The Commission of Audit in a nutshell: ideology over evidence

The Commission of Audit is a rare example of a government attaching itself to a document that appears to hate Australia. Its recommendations start from a premise that the Australia which has become the envy of the world needs to be drastically changed. Notions of equality and fairness which have underpinned our health, education and welfare systems would be replaced with a view that efficiency trumps all.

Its few recommendations that affect revenue would pit states against each other with an ultimate aim of further reducing tax revenue in the hope that there will need to be more cuts to services similar to what has happened in the US over the past 30 years.

It is like the authors caught a few episodes of The Wire and thought, “if only”.

Such drastic changes to our social and economic way of life would perhaps not be so bad if it wasn’t recommended in such a silly way as in the Commission of Audit report. The entire document lacks much coherence. Recommendations are made with little care for their impact on other areas. They also stray into areas like the minimum wage, which have nothing to do with the budget.

It suggests governments should protect the “truly disadvantaged” and then proceeds to suggest cuts to Newstart, NDIS, carers allowances, foreign aid, the pension, homeless funding and students.

Perhaps we should ignore it – and realise its purpose is just to soften us up for the budget. In the past, sensible people in the government and their media cheerleaders would have put it quickly to one side. But such sense is thin on the ground these days. The softening up is not just for the budget, but to shift to the right what is considered a “neutral” position.

Take the proposed $15 fee for GP visits. The budget will likely introduce just a $6 charge. Both are poor policies – one just seems less radical.

The GP fee is a classic case of what happens when economists think they know everything.

Economists love price signals. They are very effective at changing behaviour, and when used in health policy (such as with cigarettes) they can change behaviour for the good. But people are very poor judges of why we should go to the GP, and fewer visits to the GP will not make for a healthier Australia. The extra cost would not only hurt those on lower incomes, it will also deter those who already don’t go to the GP enough, and lead to increased costs through hospital treatment.

The head of the commission, Tony Shepherd last Friday could provide no evidence to a Senate committee for why he believed the current average of 11 GP visits a year was “excessive”. He just thought it must be because people got it for “free”.

Ideology over evidence. The commission in a nutshell.

Similarly, its view that private health insurance is a more efficient way to insure health owes much to ideology and little to evidence. It charts a way towards a more American style of private insurance dominated health.

Anyone recommending our health system follows the US really should not cut paper without supervision, let alone give advice on how to cut the budget. Bloomberg in 2013 rated our health system the seventh most efficient in the world; the US came 46th.

Clearly we’re the ones who need to drastically change.

Last year I noted the richest 20% of 60-year-olds can expect to live two years longer than the poorest 20%. In the US, the gap is four years between the richest 50% to the poorest 50%, meaning the gap between the most extreme 20% would be even larger.

The inequality of the US health system is so bad that since 1977 life expectancy for 65-year-olds in the richest half has risen by six years, whereas for the poorest half it rose a mere 15 months.

So it’s not really a system you’d want to emulate – especially if you are also advising the pension age be raised.

Though it could be worse ­– you could be young and unemployed. Tony Shepherd suggested only the “deeply disadvantaged” should get government assistance, which is lucky, because if his recommendations were implemented there would be a lot more of them.

Last week I wrote how tightening an already progressive welfare system reduces people’s incentive to work and that the main problem with Newstart is that it’s too meagre to alleviate poverty. So it was quite surprising to see the commission recommend changing Newstart in a way which reduces not only the incentive to work, but also its ability to alleviate poverty.

It recommends changing the amounts Newstart is reduced when you earn over $100 a week from 50 cents for each dollar earned to 75 cents. Yep, earn $100 and only be $25 better off.

Blogger David Plunket estimates that under the proposed changes to Family Tax Benefit, a single person with two kids earning $20,000 a year would be nearly $5,000 worse off.

The US education system is also apparently worthy of emulating. The commission argues funding should be more state funded and controlled and that the needs-based funding model is abandoned. It suggests funding isn’t as important as “how schools and classrooms are run”. Which is a nice way of saying public schools should get less money.

It also suggests Hecs should start being paid off at the minimum wage of $32,354 instead of the current threshold of $51,309. Fine if you get a good job after uni, but if you have to take a low paying job (as I did), well, bad luck.

The minimum wage will be much lower as well if the commission had its way. Even though nothing in its terms of reference has anything to do with recommendations on the minimum wage, the commission made them anyway.

It suggests our minimum wage should increase by 1% less than inflation until 2023. In current dollars that would see those on minimum wage taking a 19% pay cut and earn $132 a week less.

It compared our minimum wage to the US, Canada, UK and New Zealand, arguing it hurt youth employment. While Australia’s minimum wage is high among OECD nations, our youth unemployment rate is not, and neither is the gap between it and total unemployment.

Moreover, while the percentage of young people on the minimum wage is greater than those who earn above that rate, it’s worth noting that most workers on minimum wage are over 25:

I guess we should also envy the high levels of working poor in the US:

A US family on median income in 2012 actually earned less than it did in 1989, while its middle class as a whole has shrunk. That’s a hell of situation to think it is worth aiming for.

Is there anything good? Sure. Their recommendations for paid parental leave and some of the tidying up of regulatory and funding overlaps and complexities, and competition for the pharmacy sector. But little that is good that has not been already recommended by private think tanks.

It would be nice to think this dopey regurgitation of libertarian masturbatory fantasy will be put to one side.

In the past, sensible heads would have prevailed. Many of the recommendations are similar to those in the 1996 commission of audit. A report John Howard largely ignored, and yet bizarrely Australia was able to continue to grow for another 18 years straight. But this government is too full of those who actually believe in this idiotic ideological view of the world – where “reform” is a synonym for “cut”, and ideology trumps evidence. And for them, the budget is just a first step to achieving it.