Tuesday, October 24, 2017

Schools, universities, hospitals holding us back - Productivity Commission

Automatic dispensing machines would replace pharmacies, low-value healthcare procedures would be defunded, people with real-world skills would be made teachers, and drivers would be charged for the use of roads under a series of audacious proposals the Productivity Commission believes could add $80 billion per year to economic growth - an amount it says would grow over time.

The five-year program, requested by the Treasurer Scott Morrison, is designed to jump-start innate, or so-called "multifactor" productivity, which the commission believes has barely grown since 2004.

The productivity boost brought about by economic reforms in the 1990s produced almost all of the decade's spectacular lift in living standards. Since 2004 innate productivity growth has produced almost none, with most of the productivity growth that has been achieved the result of investment spending and most of the income growth the result of the mining boom.

Productivity Commission chairman Peter Harris said the slowdown in Australia's capacity to "do more with the same" was puzzling because scientific and technological knowledge had seemingly advanced. In 2003 there was no "cloud", no "internet of things" or smartphones and music and software were provided in physical forms.

Without action to remove the last big obstacles to productivity, Australia might consign itself to half a century of low income growth.

The obstacles were predominantly in the public sector, in the way it provided health and education and managed cities. It was as ripe for reform now as manufacturing was in the 1980s.

Twenty seven per cent of adults were obese, holding back their ability to contribute to the labour force, although Australians life expectancy was the third-highest in the developed world, the 11 years spent in ill-health was the third worst in the OECD.

Medical best-practice was often ignored. Seventy five per cent of bronchitis was treated with antibiotics, when the correct rate was close to zero, 71,087 knee arthroscopies were performed per year in most cases without evidence of benefits, 27,500 hysterectomies were performed without a diagnosis of cancer. Often it was because doctors didn't know how to say "no" to patients, and because patients didn't know what best practice was.

The commission recommends defunding low value procedures and creating scorecards for the performance of providers to enable patients to compare outcomes.

Medicines would be dispensed by ATM-style machines or by staff without pharmacist qualifications. "This new model would not, under any realistic assumptions require anywhere near the current 20,000 pharmacists who provide clinical services, and so would require a transition to a much smaller employment base," the commission says. Universities would be informed of the need for fewer pharmacists, some of whom could transition to other forms of medical work assisting doctors. The new dispensaries would not be bound by the location rules that prevent pharmacies from competition.

The Pharmacy Guild - one of the country's most powerful lobby groups - instantly rejected the recommendation as "radical and unworkable", saying it would "dumb down" an entire profession.

The commission wants universities to provide honest assessments of the employability of their graduates before enrolment and to be subject to competition law where they could be made to provide refunds or replacement courses.

"If you buy a kettle and it doesn't perform, you've got the right to return it and get a new kettle," Mr Harris said launching the report. "If your education doesn't perform as promised, the same law should apply."

Mr Harris said one-in-five university graduates were underemployed, up from one-in-10 a decade ago. His report discusses, but does not recommend, stopping fees imposed for university teaching being used to fund university research.

The report imposes a five-year timeframe for lifting teaching standards, noting that the performance of 15-year-olds in maths has slipped to the level of 14-year-olds in the year 2000. It says 30 per cent of year 7 to 10 information technology teachers have neither studied the subject at second‑year tertiary level nor been trained in how to teach it at tertiary level.

"Fifteen-year-olds are being taught by people who may not necessarily know the subject and can't answer questions because it's not their field," Mr Harris said.

One solution was to "take people who aren't necessarily trained teachers and train them up". Another was to train teachers in specialist fields such as maths and IT.

Other recommendations include phasing out stamp duties in favour of land tax and trialing pay-peer-drive charges for roads as an alternative to petrol excise.

"None of these ideas are new, we didn't make them up," Mr Harris said. "But when people tell you they are already being implemented, don't believe them. That's what we are trying to achieve."

Mr Morrison said he would work with the states on the ideas, beginning with the treasurers' conference on Friday.

In The Age and Sydney Morning Herald


Pharmacists are unfinished business

Why pharmacists? They've got off lightly. Peter Harris, the head of the Productivity Commission, worked for the prime minister's department in the 1990s when the Hilmer competition reforms were ending cozy arrangements for just about everyone, and earlier on prime minister Bob Hawke's personal staff.

Manufacturers lost tariff protection, banks suffered an onslaught of foreign competition and unions were denied industry wide bargaining. Only three industries survived completely unscathed, each due to impressive lobbying.

One was the taxi industry. It has since been buried by the GPS (anyone can find a street) technologically-driven undercutting. Another was newsagents. The cozy rules that prevented one from encroaching on the turf or another and guaranteed they changed hands for high prices have been rendered irrelevant by digital direct delivery.

The third was pharmacies. Incredibly profitable, protected by a thicket of impenetrable rules that prevent one from competing with another within 1.5 kilometres, or 500 metres inside a shopping centre subject to the provision of a surveyor's report, they get guaranteed business "sustained through government fiat".

Like once-valued taxi drivers, they have special skills that are no longer especially special. Machines can read prescriptions, select the right pills and stick labels on bottles. In some parts of the world they operate like ATMs. In others they work with the assistance of sales assistants without a detailed knowledge of pharmacology.

Harris can see what will happen to pharmacists (and is happening already through the online delivery of medicines from overseas). He wants a new less-skilled workforce trained to work with the machines and universities told to produce fewer pharmacy graduates.

It's an inconvenient recommendation for a government that has just signed a new long-term agreement with the Pharmacy Guild, as is the recommendation for a carbon price, a land tax in lieu of stamp duty, a fair use regime for copyright and taxing wine as if it was beer. It is a tribute to the Treasurer Scott Morrison that he commissioned the report without knowing what would be in it.

The traditional targets for productivity reform; unions, industries protected by tariffs, have few further to offer. The big ones left are in the public sector where hospitals, schools and universities operate pretty much as they did in the 1970s.

Harris wants them subject to the same sort of market discipline as manufacturers. They shouldn't be rewarded for producing products that don't work and consumers should have the right and the information needed to shop around. Teachers should know about what they teach and universities should provide refunds if their courses don't work.

Harris is bothering because without a new push on productivity, living standards are likely to stagnate. The targets he has picked are the big ones left.

In The Age and Sydney Morning Herald