We outline policy recommendations for the National design blueprints for practical action towards Cabinet to consider across small business a more resilient and prosperous Australia. regulation, regional economic development, energy and climate policy, technology and Blueprint Institute was established in the era of innovation funding, and education reform in COVID-19, in which Australians have witnessed vocational, schooling and tertiary sectors. how tired ideologies have been eclipsed by a sense of urgency, pragmatism and bipartisan- For further information on Blueprint Institute’s ship. The challenges our nation faces go beyond programs, or to join our mailing list, please go partisan politics. We have a once-in-a-gener- to: www.blueprintinstitute.org.au ation opportunity to rethink and recast Austra- This report may be cited as: Guinness, H., lia to be more balanced, prosperous, resilient, D’Hotman, D., Steinert, J., De Mestre, G. (2020). and sustainable. A Blueprint for the National Cabinet. Blueprint Institute.

All material published or otherwise created by Blueprint Institute is licensed under a Creative Commons Attribution-NonCommercial-Share- Alike 3.0 Unported License.

Methodology: Blueprint Institute commissioned polling through Pureprofile to inform this report. Polling took place over the weekend following the Prime Minister’s announcement that the National Cabinet would replace COAG. 1000 responses were recorded. Any additional com- mentary and analysis are our own. About the authors

Harry Guinness, Daniel D’Hotman, CEO and Co-Founder Senior Researcher With 10 years experience across public, private Daniel is a Rhodes Scholar currently completing and non-profit sectors, Harry is a passionate his PhD on the political and ethical implications advocate of liberalism, citizen engagement in of using AI in mental health at the University of democracy and evidence-based policy. Over Oxford. With a strong interest in business and four years Harry worked as adviser to Australia's innovation, Daniel was awarded one of two Foreign Minister and the Deputy Leader of the undergraduate scholarships in the Asia-Pacif- Liberal Party, the Hon Julie Bishop. He oversaw ic by the Boston Consulting Group, undertak- key areas of foreign policy including foreign aid, ing health systems and private equity projects technology for development, public-private in Sweden. Daniel has published a variety of partnership and climate change. Harry holds academic papers, with one of these articles Bachelor Degrees in Economics and Politics selected amongst the ‘Best in Philosophy’ col- from the Australian National University and an lection for 2019 by Oxford University Press. MPhil in International Development from the His work in the media has been featured in The University of Oxford. Spectator, The Sydney Morning Herald, The Sun Herald, Herald Sun, Brisbane Times, The Critic, Josh Steinert, Researcher and The Conversation. Josh recently graduated from the University of Oxford with a degree in Politics, Philosophy and Georgia De Mestre, Researcher Economics (PPE), where he specialised in Politics Georgia currently works at PremierState and of the Middle East and Political Theory. He is PremierNational, a leading public policy and planning to return to university to complete corporate affairs consulting firm. Georgia has postgraduate studies in economics. experience working in NSW Government and on both State and Federal election campaigns. Georgia is currently a student at the Universi- ty of Sydney, studying Politics and International Relations. Contents

5 Executive Summary

10 Introduction 16 How the National Cabinet can become an engine for creating jobs and economic growth

19 Principles that should govern the National Cabinet

22 The National Cabinet should not limit its activities to jobs creation Executive summary The National Cabinet has the potential to solve some of the most intractable challenges facing Australia. The Blueprint Institute commends Prime Minister Morrison and the State Premiers for committing to it for the long-term. The Australian people are on the same page as our national leaders and have high hopes for a new era of cooperation in politics. This executive summary outlines the polling, key findings and recommendations of our Blueprint for the National Cabinet.

Blueprint Institute | Executive Summary 5 Key results of polling conducted by Blueprint Institute include:

89% 60% An overwhelming 89 per cent 60 per cent of Australians of Australians support the believe the National Cabinet is continuation of the National an example of effective policy Cabinet post COVID-19, with this collaboration, with this number number increasing to 90 per cent jumping to 71 per cent of Coalition for Greens, 91 per cent for Labor voters. Interestingly, this number and 93 per cent amongst Coalition drops to 57 per cent for Labor voters (77 per cent One Nation, and 50 per cent for Greens. 79 per cent Other).

