Outlook Conference: Expect more bumps in road with China, Wong warns

Outlook Conference: China sees the Morrison government as a “placeholder administration”, says Lowy Institute’s Richard McGregor.

Senator Penny Wong at the Outlook Conference. Picture: David Geraghty/The Australian

• Enterprise bargaining ‘a failure’
• Migrant key to climate: Tudge

Hello and welcome to Day Two of The Melbourne Institute/The Australian 2018 Outlook Conference: Australia’s Economic & Social Future.

Speakers today include former ABC and now NSW Education department boss Mark Scott, Federal MPs Alan Tudge and Anthony Albanese, followed by Alan Fels and concluding with Labor foreign affairs spokeswoman Penny Wong on China relations.

Rick Morton 5.59pm: “Cities should be given a seat on COAG”

The mayor of the nation’s fastest growing city says she clings to the “thin hope” that squabbling over infrastructure planning and population growth between the major parties will end and that cities will be given a voice with governments.

Melbourne Lord Mayor Sally Capp said cities should be given a seat at the COAG table because they are at the “coalface” of dealing with growth and planning.

“Federal and state governments must work hand in hand with us to unlock investment and coordinate, fund and deliver complex projects with long timeframes,” Ms Capp said.

“This requires deep, long-term, committed partnership.”

There was at least a hint of movement on bipartisanship at the Melbourne Institute / The Australian Economic and Social Outlook Conference as Labor’s cities spokesman Anthony Albanese conceded parts of a Coalition plan to push migrants into the regions could work.

“It is a challenge but I agree with Alan (Tudge) that it is possible to make a difference,” Mr Albanese told the audience yesterday.

Mr Albanese said further reductions in population pressure can be made by focusing on temporary migrants by introducing a union-backed “labour market testing” idea to make sure jobs go to Australian residents first.

He also leapt on comments made by former Liberal treasurer Peter Costello that promising big spending in 10 years’ time is “a nonsense.”

“The idea that a 10-year plan can be taken seriously as opposed to real investment in the forward estimates is a nonsense,” he said.

“And what’s more, the idea that you can have value capture and off-budget funding of public transport is a nonsense and perpetuating this fantasy means some government down the track will have to deal with it.”

Mr Albanese said the nation will have “an ongoing political problem” unless a rise in living density also comes with green space and amenity.

Cities and Population Minister Alan Tudge told the panel his plan to send migrants to regional centres and smaller capital cities is “not a radical idea” and state leaders in South Australia, Tasmania and the chief minister of the NT are actively begging for more residents.

“We can work with them and support their population growth ambitions and it also takes a bit of pressure off Melbourne and Sydney, so it’s a win-win and it is absolutely possible,” he said.

The federal government already has levers to provide incentives for migrants to move outside Sydney or Melbourne and can place conditions on visas such as on the 489 Visa.

Mr Albanese said agreed, saying “ultimately it comes down to quality of life.”

While Ms Capp said she supports a congestion tax both Mr Tudge and Mr Albanese said such a price would unfairly punish motorists who have no other options to get to work from fringe suburbs in major cities.

“I do not and will not support congestion taxes, personally, because you just end up disadvantaging the people who can least afford them,” Mr Tudge said.

Rick Morton 5.45pm: Inequality rising “not backed by evidence”

The “popular perception” stoked by Labor that income inequality is rising is not backed by the evidence and the “best guess” of economists is that the gap between the rich and poor has started falling.

A discussion about the murky world of measuring inequality at the University of Melbourne / The Australian Social and Economic Outlook Conference has painted a “benign picture” of the income gap, although other indicators pose political issues for both parties.

“Not only is income inequality not rising, our best guess is that it is actually falling,” Melbourne Institute economist Roger Wilkins told the panel, referring to a chart which shows the reduction in the Gini co-efficient from 2007-08.

“This paints quite a benign picture. I think the bigger story is that there is a growing generational divide in wealth inequality.”

Using the Household Income and Labour Dynamics in Australia data, median household wealth by age group went backwards by about 2 per cent for young people aged 25 to 34 between 2002 and 2014 but increased by more than 60 per cent for those aged 65 and over.

Even using the more conservative ABS figures, wealth for young people grew by about 7 per cent compared with about 42 per cent for those aged 55 and over.

Professor Wilkins noted that even if the rate of income inequality has fallen or flatlined in the past decade it is still significantly higher than it was in the early 1990s but attributed a spike between 2004 and the Global Financial Crisis to “substantial” methodology changes by the Australian Bureau of Statistics.

“That’s a 14 per cent increase over the four years, that would probably be some sort of record internationally if that were real,” he said.

