There are a few worrying trends and signs on the horizon for Australian governments.
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The world is motoring. Growth in the US, Europe and Japan is near 2%, with China and India doing the heavy lifting to raise overall global growth above 3.5%. But China has been tightening the screws, which will see its growth slow during 2018, with flow-on effects for the wider world. And there are structural headwinds for the medium term: the developed world is ageing, with its potential growth sapped by rising retirements. That’s true of China, too. And, at the same time, the business world has been reluctant to invest for a decade, spooked by rising political and economic uncertainty, as well as fears of regulatory and technological developments – creating an additional headwind. Both the world and the Reserve Bank have been doing Australia favours, with China throwing red meat at those bits of its economy that buy big from the Lucky Country, and with the RBA’s 2016 interest rate cuts revving up housing prices. Despite that, production growth has been weak, as big gas projects finish construction, as the big home building boom of recent years starts to peter out, and as Cyclone Debbie took a toll. Yet our stuttering pace of production was still enough – thanks to higher commodity prices – to see national income chalk up a gain of near $100 billion in 2016-17. That brought an emphatic end to five years of ‘income recession’, though to date it has been profits rather than wages that have benefited, while the pace of home building is set to shrink further amid increasing evidence that gravity may soon start to catch up with stupidity in housing markets. And the gargantuan Chinese credit surge is finally easing back, suggesting the global economy won’t be doing Australia quite as many favours from 2018 onwards. Yet those are merely caveats on an otherwise solid outlook. Relative to the rest of the rich world, Australia’s economic outlook may not be quite as impressive as it once was, but we are still kicking goals. Consumer price inflation remains a dog that isn’t barking, both locally and globally. And although global and local leading indicators of inflation are stirring in their sleep, they don’t look like getting out of bed any time soon. We see wage growth set to climb from 2018, as inflation lifts a tad, as retirement among boomers restrains growth in potential workers, and as the ‘income recession’ of the post-2011 period gives way to more settled gains in national income (and workers get their share of that). Even so, the pick-up in inflation and wage gains is likely to be both modest and slow. The past decade saw a growing global gap between economies and interest rates, but the US Fed is continuing a slow grind towards closing the gap. The rest of the world will eventually follow, with Australia’s turn starting during 2018. Yet as J. Paul Getty so neatly put it: “If you owe the bank $100, that’s your problem – if you owe the bank $100 million, that’s the bank’s problem.” Australia’s heavily indebted families are now the Reserve Bank’s problem, which is why, although interest rates will indeed rise in the next few years, they won’t rise sharply. On the currency front, Australia will sit more towards the back of the queue for global interest rates normalisation, and there’s the risk of further price pain on commodities. That combination will weigh on the Australian dollar, but not by much. Australia is within a hair’s breadth of a current account surplus for the first time since bell-bottomed jeans were all the rage. However, just like bell-bottoms, Australia’s dash for cash looks set to be very short-lived. We got close courtesy of spikes in coal and iron ore prices, but those same global commodity prices are once again curled up into a ball and rocking. That will increasingly show up as lower export earnings over the next year or so, cementing a return towards our customary deficits. Job growth in the next couple of years will be solid: not as good as 2017 to date, but not as bad as 2016, either. There’s good news in the better gains in national income of late, but overall macro trends aren’t really giving a strong signal either way on job prospects. And while the bugaboos of the moment (disruptive technologies and new business models) grab the headlines, they do more by way of generating churn at the level of individual businesses than they do to ruffle the surface of overall job numbers. The Federal Budget saw the Coalition abandon Plan A (a return to sustainable fiscal finances via spending cuts) to Plan B (tax and spend, amid increases to the Medicare levy, a bank tax, and Gonski2.0). Given Plan A spent years going nowhere, we see great sense in Plan B. But it’s a real worry that a conscious shift to the centre still didn’t unleash much bipartisanship in Canberra. That says official figures (which assume stuff passes the Senate) remain at risk. And, speaking of risks, commodity prices could yet spell trouble for the Federal, WA and Queensland Budgets, while – a little further out in time – housing markets may yet do the same for the NSW and Victorian Budgets. The tussle at the top Among industries, it’s still a tussle for the top of the growth leader board, as mining output rides the crest of earlier investment decisions, while health care rides a demographic dividend topped with technological treats. Both sectors look set to keep growing rapidly, with mining seeing huge gas projects ramp up their production levels (to meet export