Australians thought that the National Cabinet should prioritise:

improving the tackling environmental creating jobs in health system problems like drought, the short-term water management and climate change 57% 58% 55%

Blueprint Institute | Executive Summary 6 Coalition voters were the most 68 per cent of Australians likely voter group to support identified increasing Australian the National Cabinet working manufacturing using new to reform the energy system to technologies as key to the COVID-19 coordinate efforts on electricity economic recovery. This points to prices and carbon emissions. a strong desire to move towards advanced manufacturing as part of the COVID-19 response.

88 per cent of Australians (94 per cent Labor and 79 per cent Coalition voters) would support investment in renewables to promote post-COVID recovery (as opposed to fossil fuels) 88%

83% 73% 83 per cent of Australians 73 per cent of Australians agreed believe that developing more that a strong economy is not manufacturing in regional important without a healthy Australia should be one of environment (Labor 77 per cent the top three actions for and Coalition 61 per cent). the government to take in creating new jobs and economic growth.

Blueprint Institute | Executive Summary 7 Blueprint Institute will address a number of these issues throughout our research over the coming months. This paper will focus on the genesis of the National Cabinet, elements that have helped make it successful, and how it can continue to fulfill the expectations of the Australian public during the COVID-19 recovery.

Embrace the Address the vision of Federation fiscal imbalance as a flexible and between State and agile system of Federal systems governance

To deliver on its potential, the National Cabinet needs four key ingredients.

Prioritise Involve experts interjurisdictional for evidence- reform and ongoing based decision collaboration making across levels of government

Blueprint Institute | Executive Summary 8 Along with a ‘laser-like’ focus on job creation, the National Cabinet is to be tasked with overseeing key areas of reform: the needs of rural and regional Australia, skills, energy, transportation, housing, transport and infrastructure, population and migration, and health. Within these areas, and strongly supported by our polling findings, the Blueprint Institute recommends the National Cabinet put the following issues at the top of their to-do list:

Moving towards a Reducing regulation on national consensus on small businesses so they energy and environment can invest and grow. policy that reduces power prices and emissions while stimulating investment and jobs in renewable energy. Increasing technology and innovation funding to drive entrepreneurial activity and encourage long-term growth and job creation.

Investigating opportunities for regional economic development, Reforming the vocational, with a particular focus on secondary and tertiary advanced manufacturing education system to improve and improving national the quality of our workforce, resilience to shocks (such better connect skills with as pharmaceuticals, industry, and increase the medical supplies and long-term viability of our water/food security). training systems.

Together, a coordinated response on these issues will boost economic growth, create jobs and contribute to a more sustainable future for Australia. It will also align the National Cabinet’s activity with the expectations of the Australian public, who are supportive of the National Cabinet but expect continued progress in key policy areas affecting the nation. Blueprint Institute will outline an approach for the National Cabinet to consider in each of these areas in subsequent releases.

Blueprint Institute | Executive Summary 9 Introduction

The world around us is rapidly changing. The way we work, the way we shop, and the way we socialise. Even as the health threat of COVID-19 subsides, these changes will continue to affect our lives. Workers may continue to work from home. Gatherings may continue to be limited, either by government rules or due to behavioural change. And many Australians will struggle to find a job.

The economic shutdown to contain the Australia also faces other challenges, aside pandemic has been effective at saving lives but from COVID-19. For example, the economic there were no costless choices in dealing with turmoil caused by the virus may accelerate the this crisis. The RBA predicts1 that Australian GDP pace of automation and integration of tech- will decline by around 10% over the first half of nology in various businesses; while this may be 2020. It similarly forecasts2 that unemployment good for productivity, technological change will increase to 10% in the June quarter. The Job- could threaten a range of traditionally secure keeper program is supporting more than three jobs and professions. million jobs; these may also be at risk when the program is rolled back.