“The independent data source we have doesn’t show that same increase. Having said that, our best guess is that these rates are above where they were in the 1990s.”

The proportion of people with incomes of half the median have fallen from between 11 and 13 per cent in the same period to below 10 per cent today which is an “unambiguously good story,” Professor Wilkins said.

Productivity Commission commissioner Jonathan Coppel presented a summary of the PC’s recent stocktake of inequality evidence which he said will “hopefully… dispel the popular perception that the benefits of growth are not being shared.”

The good news, he says, is life course mobility is high in Australia and the “in-between” news is that intergenerational mobility - how far a person builds on the life of their parents - is neither particularly high nor low compared to other countries.

The bad news, however, is that mobility for those at the bottom rung is particularly “sticky.” Of those in the bottom 10 per cent of incomes in 2001-01 more than one-fifth were still on the lowest rung 16 years later and 28 per cent had managed to climb just one decile.

Those at the top were marginally more likely to stay there over the same period.

Both Professor Wilkins and Mr Coppel argued the focus should turn to entrenched disadvantage in Australia, with 700,000 people in income poverty for at least the past four years.

“There is a risk for those people of economic disadvantage becoming entrenched,” Mr Coppel said.

“These risks are particularly elevated for children living in jobless households which is a group that have stood out among the multiple measures of inequality and disadvantage.”

Rebecca Urban 5.35pm: Plan to weed out poor quality teachers

The NSW Government will weed out poor quality teaching graduates by withholding job offers if universities resisted calls to lift course entry standards, the state’s top education bureaucrat has warned.

Education Department secretary Mark Scott has revealed that the government faced opposition from the university sector toward its bid to raise the bar for entry to study to become a teacher.

“The NSW Government —having pushed that point hard but faced significant opposition from universities — is now going to use its power as an employer,” Mr Scott told The Melbourne Institute/The Australian 2018 Outlook Conference in Melbourne yesterday.

“They can enrol who they like but if those people are not going to get the jobs …those universities will have to respond.”

Mr Scott’s comments come after the NSW government announced tough new criteria for prospective teachers, including a minimum credit grade point average in their studies.

The new Teacher Success Profile policy comes amid widespread concerns that school leavers with very low ATARs have been accepted to study education degrees.

Mr Scott said he anticipated a decade of “very significant change” for the university sector, which would need to respond to employers increasingly taking charge of the knowledge and skills their employees attained, and how they attained them, and the growing requirement for employees to be life-long learners.

“I think market realities are going to come to bear on this,” he said.

“The idea of ‘come and give us your next four years and $40-$50,000’. … I think students are going to query that, parents are going to query that and employers are going to query that.”

Mr Scott, whose department is overseeing a broad review of the NSW school curriculum, said school education had to change also and that warned against sticking with the “status quo”. He said education policymakers “need to think through the kinds of skills, the kinds of capabilities and mindsets young people will need to flourish”.

“There once was a model that you went to school to be educated, and education prepared you for work. We know now that what education is preparing people to do is to spend their life learning.”

Richard Ferguson 5.02pm: Australia’s verdict on polticians

Nearly three quarters of Australians do not believe politicians are serving their interest, a new survey revealed at the Melbourne Institute/The Australian Social and Economic Outlook Conference says.

Centre for Policy Development chairman Terry Moran said a recent survey into democracy by the group found a majority of Australians did not think politicians served their interests or the national interest.

“In answer to the question our elected representatives do not seem to be serving my interests, 70 per cent this year agreed and 14 per cent disagreed,” the former top Canberra bureaucrat said.

“On the issue ‘our politics is fixed on short term gains and not the long term national interest’, 75 per cent agreed.”

The survey also revealed that federal police were the most trusted public institution in Australia, and local government was more trusted than its state or federal counterparts.

Richard Ferguson 4.05pm: “Economic narrative lost”

Scott Morrison and Bill Shorten have used the Melbourne Institute/The Australian Outlook Conference to show they are forging the long-sought-for economic narrative, The Australian’s Paul Kelly says.

“They know the economic narrative is lost and in their own way they are trying to find the narrative and talk about the social compact,” he said at the Outlook conference’s last session.

The Prime Minister and Opposition Leader used the conference to float new policies on tax cuts and superannuation respectively.

But they also both set out their own views on the definition of fairness and the problems facing Australia economically.

“They have very different reform agendas. Shorten says the problem is inequality ... Morrison says we have to tackle entrenched under-privilege,” Dr Kelly said.

Dr Kelly remarked that Mr Shorten and opposition treasury spokesman Chris Bowen made a “smart move” by today supporting fast tracked tax cuts for small and medium sized enterprises.

