#26 December 2009 - Melbourne Institute News

Melbourne Institute News December 2009 ISSN 1442-9500 (print)

ISSN 1442-9519 (online)

Print Post Approved PP381667/01204

Issue 26

Economic and Social Outlook Conference

MABEL Survey of Doctors Results are now available from Wave 1 (2008) of the Medicine in Australia: Balancing Employment and Life (MABEL) Survey, a longitudinal survey of Australian doctors.

Page 5

IBM® – Melbourne Institute Innovation Index of Australian Industry IBM Australia and the Melbourne Institute recently released the third edition of the IBM® – Melbourne Institute Innovation Index of Australian Industry.

Page 6

Global Proxy – Melbourne Institute Shareholder Confidence Index™ Survey The Shareholder Confidence Index increased by 4.4 per cent between August and November 2009, and continued an upward trend which was established in March 2009.

Page 6

The Melbourne Institute and The Australian jointly hosted the sixth Economic and Social Outlook Conference on Thursday 5 and Friday 6 November 2009 at the University of Melbourne.

Widely acknowledged as the nation’s premiere economic and social public policy conference, this year’s conference again lived up to its reputation, attracting a stellar line-up of speakers and around 350 registrants.

While the central theme of the conference was ‘Road to Recovery: Restoring Prosperity after the Crisis’, it was widely accepted by participants that the crisis was now behind us and the central objective for policy-makers was how to best negotiate the bumps along the road to the next peak in the business cycle. As Reserve Bank Governor Glenn Stevens expressed in his speech to the conference dinner, the policy debate now needs to focus on how the road to recovery connects to the road to prosperity (an allusion to a previous Economic and Social Mr Glenn Stevens, Governor, Outlook Conference).

Reserve Bank of Australia

Continued on page 2

www.melbourneinstitute.com Melbourne Institute of Applied Economic and Social Research - Page 1

2009 Economic and Social Outlook Conference (continued) Despite this consensus, it was just as clear that views about how best to manage the recovery were sharply divided. Chris Richardson, from Access Economics, highlighted the impact of the fiscal stimulus on the budget deficit and the political difficulties involved in eliminating the deficit at any time. Gary Banks, Productivity Commission Chairman, went further suggesting that the infrastructure spending phases of the stimulus need to be rethought, remarks that were seized upon by the then Opposition Leader, Malcolm Turnbull, who was scathing in his assessment of both the size and composition of the stimulus package in his lunchtime speech on day 2 of the conference.

A recurring theme was the impact of the growing imbalance between supply and demand in the housing market. Unlike many other industrial nations, and contrary to some predictions, the global financial crisis recession did not result in a collapse in housing prices in Australia. Indeed, as noted by Bill Evans, Chief Economist at Westpac, housing prices have grown at an annualised rate of 20 per cent over much of 2009, and have been a major factor behind the recent interest rate hikes. Saul Eslake, from the Grattan Institute, attributed part of the blame for this to the government’s own policies, and especially the more generous firsthome owners’ grants. Other speakers emphasised the restrictions on land supply, while still others, and notably Glenn Stevens, emphasised the role of continued strong population growth. Housing affordability was an issue pre-recession, and it will remain prominent postrecession. Indeed, Clare Martin, Australian Council of Social Services CEO, named housing stress as her priority social policy challenge.

For both Gary Banks and Glenn Stevens, as well as Victorian Premier John Brumby, who delivered the conference’s opening address, the key challenge for policy-makers is again productivity, especially if we are to avoid rising inflation.

Gary Banks, for example, identified three priorities for aiding productivity: first, reducing further levels of industry assistance; second, eliminating anti-competitive regulations and red tape; and The Hon John Brumby MP, third, encouraging greater Premier of Victoria private sector investment

in infrastructure. John Brumby too acknowledged the importance of easing regulatory barriers, but also stressed the importance of skills and training reforms, something that was reinforced later in the conference by Heather Ridout, Australian Industry Group Chief Executive, and Philip Bullock, Chair of Skills Australia. Premier Brumby also emphasised the benefits from improved information and communication technology (and especially highspeed internet connections).

Speaking at the lunch on day 1, Treasurer Wayne Swan was, not surprisingly, extremely upbeat about Australia’s recent economic performance and the role of the fiscal stimulus package in aiding our recovery. His speech, however, was mostly devoted to how the government would deal with the soon to be delivered Henry tax review. He outlined a large, comprehensive and long-term agenda, signalling that tax reform would be a central issue at the next election.

