WHAT’S JIM CHALMERS ON ABOUT

New Labor government Treasurer Jim Chalmers set off a debate in early 2023 with his essay in The Monthly, “Capitalism after The Crisis”.  Faced with growing debt and an inflationary global economy, Chalmers seems to be proposing greater regulation of the market and more involvement of private investment in public projects. Is this just another way of bringing back a more government controlled economy or is it an answer to a more robust and responsible development of national needs? On Wednesday 26 April 2023, The Sydney Institute heard from two of Australia’s respected economic voices on what the Treasurer is on about – Dimitri Burshtein, Head of Investory Relations at Eminence Advisory and a contributor to The Australian, and Sam Crosby, executive director of the St Vincent de Paul Society

WHAT’S JIM CHALMERS ON ABOUT

DIMITRI BURSHTEIN

Good evening everyone.  Thanks for coming along tonight.  Thanks also to Sam (Crosby) for his comments.

Thank you also to Anne and Gerard for the invitation to speak tonight.  I read somewhere that the only paths to immortality are to plant a tree, have a child or write a book.  Two out of three for me, but perhaps I can get dispensation for a Sydney Institute presentation given the Institute’s legacy.

I have attended many an Institute presentation.  A particular one that comes to mind is from July 2015 in the offices of Clayton Utz when the then Minister for Communications gave a very interesting speech on matters completely unrelated to his portfolio.  Two months later, that Minister, Malcolm Turnbull, proceeded to launch his successful bid to become Prime Minister. So, Gerard and Anne … I await Treasurer Chalmer’s presentation.

But speaking of Dr Chalmers, as is the title of tonight’s presentation, what is he on about?

I spent several years at university acquiring multiple degrees in economics, but I don’t consider myself an economist.  I am more of the Joan Robinson school that believes that the purpose of studying economics is to avoid being deceived and misled by economists.

Treasurer Chalmers, on the other hand, does not have qualifications in economics. One does not need to be read in economics to be a successful Treasurer or to write about economics. Think Paul Keating and Peter Costello. But Chalmer’s lack of economics training makes his 6,000-word essay, published at the start of this year, all the more interesting.

Just to set the scene, Chalmers’ academic qualifications include a Bachelor of Arts, a Bachelor of Communications, and a Doctorate in political science.  His doctoral thesis was on Paul Keating. Some have suggested that this is a good foundation for a Labor Treasurer. Perhaps. But Chalmers’ thesis was not on Keating’s Treasurership but rather his Prime Ministership.

I have skimmed Chalmers’ thesis. In it he wrote:

Prime Ministers can choose to give speeches simply because it is expected of them, and many go through the motions to satisfy this requirement. Others use speech making opportunities to set the agenda, leave a historical mark, and define the direction and objectives of the government.

Just to emphasise, speeches to set the agenda and to leave an historical mark.  Although Chalmers is not Prime Minister, yet at least, it seems that Chalmers’ essay on a “a new values-based capitalism for Australia” was his attempt to set the agenda.

To be fair to Chalmers, it takes significant energy and effort to articulate an economic and political narrative.  He followed it up with an explanatory opinion piece in the AFR.  And just last month, he had two op-eds on the same day in two different newspapers: one on the state of the budget and one on the state of the banking system.  Perhaps these later pieces were the output of staff, but they still had his name and imprimatur.

I think this is all important context because it signals not just what Chalmers is thinking from a policy perspective, but no doubt his ambitions.  For me, the most concerning thing about Chalmer’s essay is the absence of a comprehensive reply from the Coalition.

Writing in the Australian newspaper late last month, Greg Sheridan noted the general failure of conservative political parties to prosecute their case for conservative policies.  We should thus not be surprised that the underlying economic narrative in Australia is one of a large, expensive, rapidly expanding and increasingly interventionist state when few elected representatives are articulating an alternative, let alone prosecuting one.

We have not heard a detailed economic vision or narrative from a Coalition leader or Treasury spokesperson for a very long time.  And, as you know, you can’t have a battle of ideas when there is only one team on the field.

