Era of big bang reform is over, says analyst

A FORMER Keating adviser has warned that the "big bang" productivity gains of the 1980s are no longer available.

FORMER Keating adviser John Edwards has cautioned against getting nostalgic for the reform era that started with the 1980s, declaring that "big bang" productivity gains are no longer available.

"We have to see productivity enhancement not as a search for a big bang, not as a search for the kind of reforms that we were able to make in the 80s, which had huge impacts, because those choices are simply no longer available to us," Dr Edwards said.

"We've got to realise that our means of enhancing productivity are going to be a sequence of small, continuous improvements."

The reforms of the 80s and 90s included floating the dollar, liberalising the financial sector, slashing tariff barriers and later a program of micro-economic reforms under the decade-long national competition reform.

The big challenge for Australia was to become a big exporter of services when "inevitably . . . , the mining export boom tapers off in five or 10 years", he said.

On proposals to extend the GST to fresh food, health and education, Dr Edwards said: "It seems to me, that's just not a direction in which we are likely to go."

He made the comments at the Securing the Future conference, co-hosted by the Melbourne Institute and The Australian.

Former Victorian premier John Brumby told the conference that traffic gridlock in the capital cities was undermining productivity.

"Melbourne, Sydney and Brisbane are major drivers of innovation and economic growth. And they are becoming increasingly congested," he said.

Mr Brumby also backed privatisation of some brownfield assets to unlock funds for new infrastructure to boost productivity. "Some of those are in public hands for good reasons. But others could be leased or sold to the private sector or superannuation funds."

He also called on Treasury to look at bonds to raise money for upgrading infrastructure. Infrastructure bonds were used in the 90s on projects including the Melbourne CityLink, with Labor having given tax concessions on them.

But former treasurer Peter Costello scrapped the bonds in 1997 because they were threatening to deprive Treasury of revenue.

"It ought to be possible to design a bond which is attractive to superannuation funds, which doesn't have the difficulties . . . that the original bonds did," Mr Brumby said.