Blueprint Institute 10 From crisis to crisis A vision for the future COVID-19 has come at a time when Australia With so many changes occurring across society, is sliding from crisis to crisis. First there was the we have a once-in-a-generation opportunity drought. From 2017 to 2019, agricultural output to create a new type of collaborative, construc- fell by 22%3. Then there was the destruction and tive, ideas-driven governance for a modern havoc caused by the bushfire season just past. Australia. It is an opportunity to move away 18 million hectares4 were burned. The Insurance from the partisan politics that have undermined Council of Australia has estimated that bush- forward thinking policy making for years. Review fire-related insurance losses since November after review has identified pathways to reform 2019 amounted to $2.32 billion5, and these only in energy, tax, industrial relations, skills, popu- include approved insurance claims. Research- lation management and infrastructure policy. ers estimate that 400 people6 were killed by Australia does not have a cohesive long-term the smoke pollution that blanketed much of industry plan - or any clear process for creating the country. As the nation was recovering from one. Arbitrary divisions between governments the bushfires, the emergence of COVID-19 plague our ability to make progress on our most shifted our focus again. Through the National pressing challenges. Cabinet, our leaders led an evidence-based response that saved lives and money. However, cross-jurisdictional, co-ordinated and decisive action will be needed more than ever as we face the challenges to come.

Blueprint Institute 11 The National Cabinet can embrace this reform agenda The emergence of the National Cabinet during The fact that the new National Cabinet is the course of this crisis has been a revelation governed by existing cabinet convention will for many Australians. The Prime Minister’s recent allow free and active discussion to take place, announcement that the National Cabinet will away from the bureaucracy that had previous- continue is welcome. This decision provides ly characterised State and Federal relations at the opportunity to re-examine the machinery COAG. Forums and Councils, which once made of governmental decision making and chart a up COAG, will be streamlined. State and Federal path for meaningful reform on the issues facing Treasurers will have centralised responsibility for the nation. all financial arrangements between State and Federal Governments. Meetings of the National The National Cabinet has proven to be decisive, Cabinet will continue every fortnight during collaborative and constructive, serving the the COVID-19 crisis, before taking place on a interests of all Australians. monthly basis once normality returns. This rep- Exclusive polling from Blueprint Institute, con- resents an increase from the previous COAG ducted over the weekend following the Prime meetings, which took place twice a year, which Minister’s announcement that the National could signal a step change in the level of coop- Cabinet would continue, found that the Austra- eration between our levels of government. lian public agrees with this proposition. As the Prime Minister has outlined, the imme- An overwhelming 89 per cent of Australians diate priority of the National Cabinet will be support the continuation of National Cabinet job creation and economic recovery. Other post COVID-19. This number increased to 90 per interjurisdictional challenges should also be cent for Greens, 91 per cent for Labor and 93 addressed, including: productivity reform, per cent amongst Coalition voters (77 per cent reducing small business regulation, energy One Nation, 79 per cent Other). Further, 60 per and climate policy, innovation and technology cent of Australians believe the National Cabinet funding, regional economic development, and has demonstrated that ‘effective leaders col- education reform. laborate with others on important decisions’, Blueprint Institute holds that many of these with this number jumping to 71 per cent of Coa- reforms will have their best chance of success lition voters. Interestingly, this number drops to through the enduring National Cabinet. We will 57 per cent for Labor voters and 50 per cent for briefly explore the background to the National Greens voters. Cabinet and the history of COAG before out- lining key elements that will define the National Cabinet’s continued success. The National Cabinet is an innovation in governance forged out of necessity to respond to a unique challenge. We need to ensure it remains as proactive and visionary as it has proven to be during COVID-19, as the challenges that Australia has faced in the past will be joined by more in the future. A responsive, accountable and decisive National Cabinet can pre-empt, meet and defeat those challenges.

Blueprint Institute 12 Reflections on COAG National policy cooperation at the highest level has, in recent years, rested on the shoulders of the COAG. Unfortunately, intergovernmental relations through COAG has been, at times, cumbersome and inefficient, imposing unnecessary costs on citizens and reducing the quality of services.

Having consulted with senior politicians and public servants, Blueprint Institute found a range of stereotypes have characterised recent COAG interactions: public servants and political staffers attend COAG with individual agendas and often draw battle lines ahead of time; States attempt to extract more funding from the Federal Government; and politicians often take policies that they do not like to COAG knowing that they can bury the idea in disagreement. Meetings reportedly involved a sense of competition and disruption, not cooperation. When a policy process starts in COAG, it might take three years to get something done, even when it is fast-tracked. Over the past decade, of 44 target outcomes committed to in COAG agreements, a dashboard7 developed by CSIRO and the Productivity Com- mission indicates that only 16 have been given the green light for having been met, or are likely to be met based on current trajectory. Understandably, the public is not enthusiastic about this slow progress.

