May 2019 Economic seminar and luncheon – rethinking strategies for growth
by Peter Gill, SACES Research Associate
Rethinking strategies for growth
The South Australian Government has made a “promising” start to the micro-economic reform that will underpin economic growth, according to Steven Joyce, the author of a major report on the State’s public sector institutions and functions.
The former New Zealand minister – who held a number of portfolios, including Treasury, in a decade-long political career with the National Party that concluded in 2018 – told a SA Centre for Economic Studies’ lunch on Tuesday that many governments did not place sufficient emphasis on micro-economic reform.
“Government of whatever stripe has a huge influence on the level of investment that occurs in a geographic area – their actions can encourage investment or discourage investment,” Mr Joyce said.
“I would say that most governments underplay the importance of this sort of encouragement, by which I mean regulations – the way they operate their markets; what they say about land planning; what they say about all the different things that business has to tackle, in order to invest,” he said.
“In my experience, most governments in the world overplay the importance of monetary policy and fiscal policy in economic growth and underplay micro-economic policy.”
Mr Joyce submitted his report, Review of the South Australian Government’s International and Interstate Engagement Bodies and Functions, to the State Government in February this year. Key amongst his recommendations was the establishment of “a strong cross-government policy process to develop and maintain momentum in micro-economic reform, and integrate the efforts of the different government agencies in support of the Government’s economic goals.”
Mr Joyce told the SACES corporate members’ event that micro-economic reform “is the most least-used tool in the toolbox” because of the difficulty of explaining to people, who are affected by change, that the decisions being made are in the best interests of the State.
“That’s the hard part but, nevertheless it’s a job that must be done. I think it’s very important to adopt micro-economic policies that actually encourage investment and growth,” he said.
Later, in an interview, Mr Joyce said: “The question you have to ask yourself is: has the micro-economic policy direction (in South Australia) been strong enough to encourage growth? I think if you look back on the past 20 years, the evidence is that it probably hasn’t been.”
While Mr Joyce said it had not been his mandate to suggest policy options to the State Government, he added: “The State has a number of policy initiatives that look very promising, the things that encourage investor certainty.”
Meanwhile, while Mr Joyce was addressing the SACES function, the Governor of the Reserve Bank, Philip Lowe, was making a similar point in Brisbane. Dr Lowe said the options to reduce unemployment included “structural policies that support firms expanding, investing and employing people” along with further monetary easing and fiscal support, including infrastructure spending.
On the question of the public sector institutions that are responsible for policy development, Mr Joyce says in his report that “a major change is required, one that gives less public sector focus on government handouts and more on lifting the State’s overall competitiveness.”
“It is clear to the Review that the public sector in general is not accustomed to linking its regulatory and policy actions to economic outcomes and using the available policy levers to drive growth,” the report says.
But Mr Joyce notes that “the public sector can’t achieve growth on its own”.
“It is the private sector that will do the heavy lifting. Nothing will happen unless and until the owners of companies take the decision to invest more, hire more people, and take a risk on economic opportunity,” the report says.
Mr Joyce elaborated on those comments in an interview on Tuesday.
“In South Australia business has already got to the stage where their confidence is now high because they sense – and I don’t want to get political about this – that there’s a Government that is more open to economic growth than before,” he said.
“That’s a start but now you have to maintain it, and how you maintain it is by making decisions that investors see that ‘the walk matches the talk’. We have seen some of that here already but it’s a long-term thing if you are going to turn around 20 years of under-performance.”
Mr Joyce is now the Director of Joyce Advisory. He has recently also completed a report for the Federal Government on Australia’s vocational education and training sector.