Although most of the current political oxygen is being taken up by The Voice, I remain hopeful that Shadow Treasurer Angus Taylor, as one of the few in the current in parliament with significant real world commercial experience, will run onto the field at some stage. Especially with the budget coming up. A budget that will likely have even more government spending and taxing.

In his essay, Chalmers seeks to describe a new version of capitalism, different from the one that got us here today. Just pause for a moment to consider how unnatural is capitalism to start with and how fortunate we are to have it.  Modern humans have walked this earth for around 200,000 years. For almost all of that time, if I had some bananas and you had some apples and I wanted an apple, I would just hit you over the head with a rock and take your apples. Now, I would just trade some of my bananas for some of your apples.

This is the secret sauce of capitalism … voluntary trade and exchange.

In his Wealth of Nations book, Adam Smith observed that trade is one of the characteristics that distinguishes humans from animals. And it is this voluntary trade that has made us all wealthier, happier, and healthier. Government, in a broad sense, is just another means to take your apples with a rock. And Chalmers is not advocating for more trade but for more government.

In his essay, Chalmers presents his case for an even more active government. His arguments for something he calls values-based capitalism shows how far the economic Overton Window has moved over the last 20-plus years and is reflective of the broader economic policy ecosystem that surrounds our policy makers.

This is an ecosystem that is populated by people who seldom have private sector experience or have witnessed double digit unemployment. They may have read about a recession or the economic cancer that is inflation but have not really felt it. It is the members of this ecosystem that advocate for policies that sound good … over policies that have been shown to do good. And its members seldom pay the price when they are wrong because, as Nassim Taleb would describe, they lack skin in the game.

It was from this ecosystem that not that so long ago re-emerged something called modern monetary theory. A nice sounding wrapper around the old practice of central banks creating money at a rate faster than economic growth.  Just another theory to justify an ever-larger state.

ABC business and economics reporter Gareth Hutchens wrote in March 2021, about 6 months before the RBA was blown out of the bond market and 14 months before the RBA’s first post-Covid interest raise:

We may be on the cusp of a revolution. What if everything we thought we knew about public finance over the past 40 years has been wrong? A new economic theory has emerged that could rewrite our understanding of how governments create and spend money and what type of society we can afford to build. Governments can costlessly create and spend as much money as they want.

Modern monetary theory counts a senior Australian academic as one of its contemporary champions and its advocates, perhaps advocates no more, include a former senior economic Minister in the Rudd-Gillard-Rudd governments. Although not calling it modern monetary theory, a current sitting LNP Senator said in June 2021 that he wanted to speak to Barnaby Joyce, “accountant to accountant”, to get “an infrastructure bank out of quantitative easing.” Quantitative easing being a central bank euphemism for money printing to buy government bonds.

Despite the ahistorical delusions of some, modern history has shown unequivocally that private property, rule of law, free markets, sound money, and limited government drives prosperity anywhere and everywhere.  It lifts all boats. We have real time case studies to evidence this.  North Korea and South Korea.  East Germany and West Germany.  Even North America and South America. It’s not geography.  It’s not race.  It’s not climate.  It’s not government directed investment.  It’s not money printing, sorry, modern monetary theory.

It’s the system through the values of free markets and free peoples engaged in voluntary trade and exchange.  These are the values of classic capitalism which Chalmers suggest are not working and require changing.

But from where comes the intellectual origins of values-based capitalism?

In Chalmers’s essay, he pays homage to British-American economist Mariana Mazzucato in influencing his thinking.  Mazzucato, whom Prime Minister Albanese has also read and recommended, was an economic advisor to former British Labour leader Jeremy Corbyn.  Yes. That Jeremy Corbyn. And her writings have also been described by the Socialist Party of England and Wales as providing, and I quote: “a detailed exposé of the parasitic character of modern capitalism, drawing on Karl Marx’s theory of the source of value creation.”

Ronald Reagan and Margaret Thatcher read Friedrich Hayek, Milton Friedman, and James Buchanan. All Nobel laureates. Anthony Albanese and Jim Chalmers read Mariana Mazzucato, favourite of the Socialist Party of England and Wales. Chalmers has likely also been influenced by his former boss Wayne Swan who believes that income distribution is a problem in Australia and getting worse. This despite the data not supporting such a position. On the contrary.