contracts, and to keep the home fires of domestic markets ticking over), and with health demands marching ever-upwards. But the prospects for both also come with caveats, as mining’s fortunes remain chained to China’s, and health to Canberra’s. Like Manny Pacquiao, the reign at the top of the pops for finance has been long and gloried, but it’s looking a little long in the tooth as the cost of credit finally gets back off the canvas. That said, there’s a long tail of growth still left in finance, and its return to the growth pack may take a few years. Challenges loom for property services too, where a slowdown has already commenced. Similarly, the $A -fuelled rise of fast growth in recreation (thanks to more tourists) and education (thanks to more students) may soon start to moderate from here – the $A’s fall was a while ago, and its benefits are starting to fade. But at least the education sector has the lift in the birth rate over the last decade or so to provide better base demand via extra kidlet numbers. Construction and manufacturing are both bumping along the bottom, but for construction it may be a relatively brief spell in the doldrums, whereas manufacturing’s challenges look rather more structural. Question marks lie over the utilities, where balancing divergent aims (power that’s clean, reliable and cheap) is hard, but becomes even harder now that Hazelwood has closed and with the nation’s onion-eaters arguing the toss on Finkel. That suggests investors may stay sidelined, which is where they’ve already been for an awfully long time. Add in rising prices, and this sector – a pathway to growth for many other industries – is left reliant on population gains to generate much by way of growth. It’s just a jump to the south and east On the State and Territory front, the jump from a China boom to a housing price boom sent the nation’s money and momentum from its north and west towards its south and east. Yet although the ‘sunbelt’ – WA, Queensland and the Top End – is feeling pain as a result of that, much of the drama for those regions already lies in the rear view vision mirror. Their next phase will be one of recovery, albeit not quite yet. And don’t forget that today’s heroes – NSW and Victoria – have clay feet. A house price boom borrows growth from the future, and both NSW and Victoria will have to pay back some of that in the years ahead as today’s housing prices gradually reconnect with reality. Luck’s a fortune, and NSW has it in spades amid the shift to lower interest and exchange rates since 2012. But storm clouds are building, as the housing price boom has artificially supported retail and home building. There’ll be an eventual butcher’s bill to pay as those supports reverse. Victoria has benefited as key cyclical drivers – exchange and interest rates – moved in a ‘Victoria- friendly’ direction in recent years. And this State is experiencing its strongest population gains for many a decade. Yet, relative to other States, its population and housing cycles may be near their peaks. The key headwind to Queensland’s economy for some years now has been falling engineering construction, but that pain is increasingly history. While Cyclone Debbie and slowing housing construction are current negatives, Debbie’s impact will be temporary and gas exports are lifting. South Australia has benefited from favourable shifts in interest rates and exchange rates. In fact, and despite popular opinion, the State economy’s growth actually picked up of late. Even so, some big challenges remain, given both demographics and an unfavourable industry structure. The construction cliff is still weighing on Western Australia. This state saw a virtuous circle of reinforcing growth drivers during the boom, but it has been seeing a vicious bust for a while now. But there has been better news recently out of China, and even vicious cycles run out of steam. Tasmania has been one of the bigger beneficiaries of the lower Australian dollar and lower interest rates, and the state economy’s growth is currently looking pretty good. But structural negatives on the longer-term outlook remain entrenched, suggesting caveats on current conditions. The Northern Territory’s economy isn’t a one-hit wonder, but recent years saw a Gangnam-style blockbuster hit the charts. As construction on the Ichthys project increasingly winds down and its export phase ramps up, the Territory’s challenging conditions won’t disappear for a while yet. The good news for the ACT is that, after the cutbacks and public sector hiring freezes of recent years, the Feds are returning to more of what might be considered business as usual. On top of that, the impact of lower interest rates on the ACT’s economy remains a powerful positive. [post_title] => Gravity is starting to catch up with stupidity [post_excerpt] => There are a few worrying trends and signs on the horizon for Australian governments. [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => gravity-starts-catch-stupidity [to_ping] => [pinged] => [post_modified] => 2017-07-18 07:21:54 [post_modified_gmt] => 2017-07-17 21:21:54 [post_content_filtered] => [post_parent] => 0 [guid] => http://www.governmentnews.com.au/?p=27617 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw )  => WP_Post Object ( [ID] => 26032 [post_author] => 658 [post_date] => 2017-01-18 15:34:16 [post_date_gmt] => 2017-01-18 04:34:16 [post_content] => By Darragh O'Keeffe The Department of Health has turned to large commercial consultancy firms to provide research and analysis that will inform key aspects of the