That policy was announced at this conference by Mr Morrison yesterday.

Richard Ferguson 2.50pm: ScoMo’s “placeholder administration”

China sees Scott Morrison’s Government as a “placeholder administration”, one of Australia’s most experienced Beijing watchers says.

“They see the current government as a placeholder administration,” Lowy Institute Senior Fellow Richard McGregor told the Outlook Conference.

“They are not wanting to invest ... they are waiting to see what happens after the next election.”

Mr McGregor, a former China Correspondent for The Australian, said China is too concerned with the current US President to want a fight with Australia.

“China is looking for friends ... Trump has destabilised China, they don’t know quite how to handle them,” he said.

“In the long term, China thinks it can prevail. In the short them, who the hell knows what’s going to happen.”

Richard Ferguson 2.20pm: China relations “will get harder”

Australia’s relationship with China could get harder before it gets better, Penny Wong has told the Melbourne Institute/The Australian conference.

“Certainly there have been times when the Abbott/Turnbull/Morrison Government has made it harder than necessary — something governments should seek to avoid,” the opposition foreign affairs spokeswoman said.

“But we should assume the possibility that the relationship will get harder to manage in the future, not easier.

“Similarly, we should also not assume that these ‘bumps in the road’ will resolve by themselves.”

The “bumps in the road” won’t resolve themselves, Penny Wong said of Chinese-Australian relations. Picture: David Geraghty

Rebecca Urban 1.45pm: “Passport to life’s learning”

Literacy and numeracy skills are “more important that ever” in helping to prepare young people for an uncertain future, NSW Education Department Secretary Mark Scott told the conference.

Mr Scott, whose department is in the midst of a broad review of the state’s school curriculum, also warned against sticking with the “status quo”, claiming that education policymakers “need to think through the kinds of skills, the kinds of capabilities and mindsets young people will need to flourish”.

“We’re not preparing young people for a status quo world; the world that they will living in will be dramatically transformed and one of the constants of that world will be the rate of change,” he said.

“Literacy and numeracy skills will be more important than ever. Literacy and numeracy skills will be a passport to life’s learning … and the one thing we know for sure, young people are going to have to spend their life learning.

“There once was a model that you went to school to be educated, and education prepared you for work. We know now that what education is preparing people to do is to spend their life learning.”

The sentiment about the important of literacy and numeracy was shared by fellow panellist, Business Council of Australia chief executive Jennifer Westacott, who said that employers had expressed concerns about the lack of such skills among adult workers.

Richard Ferguson 1.40pm: Dismissing climate experts feeds distrust

Dismissing experts on climate policy feeds into the distrust of politicians and big business, Energy Australia managing director Catherine Tanna says.

“By just dismissing Dr (Alan) Finkel, dismissing the National Energy Guarantee, by dismissing their own experts, what’s left?” she said at today’s Outlook Conference lunch.

“We have to be careful here that Australians don’t run out of people to trust.”

Ms Tanna, a Reserve Bank board member, also suggested she supported an idea floated by the Business Council to enact the NEG without government support.

“I think politicians are misreading Australians if they think they don’t care about climate,” she said.

“I read that story (about the Business Council) and it sounded like a lot of bright people trying to do the right thing.”

Michael Roddan 1.35pm: Sad state of tax reform

Experts have lamented a lack of appetite for tax reform, as the GST is “undermined” by the exemption granted to tampons.

The removal of the GST on tampons is emblematic of the dire state of political appetite for tax reform that would deliver better outcomes for Australians, the country’s leading tax experts have declared.

Rick Morton 12.53pm: Migrant key to climate

Moving migrants into the regions and smaller cities would help fight climate change because congestion in Australia’s largest urban centres will fall, according to Population and Cities Minister Alan Tudge.

Mr Tudge appeared on a panel at the University of Melbourne / The Australian social and economic Outlook Conference with Labor’s infrastructure and cities spokesman Anthony Albanese and Melbourne Lord Mayor Sally Capp.

“If you have less congestion you have fewer emissions, it’s that simple,” Mr Tudge said after lunch.

After raising an idea to send migrants to smaller cities and other states that want growth - in order to spare Melbourne and Sydney a population squeeze while infrastructure lags - Mr Tudge said this would help cut congestion.

He declined to say whether the federal government is considering a total pause on the permanent migration intake, adding that the economic modelling on any changes is done each year “in the budget process.”

Mr Albanese backed part of the idea, at least, telling the audience that the plan is possible but he wants a focus on Australian workers for Australian jobs, which would reduce the temporary migration rate.

John Stensholt 12.49pm ‘Business needs to address trust’

CSR chairman John Gillan told The Outlook Conference business has some way to go to win back the trust of the public.