Of course, at this point in time, it is difficult to imagine how any topic other than climate change will get much

The Hon Wayne Swan MP, Commonwealth Treasurer, gave the lunchtime address on 5 November

airing at the next election. This issue, and especially the government’s proposed carbon pollution reduction scheme, was the subject of debate at the conference.

Senator Penny Wong re-affirmed the government’s commitment to an emissions trading scheme (ETS).

She emphasised that it is not simply a matter of there being costs of acting—there are (larger) costs from not acting. She also noted that establishing a system soon was important for business investment certainty, something Premier Brumby had stressed in his opening address.

ANU Professor Warwick McKibbin, on the other hand, while supportive of the government’s general approach to climate change, was critical of the proposed ETS, arguing that it does not allow for smoothing of emissions over

Page 2 - Melbourne Institute of Applied Economic and Social Research

disconnect between the characteristics of many persons who lost jobs and the types of jobs being created. “All the action is in part-time work”, he noted. “We need to look for ways to let people do some part-time work and claim some welfare.”

Rosanna Scutella, who holds joint appointments with the Melbourne Institute and the Brotherhood of St Laurence, also looked at social and economic disadvantage, presenting new data, drawn from the HILDA Survey, documenting the extent of social exclusion in Australia.

The central feature of her speech was how many Australians, while assessed as disadvantaged on one measure, were not disadvantaged on others. Overall, it was concluded that around 4 to 6 per cent of Australians are still “deeply excluded”.

Senator The Hon Penny Wong, Minister for Climate Change and Water

time. He proposed an alternative model based on longterm emission permits with prices fixed for a number of years (say five), with a central bank maintaining price stability through permit trading.

But the range of issues covered at the conference extended well beyond management of the macroeconomy and dealing with climate change. Melbourne Institute’s Tony Scott spoke on health care, stating that it was time to move away from Medicare’s fee-for-service system and to replace it with a system that gives great emphasis on pay-for-performance.

The Melbourne Institute and The Australian newspaper would like to acknowledge its wonderful sponsors, the Productivity Commission, The University of Melbourne, and the Faculty of Economics and Commerce at the University of Melbourne.

Conference speakers and their presentations and audio recordings are listed on the Melbourne Institute website at <www. melbourneinstitute.com/conf2009/program.html>.

Collette Tayler, Chair of Early Childhood Education and Care at the University of Melbourne, spoke on the importance of investment in early childhood education, warning that current investment levels were dangerously inadequate.

David Thompson, Chief Executive of Jobs Australia, spoke on the prospects for long-term unemployment, presenting a fairly gloomy assessment. While the recession is now past, the effects of the recession are likely to be felt by some for a very long time, and in his view there is simply insufficient investment in active labour market policies to deal with the issue. In the same session, ANU Professor Bob Gregory highlighted the

From left: Professor Mark Wooden, Mr Paul Kelly, Professor Glyn Davis, Mr Greig Gailey, Professor John Freebairn, Professor Ross Garnaut

Professor Bob Gregory, Professor of Economics, ANU

Melbourne Institute of Applied Economic and Social Research - Page 3

ARC Future Fellowship Awarded to Professor Tony Scott Professor Tony Scott, Director of the Health Economics Research Program at the Melbourne Institute, has been awarded one of only 200 prestigious four-year Future Fellowships by the Australian Research Council.

On 9 September, the Minister for Innovation, Industry, Science and Research, Senator Kim Carr, announced the 200 outstanding national and international mid-career researchers. Senator Carr stated that the 200 Future Professor Tony Scott, Melbourne Institute Fellows will conduct research into areas of national priority and will advance Australia’s international research and innovation standing. The title of Professor Scott’s project is ‘Incentives and Performance in the Health Care System’.

The research will examine changes in financial incentives for health care providers, which can have direct effects on their behaviour and influence patients’ health outcomes, quality of care, and access to health care. The research will provide a richer understanding of the effects of incentives, and it will influence policy on the design of incentives for health care providers in Australia. Changes in incentives will ensure patients receive more appropriate, higher quality and less costly health care, in the most appropriate settings, and delivered by the most appropriate health care providers. This will have direct effects on population health and well-being and the capacity of individuals to lead healthy and productive lives.

Information about all Future Fellows and their research projects is available at <www.arc.gov.au/ncgp/futurefel/ft_outcomes.htm>.

Melbourne Institute Awarded Grant to Research Hospitals As part of the National Health and Medical Research Council’s funding program, “NHMRC Partnerships for Better Health”, on 13 October Melbourne Institute was awarded a $750,000 five year partnership grant to measure, assess and explain hospital performance.