The legal and constitutional arguments invoked This is in addition to the Federal Department by the Federal Government on where the of Industry, Science, Energy and Resources, and authority lay to take action and ownership all of the State Government energy depart- during last summer’s devastating bushfires are ments. Rather than synchronise bureaucracy to not limited to emergency situations. They are promote simplicity, the Government created the frequently used by State and Territory Gov- Energy Security Boardsits on top of all of these ernments to defer responsibility in policy areas bodies to oversee their work. The end result is a that affect the lives of Australians but where the dilution of accountability and reduced capacity Federal Government is involved. The Australian of any one department to make impactful public is often left with a front row seat to a decisions. tennis match of blame and shame, with a less If governments had attempted to manage than optimal outcome for our States and nation COVID-19 using this fragmented model, we as a whole. would not have achieved such remarkable These factors have resulted in the situation that levels of success in protecting human health or we find ourselves in today. Bureaucracy and red keeping businesses afloat during an unprec- tape at all levels of government combines with edented crisis. Our success in managing poor policy coordination, resulting in wasteful COVID-19 has much to teach us about how we government spending and inertia to reform. can tackle some of Australia’s most intractable problems. Take the energy sector, for example. At the Federal level, we have the AEMC, the AER, the AEMO and the COAG Energy Ministers Forum.

Blueprint Institute 13 How the National Cabinet can become an engine for creating jobs and economic growth

The National Cabinet provides a new mechanism by which to make policy in Aus- tralia and presents an immense opportunity for pragmatic and ambitious reform.

Prime Minister Morrison has already announced During the COVID-19 crisis, this type of decision that reforms will be considered in the sectors making has occurred numerous times, perhaps of Industrial Relations and Education. Blue- most significantly with the passage of the Coa- print Institute argues that far reaching reforms lition’s economic rescue package. Gone were are also necessary to address the problems in the election and ideological commitments Energy and Climate policy, Regional Economic to a balanced budget. Instead, Australia saw Development and Productivity. the biggest fiscal stimulus package in Austra- lian history. This occurred, not because liberal But the vision of an effective National Cabinet thoughts on economic theory had changed, will only succeed if our politicians continue to but because the evidence said that it had to be operate constructively, by coming to conclu- done. We need similar thinking now to address sions based on deliberation and making the pressing challenges in the COVID-19 recovery best decisions possible based on the evidence and beyond. available. Politicians must continue to put ideology aside and look at the problems that Australia faces swiftly and decisively.

Blueprint Institute 14 The National Cabinet - born out of crisis, but can it endure? At the beginning of the COVID-19 crisis the ment of expert advisory groups will provide the National Cabinet was formed of the Prime National Cabinet with the independent advice Minister and all State and Territory Premiers and that it needs to make sound decisions. Chief Ministers. The National Cabinet was set In addition, State and Federal Treasurers will be up with no legislative change; it was simply a responsible for all of the funding agreements matter of process. Nothing underpins its legit- between the States and the Commonwealth. imacy other than participation, cooperation Previously, agreements had to pass between and results. Scott Morrison has indicated individual ministry portfolios, resulting in siloed that the National Cabinet will continue to be funding arrangements. It is hoped that this governed by established cabinet conventions move will streamline processes and allow for that determine interactions across existing money to be allocated more effectively. State and Federal cabinets. Blueprint Institute is encouraged by these Task forces that previously worked with COAG developments which will allow governments to will continue to function as before, but they will better react to the challenges ahead. now report to the National Cabinet. The involve-

Council of Australian Governments National Cabinet (COAG)

• Met twice a year • Met three times a week during the height of COVID-19. Will continue to • Governed by burdensome meet fortnightly for the duration of the bureaucracy and legislation crisis, then monthly in a normal year • Slow moving • Likely to be continued to be Governed • Large, complex and ineffective by Cabinet Convention