Income inequality is measured through something called the Gini index, a measure between 0 and 1.  The higher the index, the worse is income distribution.  According to the ABS, the Gini index for Australia was 0.329 in 2010 and 0.324 in 2020.  Yes.  A small decline over 10 years.  These low-ish numbers compare favourably with such income equal nirvanas as Guatemala at 0.48, Namibia at 0.59, and Zimbabwe at 0.50.  And according to my friend Chat GPT, the country with the lowest Gini index of 0.24 was Ukraine – likely because everyone is poor there.

Referencing Mazzucato’s work, Chalmers suggests our economic problems are caused not by markets, but by poorly designed markets. And it is the role government to design and build markets in partnership with business and labour.  But we have seen this movie before.  Government-designed and managed markets by a coalition of big government, big business, and big labour is generally called … oligarchy.

Nowhere in his essay does Chalmers define what or whose values would underpin his new capitalism, but he does hint towards the values of “many forward-looking businesspeople and investors”. Not the values of Labor’s traditional base, the working class, or of small business, or of general Australians.  But the values of the rent seeking upper bourgeoisie who have access and proximity to government.  You know, … oligarchs.

Don’t get me wrong.  I am not advocating for anarchy.  There is a valid role for government as a standard setter, an enforcer of property rights, a provider of a social safety net, a defender of national security, and provider of public goods.  But our governments have moved well past these functions.  Well, well past.  And Chalmers is looking to move us even further.

Our governments, of all persuasions, no longer just provide a safety net.  They provide a dual track of a safety net for some and a recreational hammock for others. Australia has now one of the largest and most sophisticated middle-class welfare systems in the world.  I mean, fair dinkum, childcare rebates for families earning more than half a million dollars a year. Sales tax discounts for expensive electric cars, the same cars that don’t pay fuel excise either. Discounted pharmaceuticals for retired millionaires.

In his essay, Chalmers suggested that the world had changed warranting a greater role for government.  This is based on his assessment that three so called crises in 15 years had exposed vulnerabilities in our economic systems. The crises that Chalmers identified were the GFC, Covid and inflation, but all of these were in many respects government made and amplified. I can talk to Covid separately if you like, but in the case of the GFC and inflation, as Thomas Sowell wrote over 40 years ago: “As long as we keep expecting politicians to give us something for nothing, we should also continue to expect financial crises.”

The GFC was the biproduct of a corrupted regulatory system in the US pushing banks to lend to people who could not afford home loans. And our current inflation, is now as it has been throughout history, a function of governments spending too much money, printing money to support it, and suppressing production.

If I can pause for a moment to just show this. I carry these around to show people. This is actual Zimbabwean currency.  A $20 trillion note and a $10 trillion note.  Zimbabwe’s hyperinflation was not caused by Covid or the war in Ukraine. It was cause by the Zimbabwean government destroying agricultural production, spending too much, and then undertaking modern monetary theory to pay the salaries of its public servants and associated cronies.

For all the cries of “evil capitalism” and “trickle-down economics”, the Commonwealth government’s spending as a percentage of GDP increased from about 18 per cent in 1972 to about 23 per cent in 2000, to just under 28 per cent in 2020. This is before the fiscal costs of Covid-19 or the Ukraine war.

Across the three tiers of Australian government, spending as a proportion of GDP currently sits between 40 and 50 per cent depending on how you count it. Whichever way you slice it … that’s a lot of government. Our governments have also systematically reregulated the economy over the past 20 years. The Australian Law Reform Commission even recently described the Australian Corporations Act as being in a “class of its own” for complexity.  And this is before we get to the tax code.

We should thus not be surprised that productivity is not improving, and per-capita GDP is going nowhere to backwards.  What else should be expected when an increasing proportion of Australia’s economic resources are moving from production to government and quasi-government activity.