The research has three Chief Investigators: two from the Melbourne Institute, Professor Tony Scott (Director of the Health Economics Research Program) and Dr Jongsay Yong, and the third Chief Investigator is Dr Vijaya Sundararajan (Senior Medical Adviser at the Victorian Department of Human Services). The Department of Human Services will contribute additional funding for the project and is the Melbourne Institute’s collaborative partner on this project.

This research partnership will help build long-term capacity to evaluate policies and incentives for improving hospital performance in Australia.

The aim of the collaborative research is to improve the generation and use of knowledge to measure, understand and improve hospital performance and patient care. The research team will develop and use existing hospital data to examine the key drivers of hospital costs and performance. Professor Scott states “A rigorous and in-depth understanding of the relationship between efficiency and quality is critical in developing policy initiatives to improve hospitals’ performance in terms of both efficiency and quality of care”.

Of particular interest is the interplay between volume, quality and efficiency—an issue that has clear policy implications for hospital funding and performance.

The research project will commence in 2010 and has been funded for five years.

Page 4 - Melbourne Institute of Applied Economic and Social Research

MABEL: Longitudinal Survey of Australian Doctors The latest results from Wave 1 (2008) of the longitudinal survey of Australian doctors, Medicine in Australia: Balancing Employment and Life (MABEL), are now available on the MABEL website <www.mabel.org.au>.

During 2009 the MABEL team cleaned the data from Wave 1 (2008) and began to prepare a number of papers and reports. Wave 2 (2009) questionnaires were sent out in June 2009 and data entry has commenced.

In Wave 1, there were 10,498 respondents, including 4596 medical specialists, 3906 general practitioners (GPs), 1072 specialists in training and 924 interns and medical officers. Overall, respondents were broadly representative of all Australian doctors in terms of age, gender, doctor type, and geographic location.

Four newsletters have recently been published: one for each of the four categories of medical practitioners surveyed: GPs, specialists, specialists in training, and interns and medical officers. Each newsletter contains some descriptive data on each of the groups of doctors, including job satisfaction, hours worked, and attitudes to work–life balance.

For example, GPs in rural areas were working, on average, about 5 hours more per week than urban GPs, and almost half the male GPs in rural areas were working more 50 than 50 hours a week with unpredictable working hours. Almost 50 per cent of rural 40 GPs undertook hospital work, compared with 18 per cent of urban GPs; and 74 30 per cent of rural GPs did on-call work, % compared with 44 per cent of urban GPs. Nevertheless, rural GPs were equally as 20 satisfied with their work compared with urban GPs, and were only slightly less likely 10 to want to quit.

The MABEL Survey has been funded by the National Health and Medical Research Council (NHMRC) for five years until 2011, and has been endorsed by key medical colleges and organisations.

0

GPs Working More than 50 Hours Per Week 47.5

34.4 Female

18.0

Male

8.8

Urban GPs

Rural GPs

Public Economics Forum: Resetting Priorities in Health Reform The Melbourne Institute Public Economics Forum, held in Canberra on 23 November, was on Health Reform. Over 90 people attended the forum. Discussion centred on proposed reforms to the structure of the Australian health care system, including Medicare Select, pay for performance, the efficiency of public and private hospitals, and Commonwealth–State relations.

Speakers were Professor Tony Scott, Mary Ann O’Loughlin (Executive Councillor and Head of Secretariat, COAG Reform Council) and Professor John Deeble (Emeritus Fellow, The Australian National University). The forum was chaired by Jane Halton (Secretary, Department of Health and Ageing).

The speakers’ presentations can be found on the Melbourne Institute website at <www.melbourneinstitute.com/forums/pub_forums>.

Melbourne Institute of Applied Economic and Social Research - Page 5

Innovation Index of Australian Industry IBM Australia and the Melbourne Institute have jointly released the third edition of the IBM® – Melbourne Institute Innovation Index of Australian Industry.

The study, released in December, revealed that there was no change in the rate of innovative activity in Australia between 2006 and 2007. This compares with an average rate of increase in the period since 1990 of 2.0 per cent per annum. However, the authors note that while generally the level of innovative activity has stalled for a third consecutive year, trends vary widely across industries, with very large increases in innovation activity taking place in Health and Community Services as well as in Personal and Other Services.

Economic research indicates that attempts to commercialise inventions are also pro-cyclical. Accordingly, the authors of the report state that the Global Financial Crisis (GFC) is likely to have an effect on innovative activities.