• Burdened by a history of policy inertia • Decisive, effective

• Multitudes of Committees and Forums • Wide support from Australian public

Blueprint Institute 15 The effectiveness of the National Cabinet has public support. There is a possibility that, already begun to improve trust in our system when this current unprecedented crisis subsides, as a whole, and political leaders are happily the National Cabinet could fall victim to the reaping the results. same bureaucracy and partisan behaviour that plagued COAG. Along with the public, The introduction of the National Cabinet has we hope this does not occur. The magnitude coincided with a significant increase in public of the emerging economic challenge is unlike trust for our politicians. Trust in politicians and anything this generation of leaders has seen. government has, until recently, been on a We will need vision, inspired leadership and col- downward trajectory8; now, The Prime Minister, laboration if we are to save jobs and minimise the Leader of the Opposition and State Premiers the economic damage. have seen significant improvements in their popularity. The same is true for the mainstream parties, with voters flocking to the Coalition and Labor and away from minor parties. Morrison’s In the National Cabinet, the approval rating jumped 20 points9. Anthony Prime Minister has a decision Albanese also increased his net approval rating making vehicle which will provide by 9 points10. him with every chance of success. However, to ensure positive Why might this be the case? We hypothe- outcomes, it is imperative that sise that it is being driven by a renewed faith the National Cabinet: in politicians to serve the national interest, not short-term political aims. There was no need for • Embraces a vision of Federation lengthy Senate Reviews or Royal Commissions; as a flexible and agile system politicians found common ground, on advice of governance. from experts, and acted swiftly in a coordinated • Addresses the fiscal imbalance policy response. Indeed, according to our own between State and Federal polling, an overwhelming 89 per cent of Aus- systems – so that states can tralians support the continuation of National more effectively test different Cabinet post COVID-19. policy approaches. The decision that the National Cabinet will • Involves experts – to ensure meet fortnightly during the COVID-19 crisis and consultation and good decision then monthly once the crisis subsides is a step making, and transparency about in the right direction. However, it is imperative the advice it receives and the that these arrangements remain flexible so basis for its decisions. that the National Cabinet can effectively • Prioritises interjurisdictional reform address the overarching problems facing the and makes real progress on nation in the agile and adaptive manner which intractable policy issues that sit has characterised decision making during between states and territories COVID-19. and the Commonwealth. Questions remain over whether the National Cabinet can continue its success and maintain

Blueprint Institute 16 Principles that should govern the National Cabinet Embrace a vision of Federation as a flexible and agile system of governance While the National Cabinet has been more Being able to draw on eight examples for agile and responsive than COAG, it is simply a shared learnings and solutions can be a source change in process. It is critical that the Federal of strength, not weakness, for the National Government continues to provide autonomy to Cabinet. In times of crisis, such as COVID-19, the States, empowering them to better serve a more coordinated national policy may be citizens in the areas of governance they are required; however, in other policy areas, such responsible for. as health and education, different approaches between the States can offer valuable learnings We envisage a Federation where States and to inform more effective legislation. Territories test different policy approach- es to suit the local context. A distributed Local and State Governments have exten- decision making system has inherent advan- sive experience in service delivery in areas tages. States and Territories can engage in where the Commonwealth has limited in-house ‘test and learn’ policy cycles, where differ- expertise. As a result, State Governments are ent policies are trialed and their outcomes often better placed to understand the needs assessed at the National Cabinet. Unforeseen of residents than Federal bureaucrats in negative consequences of reform are mini- Canberra. The Prime Minister can leverage the mised to one jurisdiction rather than nation- State Government apparatus to implement wide. Such a model respects the separation important reforms post-COVID that improve of powers that is outlined in the constitution the lives of all Australians. and keeps the Federal Government in-check.

Blueprint Institute 17 Addressing the fiscal imbalance between State and Federal systems Another issue for consideration by the National Change will not be easy; numerous Prime Cabinet is the well documented fiscal imbal- Ministers have previously attempted reform. ance between State and Federal systems. In 1997 Malcolm Fraser proposed a ‘New Fed- The Federal Government collects the majority eralism’ which would facilitate the introduction of the nation's taxes, but the States deliver the of income tax surcharges to help States raise majority of our services. The Federal Govern- funds. In 1991 a “Working Party on Tax Powers”11 ment has to distribute this money to the States was set up under Bob Hawke’s government in a way that is often not fair or efficient. which reviewed State and Federal abilities to raise taxes. In February 2014, the National Com- This fiscal imbalance has resulted from mission of Audit12 recommended that States be increased control of the purse strings by the granted the ability to levy an income tax sur- Federal Government. Fiscal imbalance funda- charge. Then, in 2016, Malcolm Turnbull again mentally undermines States’ sovereignty and raised the prospect13 of a State income tax as their ability to engage in ambitious reform. an attempt to provide the States with a means It also reduces the ability of the States to to collect a portion of income tax, and thus respond to citizen interests (which differ from become more fiscally self-sufficient. Unfortu- State to State) as accurately as possible – nately, Turnbull’s proposal, like many that had which is the whole point of federalism. The come before it, was shot down by State Premiers National Cabinet could consider examining who had little interest in taking on responsibility opportunities to provide greater autonomy and for fiscal management when they could easily control over State finances; such a move would blame any State-based issues on the Federal likely improve the effectiveness of State Gov- Government’s funding arrangements. Blue- ernment responses that are agreed through print Institute argues that this issue should be the National Cabinet, as well as returning the revisited by the National Cabinet; providing the Federal system to its roots. States with more autonomy over their funding arrangements will encourage different policy responses that enable better outcomes overall.