Creeping government intervention continues to damage Australia’s competitiveness.  Incitec Pivot did not move its fertilizer production plants to the United States because of deregulation. It moved because of Australia’s high energy cost, high taxes, and high regulation business environment.  And now Australia imports some 95 per cent of our urea fertilizer. For a nation that is theoretically energy and food independent, we import most of our fuel, most of our fertilizer and almost all of our new electricity generation infrastructure.  It’s no wonder we need to spend $370 billion on nuclear powered submarines to secure our trade lanes.

More than 30 years after the fall of the Soviet Union and nearly 40 years since the start of the Hawke-Keating-Walsh reforms, Treasurer Chalmers and many of his colleagues believe it is time to give active government and economic planning another go.  To provide centralised management and guidance through what he described in his essay as “reimagining and redesigning markets … with co-ordination and co-investment”.

As an example of government working with business and labour to reimagine and redesign markets, earlier this month, it was reported that the Australian Hypnotherapists Association had hired a Labor aligned lobby firm to get things like GST exemptions, and NDIS and Medicare recognition.  Perhaps next, the Association of Crystal and Hot Rock Therapists will also come seeking Medicare and NDIS recognition also?

This is the essence of the problem with Chalmers’ essay.  He is building a strawman of capitalism which does not exist and which he can tear down to support his vision of an ever-larger role for government.  But history and data are not on his side.  What Chalmers is proposing is just a further acceleration of the poor economic policies that continue to erode our national prosperity.

The ideas may sound wonderful, but reality has a habit of not cooperating. 

Q+A session

Question: Sam, what do you see as the strength in Jim Chalmers’ article in The Monthly? Dimitri, what would you say the weaknesses are?

Sam Crosby: The strength of Chalmers’ article is that he’s had a crack at articulating how he and the government should make decisions. In my book, The Trust Deficit, I write that one of the keys to trust in politics is transparency in decision making, so that you can pre-empt a decision. You can pre-empt that government idea before it happens. I think Jim’s made a stab at that. I think Dimitri is right in articulating a lot of the problems. What I didn’t hear were many solutions, other than government needs to get out of the way. In some cases, I dare say that’s correct. But he highlighted the Global Financial Crisis. He highlighted the collapse of regulatory reform before going on to bemoan the complex regulatory system in Australia. So, what is it? Should we regulate more, or should we regulate less? Surely the answer is that we have to regulate properly. We have to regulate according to our values. I don’t think you can have a better way.

Dimitri Burshtein: I agree with much of what Sam says. As I said, I think it takes a lot of courage and effort for somebody to go out there on the stage and say these things and put these things in writing to be debated. My disappointment is that there hasn’t really been a debate. To some of the points that Sam made, no doubt there are people in this nation who are struggling. I would rather public resources be directed to them than people with half a million dollars getting childcare rebates and subsidies for electric cars and discounted pensions.

The problems are complex, but to the specific question about regulation, I’m not advocating for more or less. I’m talking about right regulation. The way our regulatory environment has evolved is a failure of the political system. If the NSW Police were to come out and write policy papers advocating for changes to the criminal law, they’d be laughed out of town, and told they were talking beyond their brief. Yet, every day, our regulators, who have no interest in the marginal cost of additional regulations, constantly advocate for new and more complicated regulation. There is no trade off in their minds, because the system is not working. The problems are clear, the solutions are more complex. But to get to the solutions, you have to start the conversation, and I don’t think those conversations have started.

Sam Crosby: Can I just take up one point about the welfare state, and where we bring in welfare, where we stop welfare? It’s easy to look at the half million-dollar example and say that’s too much. It’s easy to look at the person earning $5,000-$10,000/year and say they deserve some help. My charter is trying to figure out where is the middle. Is $50,000 enough? Is $100,000 enough? That’s a difficult point.

I would like to pose one idea. Bob Hawke, in 1983, brought in Medicare. The idea that every single Australian would get access to a medical system regardless of whether you’re earning half a million dollars, a million dollars, a hundred million dollars or if you’re on the age pension. That idea, whilst I acknowledge was somewhat radical at the time, is one of the things I love about this country. Because it puts us all on the same playing field. It stops dividing us between north and south, or east and west, and it starts saying “No, we’re all the same. We all have a strong safety net that we’re eligible for.”