“I don’t think business can expect to be heard until it addresses the issue of trust, and trust is in a dire strait at the moment,” he said.

“You can reflect on the Royal Commission on the financial sector and what we think we are going to hear about the aged care sector.”

Given CSR is a major building materials supplier, Mr Gillan said the outlook for the property sector was reasonable but noted there would be an increase in the building of medium-density dwellings as the population ages.

“When you think out five to 10 years and you look at the demographics of the population and the ageing population you are going to get a significant shift in the need for medium-density dwellings and that will quite an interesting structural change,” he said.

Richard Ferguson 12.07pm: ‘They can’t read or write’

Improving adult literacy has to be a national priority, the head of the Business Council has told the Outlook Conference.

“I run a small literary program with my partner, no fees charged, and we get people who went all the way to Year 12,” Jennifer Westacott said, “And they can’t read or write.”

“This has to be a national priority.”

“People need to have skills to work … I think governments has to invest in the post-secondary education system.”

She also called for a “reinvigoration of TAFEs”.

Richard Ferguson 11.57am: The primary problem

NSW’s top education bureaucrat says the poor participation of girls in STEM subjects is “disturbing” and that there has to be a greater focus on early learning.

“Some STEM analysis is disturbing in many ways,” Mark Scott told the Melbourne Institute/The Australian Outlook Conference.

“When we look at the poor participation of girls in STEM subjects, we have to look at primary school … why some are told they are not a maths or a science person.”

Mr Scott, the former managing director of the ABC, told the audience at the Grand Hyatt in Melbourne that there needed to be a growing focus on early learning as well as secondary school.

“Some of our students will live to see the 22nd century … The future is not an abstract concept for us,” he said.

Richard Ferguson 11.22am US President is ‘enemy No1’

Donald Trump is Australia’s greatest enemy, respected labour economist Bob Gregory says.

“Donald Trump is Australia’s greatest enemy, not Putin, not the President of China,” he told The Melbourne Institute/The Australian Outlook Conference.

“Anyone who says my intention to claw back at the growth of China … is making it really hard for us.”

Professor Gregory said the terms of trade are as big a factor in lower wages growth as productivity.

“We could continue productivity for the next 5 years and it would have no real impact on wage growth,” he said.

Richard Ferguson 10.19am: End of enterprise bargaining?

It is time to dismantle enterprise bargaining, former ACTU official Tim Lyons says.

Mr Lyons, a former assistant secretary of the lead union group, said the weakness of labour institutions were keeping wages down, and that enterprise bargaining has been “a colossal failure.”

“I think we need to dismantle the enterprise bargaining system,” he said, “that includes looking at sectoral bargaining.”

Mr Lyons, now with think tank Per Capita, said it was “simply impossible” for most workers to push for a pay rise under current labour institutions.

He also said governments are keeping wages down by not giving pay increases to their own workers.

Enterprise bargaining has been a ‘colossal failure’, @Picketer tells #OutlookConf18 panel on how to fix wages. Calls for Fair Work Act to be amended to allow states to set higher minimum wage than federal minimum wage, as in the United States. pic.twitter.com/iSYH2UnSBm

— Ewin Hannan (@EwinHannan) October 11, 2018

Mr Lyons also called for the Fair Work Act to be changed to allow states to set minimum wages.

“State governments should be able to establish higher minimum wages than the federal minimum wage - as is the case in the US,” he said.

Richard Ferguson 9.10am: Cities, wages, China on agenda

Big cities, low wages and the rise of China are set to dominate day two of the Melbourne Institute/The Australian Economic and Social Outlook Conference.

Yesterday’s news breaking conference saw Scott Morrison announce fast-tracked tax cuts for small business, and Bill Shorten flag changes to bank-owned retail superannuation funds.

And Peter Costello delivered a scathing critique of Malcolm Turnbull and the Liberal Party’s difficulties finding an economic narrative.

Today’s conference is set to be just as interesting.

Opposition foreign affairs spokeswoman Penny Wong will tell the conference today that the nation’s relationship with China could become even more difficult, partly due to Washington’s hardening stance against Beijing.

The morning will kick off on the issue dominating developed world politics at the moment - low wage growth.

Former ACTU assistant secretary Tim Lyons and The Australian’s Judith Sloan will face off on whether the nation’s workers need a guaranteed living wage.

Also on today’s agenda is the challenges, and benefits, of our booming cities with Anthony Albanese, Alan Tudge, and Melbourne Lord Mayor Sally Capp speaking.

And former ABC managing director and current NSW Education boss Mark Scott will discuss education with the Business Council’s Jennifer Westacott.