Blueprint Institute 18 Involvement of experts The success of the National Cabinet has been determined by its reaction to one crisis: COVID-19. Premiers, Chief Ministers and the Prime Minister shared a table with our Chief Medical Officer and top scientists to determine Australia’s response to the virus. As the National Cabinet broadens its scope, we argue for the continued involvement of experts and civil servants in National Cabinet decisions.

The involvement of public servants through working groups, as outlined by the Prime Minister, is of the utmost importance. High quality and independent advice will ensure that the National Cabinet possesses the evidence it needs to make good policy. By maintaining involvement of civil servants in policy making, our political leaders will ensure that various stake- holders at all levels of government continue to Prioritising be heard. This will engage the public service as interjurisdictional reform a collaborative partner in reform efforts, provide accountability to governments, and improve This development of the National Cabinet public trust. Inspired leadership should not be provides a unique opportunity to tackle the dislocated from sound advice. Strong leaders difficult policy areas that will arise as a result seek counsel and apply evidence-based policy of the pandemic and the economic recession in the national interest. This is something that that is on the horizon. Blueprint Institute will be the National Cabinet can achieve. releasing subsequent reports which outline the long-standing issues in critical need of resolu- To maintain high levels of public faith in the tion via the National Cabinet. National Cabinet over time, it should also be transparent about the advice and evidence it If Australia is to weather the coming economic receives from State and Federal public servants, storm, we need to build alignment and common and provide clear explanations to the public of ground across the State and Federal systems the evidence base for its decisions. on areas of tax policy (such as broadening the GST), deregulation, climate and energy policy, industrial relations reform, welfare policy, and housing. Many aspects of this reform agenda have already been discussed by Prime Minister Scott Morrison, including during his recent address to the National Press Club.

Blueprint Institute 19 The National Cabinet should not limit its activities to job creation

Our polling has revealed that many Australians, including Coalition voters, are passionate about structural reforms which go beyond short-term economic recovery.

While tackling unemployment is a major A brief summary of potential areas concern, Australians see the National Cabinet is included below: as an opportunity to resolve long standing chal- lenges faced by the nation. Somewhat surpris- 1. Productivity ingly, in a time of great economic uncertainty, 2. Freeing up small business the need to solve systemic issues like drought, to invest and grow water management and climate change was the number one priority identified in our polling. 3. Education reform There is clearly public appetite for the National 4. Aligning climate and Cabinet to use our recovery from COVID-19 as energy policy a chance to build a better nation. 5. Regional economic Blueprint Institute will be releasing in-depth development papers in key areas that the Australian public is eager to see addressed and for which the 6. Technology and innovation National Cabinet is well-placed to tackle. funding

Blueprint Institute 20 Productivity Australia has been labelled the Lucky Country tralia ranks 22nd on Cornell’s Global Innovation and indeed it is so. Australians are rightfully Index16, 16th in competitiveness by the World proud of the economic success which underpins Economic Forum17, and fares outside the top our fantastic high quality of life. 20 nations on multiple indicators of industry and business collaboration in that report. However, it would be foolish to take our pros- perity for granted. In recent years our economy A complex regulatory environment spanning has been likened to a twin engine aircraft, with three levels of government increases barriers of one engine the property boom14 and the other entry for startups, adds to running costs for small engine the mining boom15. Those two engines businesses and deters foreign investment. Now cannot sustain our quality of life indefinitely and, is the time to look to the future. The tragedy of in fact, cracks have already begun to appear. COVID-19 has created a once-in-a-generation opportunity to adjust the nuts and bolts of Aus- On measures of economic complexity, a key tralia’s economy, so that it can continue to run indicator for the development of new industries, strong for decades to come. Australia holds the same rating as Angola. Aus-