I respect the view that, perhaps, some subsidies are too generous to some income demographics. But I think we need to think through what that does by expanding that social welfare net, obviously to the point that we can pay for it. That goes without saying.

Dimitri Burshtein: Bob Hawke also introduced the Pension Assets Test, because he said that those who don’t need it shouldn’t get it. That seems to have been lost in the conversation. With regard to Medicare – and I know we’re going beyond the scope of the subject – there is a difference, to my mind, between government providing assistance to people to get access to healthcare and governments running healthcare. That conversation needs to be had. I referred to James Buchanan in my comments, the author of Public Choice Theory.  The academic Dr Margaret Fuax wrote recently that $8 billion of Medicare money is wasted. I don’t have a problem with government spending money, but I don’t want it poured down the toilet. And before they ask for more, they should fix what they’re spending first.

Question: Sam, how do you see the role of government with regard to an organisation such as a not-for-profit like yours?

Sam Crosby: I say this with a lot of love in my heart for Vinnies. I was a member before I worked there, I dedicated all my free time to it and now I work there. I want to do it professionally. There is a lack of dignity in having to come and ask for help. A lot of people are brave enough to do that. They can turn up to one of our centres and they can see our members and say, “I’m struggling, I need help.” That’s a wonderful thing. For everyone that comes and sees us, there are thousands that don’t. A government system of slightly more generous welfare payments, new start payments, means that doesn’t happen.

During Covid, when the welfare payments were increased, we saw our numbers plummet. The number of people that would knock on our doors, when the New Start payment was increased significantly, plummeted. That was the case for a number of different organisations such as ours. Fast forward onto the second lockdown in NSW, where New Start wasn’t increased, and we saw our numbers skyrocket. So, we know that there is a direct impact on that.

Question: The Labor government has proposed three new entities. I think the total of them all up is more than $30 billion. Something like housing for people needing government support should be in the budget. But, I believe the three as announced are going to be an unnecessary expense.

Dimitri Burshtein: The three funds you’re talking about is to turn the Future Fund into a leverage hedge fund. They’re basically borrowing money to give to the Future Fund to invest, and then recycle the proceeds of those investments into rewiring the nation. I think there was a manufacturing one as well, and the social housing one. We can debate whether they’re the correct policy pathways, but the thimble trick of borrowing to give to the future fund to expose Australian taxpayers to market risk is a very strange logic, to my mind.

Sam Crosby: I’m not going to comment on the economics of it; it’s far beyond my remit. What I will say is this. That woman that I spoke of, is an incredibly common story. They come through the door, and you think to yourself, “I’ve got to refer these on” or “It’s such a compelling case. They will get a house, they will absolutely get on the top of the social housing list and within a week they’ll be in a house. No problem.” And they’re not. A lot of the time, they go on the list and sit there, and they sit there and they sit there. And then you realise that the other people on the priority wait list have equally compelling cases. Equally as heartbreaking stories. The number of them is impenetrable. Maybe the future housing fund isn’t the right thing, but it’s something. I have to say, as someone in that sector who regularly makes calls to people to say, “Can we get this person on the priority wait list and can we get some action for them?” I’m crossing my fingers and hoping that it goes through. I really am.

Dimitri Burshtein: The Commonwealth government employs around 250,000 people. There are front line service providers – there’s the federal police, there’s home affairs. The vast majority of them are not front line service people. The payroll cost of these employees is about $25 billion. You wonder how much social housing and income support could be allocated at that expense. I note also that Gerard’s friends at the ABC got an 11 per cent pay bump and a $1,500 cash bonus.

Question: Could you elaborate on how you see the cooperation between business and unions could build economic and political capital to fulfill many of the elements of Dr Chalmers’ values-based capitalism?

Sam Crosby: We saw it in the 1980s and the 1990s. We saw the modern system of Medicare grow as a result of that cooperation. Truth be told, I don’t know what this next iteration looks like. That was at a time when centralised wage fixing of union density was 48-49 per cent – we’re obviously not there anymore. I would say that, even with the unions’ declining share of the labour market, they still represent around two million working Australians. As Dimitri points out, if you’re going to listen to either upper bourgeoisie or regular working people, the Australian union movement provides a very good link to those very good regular rank and file policemen, nurses and workers of all shapes and varieties. I don’t think we’re going to see another accord as in the 1980s and 1990s. I don’t think the cooperation will take that shape. But we’ll see.

