CEDA report: protectionist policies a danger to Australia’s service sector

CEDA National Chairman, Paul McClintock AO said the health care inquiry was one of 14 recommendations in the report which examines how to improve service sector productivity in Australia.

“The majority of workers in Australia are engaged in service industries, which in turn generates the largest component of national wealth. While other sectors are in decline, this is a sector that is growing and will provide the jobs of the future in Australia,” he said.

However, he said digital disruption has the potential to drive jobs in the service sector offshore, which is why it is important that Australia has policies in place that embrace technological change and ensure the sector is as efficient as possible.

“Governments at both a federal and state level need to ensure they are removing and not putting in place barriers, and should embrace disruptive technologies including those produced offshore in order to provide better value for taxpayers,” he said.

“There may be other areas where regulatory barriers need to again be reviewed to allow importation of foreign services, for example accelerating the liberalisation of air services which could assist tourism and freight movement.

“Globally there has been a lot of talk about countries moving towards protectionist policies, such as in the US and UK, but this will not serve Australia well. “The best protection Australia has against global competition is to make sure we are innovative and efficient.

“There is no doubt measuring productivity in the service sector is much harder than say, manufacturing but given the importance of this sector to our future prosperity, there needs to be much more focus on policies to support this sector.

“We need to make sure we are operating as efficiently as possible in these sectors so we can retain as well as develop jobs. “It is likely some jobs will be offshored as technology increases competition in areas such as accounting. We need to make sure we are at the forefront of industry development so that the high skill, high paying jobs are retained in Australia.

“Given the importance of this sector to our economic growth, high productivity in this sector would help deliver higher living standards for Australians.”

Mr McClintock said other key recommendations in the report included:

Health care

• Providing a greater focus on productivity gains through business system innovation in health care;
• Developing payment methods that shift the incentives from volume to value in health outcomes; and
• Extending the use of efficient prices, now implemented in public hospital funding, across the rest of the health care system.

“Health care costs are increasing due to a number of factors, but there is significant opportunity for improving efficiency both in the public and private sectors. However, this must not look just at cost but also the social cost or value,” Mr McClintock said.

“CEDA’s recommendation for a major inquiry into health care is in line with a Productivity Commission recommendation in 2015. It is time for the Federal Government to take action.”

Education

• Increasing efficiency of university governance and administration;
• Streamlining current research processes in universities; and
• Tasking government vocational and training systems with providing high quality support for industries seeking to upgrade skills.

Financial sector

• Starting periodic independent reviews of the financial sector, as recommended by the Murray inquiry, to ensure that appropriate government support is being delivered as intended.

Mr McClintock said CEDA’s report also includes a case study examining options for improving road infrastructure funding and efficiency, such as user-pays systems. The case study highlights that Australians may be becoming more open to road-funding reform and user-pays.

The launch event in Sydney will be followed by a series of events being held in Adelaide, Perth, Brisbane, and Melbourne in June.

Read or download report: Improving service sector productivity: the economic imperative