However, it is too early to judge whether the sudden downturn in patenting will be sustained, since much of the effect of the GFC reflects the impact on confidence—which can be especially fickle.

The Innovation Index of Australian Industry measures the many different aspects in which local industry innovates in its provision of products and services, involving inter-industry and multi-indicator analysis. The Index has six key data components: research and development intensity, patent intensity, trade mark intensity, design intensity, organisational/managerial transformation, and productivity. The study is unique in that it captures innovation trends across thirteen categories of Australian industry, as defined by the Australian Bureau of Statistics over a period of 16 years since 1990.

The full report is available to download from the Melbourne Institute website at <www.melbourneinstitute.com/publications/innovation/>.

Global Proxy – Melbourne Institute Shareholder Confidence Index The November 2009 release of the Global Proxy – Melbourne Institute Shareholder Confidence Index™ revealed a subdued outlook on Australian shares, despite surveyed investors saying that the market was back to normal.

While confidence among share owners increased since the previous survey in August, the November survey showed an observed weakening in both the current and expected share trading intentions. The subdued outlook emerged at a time when the Reserve Bank of Australia started to raise official interest rates. It also coincided with a correction in share prices, following a strong recovery rally that began in March 2009.

Professor Guay Lim of the Melbourne Institute said that the latest survey suggested there could be a slowing in share market activity during the next few months. “Because there has already been a significant recovery in prices, and the state of the global economy remains fragile, people may be adopting a ‘wait-and see’ attitude for now” said Professor Lim. Also, retail investors were signalling a strong preference for shares in metals and minerals, financials and the energy sectors for 2010. The overall Shareholder Confidence Index increased by 4.4 per cent in November 2009 to 123.6 from 118.4 in August, and continued an upward trend established in March 2009. The specific indices on returns and volatility each improved, but despite the current returns index improving by 53 per cent, it still remains below 100.

The full report is available to download from the Melbourne Institute website at <www.melbourneinstitute.com/research/macro/gproxy.html>.

For further information contact Professor Guay Lim, Melbourne Institute, (03) 8344 2146 or email <g.lim@unimelb.edu.au>.

Page 6 - Melbourne Institute of Applied Economic and Social Research

Australian Economic Review The December issue of the quarterly Australian Economic Review (vol. 42, no. 4), produced by the Melbourne Institute, includes a lecture by Howard Davies (Director of the London School of Economics and Political Science) on the role of central banks in the Global Financial Crisis (GFC). It is argued that central banks should have paid more attention to asset price bubbles.

The article ‘Political Cycles in the Australian Stock Market since Federation’, by Andrew C. Worthington, examines the political cycle in Australian stock returns from 1901 to 2005 as defined by the party in power (Labor or non-Labor), ministerial tenure and election information effects.

‘Assessing the Costs of a Haulage Regime’, by Nick Wills-Johnson, examines the likely impacts of a regulated rail haulage regime for Australia’s iron ore railways. Two other contributed articles are by Dean Hyslop and Dave Maré; and Richard G. Harris and Peter E. Robertson.

The Policy Forum section includes five articles on ‘Financial Regulation after the Global Financial Crisis’. The article by Kevin Davis discusses how the GFC has prompted a wide range of ad hoc government responses internationally that include new forms of government involvement in the financial sector and new forms of financial regulation. Martin Codina and Bob Edgar in separate articles address how much, and what type of, change in financial regulation is likely and/or needed in Australia. Robert Eisenbeis provides an overview of the regulatory responses to date. Deborah Ralston’s article points out that when the GFC struck, a program of reviewing consumer protection and rationalisation of regulation was already in train.

More information on the Australian Economic Review can be found on the Melbourne Institute’s website at <www.melbourneinstitute. com>.

Downing Lecture by Professor Jenkins Professor Stephen Jenkins (Professor of Economics at the Institute for Social and Economic Research, University of Essex, UK) has been visiting the Melbourne Institute for two months since October, as the 2009 Downing Fellow with the Faculty of Economics and Commerce, The University of Melbourne.

On 22 October Professor Jenkins delivered the 2009 Downing Lecture entitled ‘Spaghetti Unravelled: How Income Varies with Age’, and discussed the key features of income-age trajectories. Professor Jenkins has wide-ranging substantive research interests in income distribution and labour market topics, and methodological research interests in microeconometric methods for longitudinal data. He was President of the European Society for Population Economics in 1998, and Chair of the Council of the International Association for Research on Income and Wealth in 2006–2008.