Question: Australia’s got the best terms of trade it’s ever had in its history. We have the lowest unemployment for about 50 years. But the budget looks like it’s going to have a deficit number. Isn’t all this discussion a distraction from the job of the Treasurer to fix the budget at a time when it should be delivering record surplus rather than more deficit?

Dimitri Burshtein: Yes. It was covered in both The Sydney Morning Herald and The Australian; and the Grattan Institute’s Back in Black report. Which offered a number of ideas – some of which would be described by Sir Humphrey as “courageous”. They were highly skewed to the revenue side. In their report, they put up a chart that showed taxes across the OECD. The clear implication was that Australia is a low tax jurisdiction. It’s just not so. I think the number they said was that the average tax rate across the OECD was 28 per cent and Australia was 25 per cent. But when you add in all the other state and territory taxes, and account for superannuation, which other European countries tax for but we take off budget, so to speak, our tax rate is over 40 per cent across the three tiers of government. That puts us in the Scandinavian territory. At least the Scandinavians have efficient and effective government. We have three tiers of confused, overlapped government. I’m not sure that Australia’s national competitiveness can withstand much more taxation.

Sam Crosby: I agree to an extent. We’ve got a trillion dollars in debt and deficit in this country. It’s crazy. How are we going to repair that? You can’t – as Joe Hockey famously said – do it one cycle. You remember when he was opposition shadow treasurer, and he said, “We’ll have a budget surplus year one, and every year thereafter”, and then proceeded to deliver none? It’s rubbish. I think we’re going to have it do it over time, and it’s going to be a generation job to get over this debt and deficit emergency. As Tony Abbott described it before the Liberal government doubled it before Covid and then doubled again during Covid. But it’s going to be a long run.

Question: What is an example of a when a government has designed a market well?

Sam Crosby: On the housing market, it’s important that government housing policy is fundamentally a feature of a democracy. To have house prices level off, to grow slowly but not to collapse or explode, you need, in Sydney, about 50,000 new homes built every year. Any time that government gets close to 50,000 homes each year, everyone freaks out, everyone complains to their local member and says, “This is crazy, you’re building properties in my backyard.” And whoever the government is, they’ll come along, and close that argument down. So, you’re right, it is a feature of various governments, multiple governments at multiple levels. But it is also a feature of – unfortunately in this case – the democratic will of those people.

A government intervention that works? Off the top of my head, superannuation. I look at the United States that tears themselves apart every time someone talks about privatising social security or anything in that general space. It’s the third rail of American politics. We cracked that in the 1980s. That area, that sector, that part of the economy has grown and grown, and in doing so provided fantastic retirement incomes for a generation of people. So, I’d say superannuation.

Question: How are we going to get rid of the “Yes, Minister” culture?

Dimitri Burshtein: I had a chat with the infamous John Stone once, and he dates it all back to the Dawkins reforms of the early 1980s. It is like “Yes, Minister”. There was a famous episode where Sir Humphrey and Sir Arnold were talking about civil service accountability. Sir Arnold says, “This is why we rotate people every 2-3 years to stop this accountability nonsense”. Well, for anyone who’s had any dealings with the Commonwealth government, that is literally what goes on in Canberra right now.

If you’re dealing with any complex public policy issue with the Commonwealth – these things take time to explain. It’s almost like a bell rings after 2-2 ½ years; then it’s “Rotate”, and they hand over to somebody new with no handover, and you have to start again. I’m talking about people who are doing work in social housing. They’ve had these issues. One person would go to Canberra and they’d sit in a giant room with 30-40 people taking notes. They have to start from scratch every time. Lo and behold. How do you fix that? I don’t know. But I referenced Buchanan and public choice theory; you have to change the incentives. You change the incentives; you change the outcomes. If you reward for outcomes, you might get the outcomes.

