Frank advice on productivity from Gary Banks

Former Productivity Commission chair Gary Banks has delivered a pointed critique of government misdirection, calling out a new protectionist agenda and a collective failure to grasp what productivity is really all about. Professor Banks’s forthright views are all the more pointed given the Albanese government has sought to make a virtue of not wanting to listen to the advice of the body he chaired from its inception in 1998 to 2013. Established by John Howard in the face of community fatigue after the much-needed microeconomic reform agenda of the Hawke and Keating years, the PC was opposed by the Labor Party, which pledged to repeal it. Yet the institution was lauded by Wayne Swan as a key advisory body on all aspects of microeconomic reform and regulation. Not so much today.

Under Jim Chalmers, the PC has been relegated to being merely “an addition to the debate”. This is despite the strong view of outgoing Reserve Bank governor Philip Lowe that lifting productivity is central to better managing the nation’s economy.

Rejection of the PC, which is slated for an institutional update by the Treasurer, is hardly surprising given the tough appraisal Professor Banks has given to government priority reforms, notably in the care economy. In fact, signature reforms on the Albanese agenda have been rated as being mischaracterised. On childcare, Professor Banks says workplace participation is not the same as productivity, and while increasing subsidies may lift participation, it could reduce productivity. As will a 15 per cent wage rise for aged-care workers, who will be paid more for doing the same thing.

Professor Banks’s biggest criticisms are levelled at two of the federal government’s favoured reform areas, industrial relations and the energy transition.

The assessment of Professor Banks is that the potential for government harm is as great as it has ever been, possibly greater. This is because a determination to meet overly ambitious emissions targets while suppressing our only baseload energy sources will inevitably mean further price increases and less reliability, which could in turn bring a further resort to price controls and other regulatory interventions.

There is further evidence of this in Chris Bowen’s consideration of a carbon border adjustment scheme that could act as a new tariff regime and set off a wave of protectionist actions.

The long-serving inaugural PC chair has made a persuasive case for why we need a fierce and independent Productivity Commission now more than ever.