Not ‘wasting the crisis’

It is becoming a cliché to say that we should not waste the opportunity for reform presented by the COVID crisis.

But achieving sufficient support to secure particular reforms (consensus rarely being possible) still requires a compelling case to be made.

It is a no-brainer that the absolute policy imperative is getting people back into productive work as soon as possible.

Job creation will need to take place mostly in the private sector, since public sector employment is still at record levels.

The capacity of businesses to employ people will depend not only on the state of the market for their products, but also on their ability to adjust and compete (without government support) in a post-COVID world.

This shifts the spotlight from well-worn macro instruments to stimulate demand, to regulations and other policies that inhibit the ability of firms to adapt, or that unduly raise the unit cost of labour.  Governments must make it easier, as Reserve Bank Governor Philip Lowe recently put it, “to expand, invest, innovate and hire people”.

The reforms that are most needed right now are ones that can support job creation in the short term, while simultaneously contributing to higher productivity growth in the longer term.

Mr Lowe went on to nominate taxation, infrastructure, training, industrial relations and regulatory impediments to innovation as key areas.

In devising a new ‘to do list’ of reforms that would best meet the dual objective of early job creation and sustained productivity growth, two of those areas stand out.

The first is regulatory impediments to innovation. This encompasses not just technology adoption, but enabling investment and enterprise adjustment generally.

The second area deserving priority attention is what Lowe refers to as the problem of ‘flexibility and complexity’ in the industrial relations system.

Australia’s idiosynchratic and highly prescriptive system for regulating workplaces, impedes firm adjustment and job creation in ways that have become too costly to ignore.

This is an edited excerpt of an opinion piece published in the Australian Financial Review as This job-killing IR system has to go.