The notion of evidence-based policy in Australia is dead
The notion of evidence-based policy in Australia is dead. While it's been in poor health for some time, it was finally killed by the Coalition backbench last week and replaced with "gut instinct" and "the pub test".
First published by the Australian Financial Review - here
When Deputy Prime Minister Barnaby Joyce was recently quizzed about the lack of a business case for a dam he wanted Australian taxpayers to fund he retorted that he prided himself on being a "doer" not a "fluffer" and that he wanted to "get stuck in". What could go wrong?
Last week Senator Cory Bernardi and George Christensen's insights into energy policy trumped the considered advice of the government's own appointees to the Climate Change Authority and that of the chief scientist. Admittedly, all of those advisers do accept the scientific evidence of human-induced climate change, which renders them "biased" in the eyes of many in the Coalition. Policy advisers who take science seriously? Where will it end?
The idea that government should be run like a business is one I have never subscribed to but allow me, for a moment, to play along.
Imagine if company directors saw their role as not just generating business ideas, but demanding their ideas be implemented without careful examination. Now imagine that individual shareholders could veto the rollout of, or even consideration of, new business opportunities. Sound workable? That's how the Turnbull government has "organised" itself.
Joyce recently insisted that the Australian Pesticides and Veterinary Medicines Authority move from Canberra to Armidale at a cost of $25.6 million and the loss of most of its senior staff. A cost-benefit analysis of the idea conducted at a cost of $272,000 by EY found no economic benefit to the move. It's still going ahead.
A company director that demanded the company headquarters be housed in their parents' property, despite the high rent, would be breaking the law. But apparently a Deputy Prime Minister spending other people's money to deliver benefits to his electorate is simply part of his strategy to "get the country moving".
Philosophers or thought police
In a well-functioning government ministers and backbenchers play an important role in setting strategic direction and ensuring plans are well implemented.
But Coalition MPs increasingly see their role as either "philosopher princes" who can divine the virtue of an idea by simply having had it themselves, or as "thought police" who can veto the mere consideration of an idea proposed by members of their own Coalition.
Kevin Andrews got $200 million to fund "marriage counselling vouchers" to discourage divorce, Matt Canavan got $1 billion for his pet Adani coal mine and, of course, Christopher Pyne shifted $50 billion to build submarines in Adelaide. None of them relied on cost-benefit analysis, but all of them trusted their gut. Would you invest in a company that allocated capital in such a cavalier manner?
Even the Secretary of Treasury, John Fraser, is into the game of ignoring inconvenient advice. Treasury, once the grand champion of economic rationalism, employs more than 800 people, prides itself on being the pre-eminent economic advisers to government, and possesses a dedicated "macroeconomic group". Despite all that, the secretary chose to spend taxpayers' money outsourcing an evaluation of the Rudd government's fiscal stimulus package to Professor Tony Makin.
Makin is a long-term critic of the stimulus package overseen by former treasury secretary Ken Henry and strongly supported by current Prime Minister and Cabinet head Martin Parkinson. Intriguingly the Makin report is not even published on the Treasury website, but on a new "Treasury Research Institute" site.
In recent years research by the World Bank, IMF and OECD have all shown strong support for the effectiveness of, and need for, fiscal stimulus in response to a rapidly slowing economy. But despite 14 references to his own previous work, Makin's report makes no mention of, and provides no rebuttal to, the significant body of mainstream economic thought which he contradicts.
Bernardi doesn't believe in human-induced climate change and Makin doesn't believe that increased public spending in a slowing economy promotes growth. Both of them might be right, but both of them are in a very small minority.
Enron and Bear Stearns provide clear lessons for what happens to companies who insist on only getting advice from supportive sources. Time will tell what happens to governments that do likewise.
Richard Denniss is the chief economist for The Australia Institute