Blueprint Institute 21 Freeing up small business to invest and grow In line with our focus on productivity, Blue- But according to Reckon21, an accounting print has identified that small business regu- software provider, bureaucratic administra- lation remains a key issue that is holding back tion requirements are costing small businesses economic growth. In a following paper, we will alone more than $20 billion each year. argue that significant reform is required to free With the economy set to contract in the June up small businesses to invest and grow. quarter22, governments must ensure that busi- Over 95%18 of Australian businesses are small. nesses are given the right support, whether that These businesses are the backbone of the be in terms of reducing regulation (and there- economy — SMEs employ 44% of all Australian fore the cost of doing business) or providing tax workers19 and contribute 57% of Australia’s GDP20. cuts to help with cash flow problems.

Blueprint Institute 22 Education reform Our education sector is not responsive to new opportunities for all workers, particularly business needs. As a result, skill gaps exist in younger Australians, our focus must lie squarely the Australian economy. A bright future for on getting people back to work. Australia will be determined by our ability to While the economy will find new ways of employ- create a skilled workforce that can adapt ing those who have lost their jobs, this process to the changing nature of work. Blueprint Insti- will take time. In a rapidly changing global tute will argue that vocational education should economy, Australia should consider afford- be more closely linked to business so that the able programs that provide micro-credentials sector is more responsive to the needs of for workers to upskill for new roles; ongoing skill the Australian economy. development programs to translate universi- In the wake of COVID-19, a million Australians ty skills for the workforce; and revamping key have lost their jobs. New types of jobs will rise investments in childhood education to better from the rubble, but other jobs may never come prepare our youth for the changing nature of back, or will not exist in the same way as they work so that they can thrive in the 21st century. did before. While Jobkeeper has been imple- We will explore these issues in subsequent mented along with an increased level of Job- research, as well as examining opportunities for seeker, welfare is not a sustainable solution to reform in the tertiary and schooling systems. drive prosperity or reduce poverty. To create

Blueprint Institute 23 Aligning climate and energy policy Our polling revealed that a majority of Coalition The National Cabinet is a unique opportunity voters (79 per cent) and Labor voters (94 per to resolve issues between our jurisdictions and cent) support investment in renewables during align energy and climate policy. The National the post-COVID recovery. Cabinet should embrace the opportunity to set us on the path to a prosperous future powered Australia is plagued by some of the most by low-cost renewable energy. expensive23 and most emissions-intensive elec- tricity24 in the OECD. Many Australians are also Australia’s abundant renewable energy increasingly concerned by environmental issues, resources could be harnessed to create a with recent bushfires and droughts threatening boom in onshore manufacturing. For example, livelihoods, land and wildlife. Australia’s agri- cheap renewable energy could make onshore culture and tourism industries are particularly refinement of iron ore cost competitive, unlock- vulnerable to rising temperatures caused by ing new tax revenue and thousands of jobs in climate change. Fortunately, the plunging cost regional Australia. In a similar vein, given our of renewable energy25 offers a solution to the rich lithium and nickel reserves, Australia could problem of high energy prices and high carbon look to become a globally competitive leader in emissions. battery production – a crucial ingredient to the world’s future energy system. While Australians have long embraced renew- able energy, governments have been slow Blueprint Institute will argue in subsequent to match their enthusiasm with a biparti- papers that we can grow our economy, future- san commitment to align climate and energy proof key industries, and restore our environ- policy. The Federal Government’s Technology ment by seizing a share of global markets for Roadmap opens up new avenues for progress. clean technology and low-emissions exports.