Sam Crosby: There’s no question that there’s a reform piece that you spoke of that would be of great benefit to Australia. That said, I do want to defend the back of this public servant. I remember the Carr government introduced into police stations non-police admin workers. They worked in a whole series of police stations. I was only in the police portfolio as a staffer very briefly. But at that stage there was about 1,500 of them across NSW. They were a fantastic addition to the police force because they took over a lot of the basic administration’s laborious work, and they put the police officers back out on the street so they could be increasingly productive. And at a much-reduced rate. They weren’t getting paid the same wages that police officers were.

It’s easy to knock public servants. You go through their titles and you think “What does this guy do? This bloke’s doing nothing.” Then you think to yourself: well, hold on, the Pharmaceutical Benefits Advisory Committee (PBAC). That’s filled with public servants, health economists. What do they do? They’re delivering one of the best value for money pieces of purchasing anywhere in the world. Our pharmaceuticals are 30-40 per cent cheaper than anywhere in the world. That’s done largely by back-office bureaucrats. In every instance, it’s easy to attack them as a strawman and to attack them as an anomaly. But when you go through the lists, they have purpose, they have reason. I’m not defending all of them. But on the whole, I’m happy to defend what they do.

Dimitri Burshtein: I’m happy to defend what they do too. But the Commonwealth Department of Health and Aged Care has 6,000 employees. They don’t run one hospital, don’t run one aged care facility. How many of those 6,000 are necessary for the Pharmaceutical Benefits Scheme? Before Covid, the Department of Health’s annual report had a number of targeted outcomes. I’ll highlight two. One of them was pandemic management, one of them sports diplomacy in conjunction with the Department of Foreign Affairs and Trade. There were more people and resources allocated to sports diplomacy.

Sam Crosby: I’ll take the bait. Sports diplomacy; how imbecilic, how silly. I mean, what sort of a silly person comes up with that idea? Until you think, well, what do sports diplomats do? They get kids playing sport. Why do we want kids playing sport? So that we’re not paying for their hip reconstructions, obesity surgeries, fatty liver transplants. Why do you want kids playing sport? For the public health benefits that they will accrue over a lifetime. That’s why you want a sports diplomat.

Dimitri Burshtein: It wasn’t domestic sports diplomacy; it was international sports diplomacy. Again, it’s all a question of priorities and relative allocation. As we have seen the cost to the Australian economy of a mismanaged pandemic, I would have rather they had spent their money on that than sport in the South Pacific.

Sam Crosby: But here’s the thing. For years I played basketball because I watched Michael Jordan in the NBA. I guarantee you that my son wants to be a soccer star because he saw the World Cup. These ideas are ridiculous in the specific until you start examining why we have that position. Generally speaking, every government, Labor or Liberal, there is generally a reason why you might want something like that floating around the Health Department.

Question: What would you attribute as value if we’re looking at success in government? What does value look like? Is this the traditional type of measure that we’ve done on this as we always have? Or is there something different?

Dimitri Burshtein: I’ll start with a parallel universe. Imagine at the annual general meeting of BHP, the chairman gets up and says, next year we’re going to spend $40 billion, the year after we’re going to spend $50 billion and the year after that we’re going to spend $60 billion. And somebody puts up their hand and says, “What are we going to get from that?” And the response is, “It doesn’t matter. We’re going to spend $40 billion, more, more, more…” Imagine the reaction from the community; or shareholders.

We’re all shareholders. I completely agree with you. We measure government success the wrong way. We measure by how much we spend, not the outcomes or the outputs. Treasuries talk about outcome and output budget. It’s hard. It’s really hard, but if you don’t want to do the work, this is the problem. Which is why it’s easy for a media grab, for a prime minister or politician to get up and say, “I announce an extra $X million for this.” What are we going to get from it? It’s not relevant, we’re just going to spend more.

Sam Crosby: There’s that Bobby Kennedy quote about GDP that says we measure everything but the things that matter most. We can measure the value of childcare, but we can’t measure a mother caring for their child. We measure napalm in his instance, but not the externalities that bring peace. It is a great question, but I don’t have a good answer. Jim Chalmers is trying with his wellness budget. We need to experiment, and that’s why I like his Monthly article, because it’s experimenting with these big ideas. And we need people to do that big thinking.