The Productivity Challenge: Get Government Off Our Back

Australia’s productivity challenge is not some mysterious economic phenomenon. Businesses increasingly spend more time satisfying bureaucrats than satisfying customers. Compliance has become a growth industry in its own right; every additional reporting requirement, declaration, audit and procurement condition consumes time, money and management attention that could otherwise be devoted to producing goods, improving services or competing internationally.

Governments love talking about productivity. They simply don’t seem to recognise it when they regulate. The consequences extend well beyond economics; one of the quiet casualties of procurement creep, as I described recently, has been freedom of association.

Freedom of association has never meant simply the freedom to join an organisation. It equally protects the freedom not to join one. It recognises the right of employers and employees to negotiate lawful workplace arrangements suited to their own circumstances without governments favouring one lawful model over another.

When access to taxpayer-funded work increasingly depends upon adopting politically preferred industrial arrangements, freedom of association begins to look less like a right and more like a privilege dispensed by government. That should trouble anyone who genuinely believes in liberal democracy.

Governments should not be using taxpayers’ money to reward politically preferred commercial behaviour. Their role is to create a level playing field where businesses compete on merit, capability and value for money, not on their ability to satisfy whichever political priorities happen to be fashionable at the time.

Some readers will argue that governments have every right to impose conditions on those seeking public contracts. Of course they do. The real question is whether those conditions improve outcomes for taxpayers or merely satisfy political objectives. There is an important difference.

Australia once understood that distinction remarkably well. There was a time when our major infrastructure projects were conceived by engineers, economists and experienced public servants who expected to spend decades building institutions rather than election campaigns. Governments changed but institutions endured. Planning horizons stretched twenty or thirty years into the future because infrastructure was viewed as a national investment, not tomorrow’s media announcement.

Today, too much of that long-term thinking has been replaced by ministerial advisers, media strategists and political consultants whose planning horizon rarely extends beyond the next announcement and opinion poll. Infrastructure has increasingly become political theatre. Procurement has become one of its principal props. Taxpayers continue funding the performance.

Somewhere along the way, politicians also confused wearing a high-vis vest with understanding infrastructure.

A high-vis vest is a safety device, not a photo-op fashion accessory. Standing in front of an excavator doesn’t make someone an infrastructure expert any more than wearing a stethoscope makes them a surgeon. If our elected representatives spent half as much time understanding how projects are actually procured, costed and delivered as they do posing for photographs on construction sites, Australia might finally begin reversing its productivity decline.

The purpose of government is not to choose winners. It is to ensure everyone has the opportunity to compete fairly. That simple principle has been quietly disappearing from Australian public policy for far too long. Perhaps Lord Acton should have added another sentence to his famous saying that “absolute power corrupts absolutely”.

Absolute power rarely arrives all at once. More often it arrives one regulation at a time, one procurement guideline at a time, one compliance checklist at a time, until eventually nobody remembers what the original purpose was.

That original purpose has never been complicated. Government procurement exists to obtain the best possible outcome for taxpayers. Not the best political outcome, or the best media opportunity. Not the best outcome for whichever interest group happens to enjoy the greatest influence at any particular moment. The best outcome for taxpayers.

That simple principle should be guiding every procurement decision made by every level of government in Australia.

Instead, governments have steadily expanded the list of objectives that procurement is expected to achieve. It must now solve social problems, industrial relations problems, environmental problems, diversity problems and political problems, all before it is allowed to solve the engineering problem. The more objectives governments attach to procurement, the further procurement drifts from its primary purpose.

That is not sophisticated public policy. It is mission creep.

There is another consequence that receives remarkably little attention. Transparency suffers. When procurement decisions become dependent upon subjective policy considerations rather than objective commercial criteria, it becomes far more difficult for taxpayers to understand why one tender succeeded while another failed. Capability, price, delivery and quality can be measured. Political preferences are far less transparent.

Good procurement should be capable of surviving public scrutiny. If taxpayers cannot easily understand why one business was selected over another, confidence in the system inevitably declines. That matters because confidence is one of the most valuable assets any market possesses. Without confidence there is hesitation, complacency, suspicion. Eventually, without merit, there is mediocrity.

History tells us that countries become prosperous not because governments successfully manage markets, but because they create conditions where markets can function freely and fairly.

Labor’s instinct has generally been to respond to problems by writing another rule. The Coalition’s instinct has too often been to complain about the rule once it has been written. For decades it has been spooked by industrial relations debates, reluctant to defend free enterprise with conviction and content to fight yesterday’s political battles instead of preventing tomorrow’s.

Australians deserve better than an opposition that simply arrives late to every argument. They also deserve governments prepared to govern by principle instead of opinion polls. Australia does not suffer from a shortage of regulations; it suffers from a shortage of governments prepared to ask whether another regulation is necessary in the first place.

We have no shortage of capable manufacturers, innovative contractors or skilled tradespeople. What we increasingly lack is the confidence to trust them. Instead of allowing open competition to determine the best outcome, governments attempt to manage commercial relationships from Canberra and Spring Street.

For a nation blessed with extraordinary natural resources, remarkable ingenuity and world-class businesses, we have become strangely reluctant to let merit do the heavy lifting. Perhaps we should introduce a simple aptitude test before anyone is allowed near infrastructure policy. The next time a politician stands in front of an excavator announcing another multi-billion dollar infrastructure project, don’t ask how much it will cost.

Ask a far more important question: Who does government procurement really serve? Because if the answer isn’t taxpayers, then everything that follows is simply politics disguised as public policy.