The video of Professor Jenkins’ lecture can be viewed online at The University of Melbourne website <live.unimelb.edu.au/episode/downinglecture-spaghetti-unravelled-how-income-varies-age>.

Public Policy Lecture by Professor Garnaut On 8 September the annual Department of Economics – Melbourne Institute Public Policy Lecture was presented by Professor Ross Garnaut (Vice-Chancellor’s Fellow and Professorial Research Fellow, The University of Melbourne).

The topic of his lecture was ‘Ideas, the National Interest and Private Interests in Public Policy: The Case of Climate Change’. Professor Garnaut spoke about the processes through which the main ideas, embodied in the Garnaut Climate Change Review, emerged in the period to September 2008 and he described the pressures from private interests on the policy-making process as the government formulated its legislation on climate change mitigation.

An audio of the lecture is available at <www.ecom.unimelb.edu.au/faculty/news.html>.

Melbourne Institute of Applied Economic and Social Research - Page 7

Recent 2009 Melbourne Institute Working Papers 26/09 ‘Estimates of Poverty and Social Exclusion in Australia: A Multidimensional Approach’ Rosanna Scutella, Roger Wilkins and Weiping Kostenko 25/09 ‘Does Part-Time Employment Help or Hinder Lone Mothers’ Movements into Full-Time Employment?’ Yin King Fok, Sung-Hee Jeon and Roger Wilkins 24/09 ‘Examining the Role of Demographic Change in the Decline in Male Employment in Australia: A Propensity Score Re-weighting Decomposition Approach’ David Black, Yi-Ping Tseng and Roger Wilkins 23/09 ‘Optimal Marginal Income Tax Reforms: A Microsimulation Analysis’ John Creedy and Nicolas Hérault Working Papers can be download for free from <www.melbourneinstitute.com/publications/working/wp2009.cfm>. If you would like to receive an email notification when new Working Papers become available, contact the Melbourne Institute on <melb-inst@unimelb.edu.au>.

Distinguished Award Bestowed to Professor Ross Garnaut Professor Ross Garnaut (Vice-Chancellor’s Fellow and Professorial Research Fellow, The University of Melbourne) received the Distinguished Fellow award from the Economics Society of Australia in September. This annual award by the Economics Society is the highest honour bestowed on an academic economist by his or her peers, and honours distinguished Australian economists for their contribution to the development of economics.

Appointment of Honorary Professorial Fellows at the Melbourne Institute Professor Judith Sloan has been appointed as an Honorary Professorial Fellow at the Melbourne Institute. She is an economist and company director, a Commissioner of the Productivity Commission, Chairman of Babcock and Brown Communities and Director of Santos Ltd. She is also a member of the board of the Lowy Institute for International Policy and Westfield Group. Professor Sloan has held a number of academic appointments, including Professor of Labour Studies and Director of the National Institute of Labour Studies at Flinders University of South Australia.

The other recent appointment of an Honorary Professorial Fellow at the Melbourne Institute is Professor Richard Burkhauser (Sarah Gibson Blanding Professor of Public Policy in the Department of Policy Analysis and Management, and Professor of Economics in the Department of Economics, Cornell University). Professor Burkhauser was the 2008 R.I. Downing Fellow at the University of Melbourne.

ARC Grant for Melbourne Institute Professor Mark Wooden (Professorial Research Fellow and Acting Director of the Melbourne Institute) has been awarded an ARC Discovery Grant for $115,000 per annum, over a three-year period commencing 2010. The methodological research project aims to assess and enhance the quality of population-wide longitudinal survey data—a problematic field (e.g. respondent attrition, panel conditioning, and seam effects) that has challenges not relevant in the more ubiquitous cross-section of surveys.

Melbourne Institute News Views expressed by the contributors to Melbourne Institute News are not necessarily endorsed or approved by the Melbourne Institute. Neither the Melbourne Institute nor the Editor of Melbourne Institute News accepts any responsibility for the content or accuracy of information contained in this publication. Editor: Cliff Howard tel: 03 8344 2154, fax: 03 8344 2111, email: howardc@unimelb.edu.au. Sub-Editor: Nellie Lentini. Contributors: Professor Ross Garnaut, Professor Stephen Jenkins, Dr Paul Jensen, Professor Guay Lim, Professor Tony Scott, Professor Mark Wooden.

Level 7, Alan Gilbert Building, The University of Melbourne P: (613) 8344 2100 F: (613) 8344 2111 www.melbourneinstitute.com