Blueprint Institute 24 Regional economic development Our polling demonstrated that an overwhelm- However, the current crisis also represents one ing 88 per cent of Australians identify regional of the best opportunities for regional economic economic development as a priority for Austra- development in a generation. Over the past lia post COVID-19. few months, we have seen the fragility of global supply chains. Politicians and the public have In the last few years, our regions have been realised that we are, perhaps, too reliant on hard hit by bushfires and drought. COVID-19 others for important supplies. Both business- has exacerbated a challenging economic situ- es and governments have expressed interest ation by damaging the tourism and agricultural in bringing supply chains onshore, and there is sectors. A body of evidence points to significant a real opportunity to produce essential items inequalities between our cities and regions such as pharmaceuticals and medical equip- across multiple domains. The current economic ment in Australia. Development of these indus- crisis has the potential to widen the economic tries could bring capital and jobs to the regions, divide between our cities and regions, with where labour and rent is cheaper than in cities. wealth and jobs becoming more concentrat- ed in cities as regions are neglected. Beyond Blueprint Institute will argue that if we are to COVID-19, other economic shocks may affect build a more unified and resilient nation, we the regions in the future; declining demand for must prioritise regional economic develop- fossil fuel resources, for example, point toward ment. Our recommendations will be targeted to an uncertain and difficult future for many areas create a fairer, more prosperous Australia that is that are reliant on the sector. better able to respond to economic shocks and global challenges.

Blueprint Institute 25 Innovation and technology funding Australia has a world-leading research industry but does not provide enough incentives for and a nascent technology sector. Internation- private investment. Blueprint Institute will argue al examples demonstrate the value of govern- that governments should consider policies that ment programs in promoting innovation and have worked in other countries and neigh- fostering private sector investment in technol- bouring jurisdictions, and identify opportunities ogy companies. A new approach is required for reform that will create jobs and prosperity. for Australia to continue to be a world leader A truly national approach to innovation could in research and development across academia fuel a new era for productivity, innovation, and and the private sector. The structure of gov- excellence in Australian industry. ernment support for these fields is extensive

Blueprint Institute 26 Acknowledgments Blueprint Institute thanks all of the experts who participated in this paper and provided invaluable feedback.

References 1. Reserve Bank of Australia (2020). Statement 14. Oliver, S (2020). The threat to Australian on Monetary Policy - May 2020. 6. house prices from Coronavirus. Published Economic Outlook. online 19 March 2020. 2. Ibid. 15. Bennet, M (2019). Why ‘mining boom 2.0’ 3. Reserve Bank of Australia (2020). isn’t like the first. Published online 12 August Statement on Monetary Policy - May 2020. 2 01 9. Macroeconomic Effects of the Drought and 16. Dutta, S. Lanvin B. Wunsch-Vincent (2019). Bushfires. Global Innovation Index 2019 Creating 4. United Nations Environment Programme (22 Healthy Lives - The future of Medical Jan 2020). Ten Impacts of the Australian Innovation. Cornell SC Johnson College of Bushfires. Business 5. Insurance Council of Australia (2020). 17. Schwab, K (2019). The Global Insurance bill for season of natural disasters Competitiveness Report 2019. World combs over $5.19 billion. Economic Forum. 6. Swannell, C (March 2020). Bushfire smoke 18. Nicholls,S. and Orsmond, D (2015). The responsible for over 400 excess deaths. Economic Trends, Challenges and Medical Journal of Australia. Published Behaviour of Small Businesses in Australia. online 23 March 2020. Reserve Bank of Australia 7. Productivity Commission and Data61 (2019). 19. Gilfillan, G: Australian Parliament (2018). Performance Reporting Dashboard. Small business sector contribution to the Australian economy. 8. Edelman (2020). The Edelman Trust Barometer 2020. 20. National Australia Bank (2017). Moments that Matter: Understanding Australian Small 9. Benson, S (2020). Newspoll: Voters back and Medium Businesses. Scott Morrison’s coronavirus rescue plans. The Australian. Published online April 6 21. Reckon (2019). How to get ‘in the zone’ and 2020. focus on growing your business. 10. Ibid. 22. Westpac IQ (2020). First impressions: Australian Q1 GDP. Published online June 3 11. Albon, R (1996). Commonwealth Fiscal 2020. Dominance, Fiscal Balance, or Reverse Revenue Sharing? Agenda, Volume 3, 23. Global Petrol Prices. Electricity prices. Number 3, 1996, pages 287-296. September 2019. 12. Hon J.B. Hockey, Senator the Hon. Mathias 24. Organisation for Economic Cooperation Cormann (2014). Our response to the and Development (2019). Australia needs to National Commission of Audit report. intensify efforts to meet its 2030 emissions goal. Published online 30 Jan 2019. 13. Turnbull, M (2016). Doorstop, Penrith — Press Conference Transcript. Published online 30 25. International Renewable Energy Agency March 2016. (2019). Falling Renewable Power Costs Open Door to Greater Climate Ambition. Published online 29 May 2019.

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