review into aged care reform and government policy. Deloitte Access Economics has been awarded a $366,700 tender to provide an “analysis of unmet demand and the potential implications of uncapping supply in aged care”. The issue of unmet demand – how many older people requiring aged care miss out on services due to the current government cap on the supply of places – is a key question facing the review into Living Longer Living Better, which must determine to what extent the reforms have improved access. But as Australian Ageing Agenda has reported a lack of clear data on the wait for aged care could provide challenging for the review. Researchers and providers have previously been cautioned against using the time lag between assessment for services and entry into aged care as crude measure of unmet demand. Read more here. This story first appeared in Australian Ageing Agenda. [post_title] => Outsourcing key to government’s aged care agenda [post_excerpt] => Deloitte wins tender. [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => private-firms-provide-key-work-informing-governments-aged-care-agenda [to_ping] => [pinged] => [post_modified] => 2017-01-18 16:18:23 [post_modified_gmt] => 2017-01-18 05:18:23 [post_content_filtered] => [post_parent] => 0 [guid] => http://www.governmentnews.com.au/?p=26032 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw )  => WP_Post Object ( [ID] => 20777 [post_author] => 671 [post_date] => 2015-07-27 19:08:29 [post_date_gmt] => 2015-07-27 09:08:29 [post_content] => It's a big number call likely to prompt Finance departments across the nation to reach for their calculators. Australian taxpayers could realise economic benefits of more than $20.5 billion over the next decade if Australia’s three tiers of government manage get their act together on digital transformation according to sponsored research by forecaster Deloitte Access Economics. The consultancy has reckoned that the estimated net benefit of the disruptive trend almost every minister is namedropping is worth “1.3 per cent of annual Gross Domestic Product or approximately $880 in net benefits per Australian citizen or $2,000 per household.” A major part of the mammoth saving stems from a huge cost reduction that can be realised by moving government transactions from face to face and snail mail channels to online execution. Launched by Communications Minister Malcolm Turnbull, the Digital government transformation report estimates online transactions for government now cost around 40 cents a pop versus a personal interaction that incurs a cost of almost $17. That makes personal service more than 40 times more costly than clicking. Phone transactions and interactions are estimated to cost $6.60 a piece, making them 16.5 times more expensive, while postal transactions chalked-up a cost of $12.90 a piece according to Deloitte – hardly a stamp of fiscal efficiency. “Of the estimated 811 million transactions at the federal and state levels each year, approximately 40 [per cent] are still completed using traditional channels. If this figure could be reduced to 20 [per cent] over a ten-year period, productivity, efficiency and other benefits to government worth around $17.9 billion (in real terms) would be realised along with savings in time, convenience and out-of-pocket costs to citizens worth a further $8.7 billion – and all at a cost of $6.1 billion in new ICT and transitional arrangements,” Deloitte said. The numbers may sound huge, but as anyone in banking will tell you, volume figures need to be viewed in proportion. For example BPAY has publicly estimated its payments volume for the financial year to June 2014 was 331 million. And in an eerie coincidence, BPAY’s base transaction charge (before banks add their margin) is also 40 cents. When you start looking at higher volume and lower value payment card transactions, the volumes are much, much bigger. The Australian Payments Clearing Association, which keeps official tabs on how money changes hands, puts the monthly number of debit card transactions (think eftpos) at 350.6 million for 2015 with credit cards transactions coming in at 179.2 million a month for the same period. Perhaps one of the most telling trends in the 74 page Deloitte Access Economics think piece, which was commissioned by software stalwart Adobe, is that the cost of conducting government transactions face could be tracking-up sharply over previous estimates from previous years. Part of the justification for the Howard government bringing in EasyClaim – which electronically puts Medicare refunds directly into people’s bank accounts from point of sale terminals at a doctor’s surgery – was the estimated $10 processing price tag for an over-the-counter cash refund. Using that $10 figure as a very rough benchmark, it seems that in less than 10 years the cost of a face-to-face transaction for a government agency could be up more than 50 per cent given it’s now estimated to be $16.90. One driver for that rise is likely to be quite logical. As officials at the Department of Human Services have previously observed in public presentations, it’s the straightforward and easy transactions that migrate to online channels first, thus leaving counter staff to deal with more complex, challenging and time consuming matters to resolve. Another challenge for government agencies that are now digitising their services is ensuring that they have a plan in place for if and when online channels misbehave or are knocked out of action. Both the Australian Taxation Office and the Department of Human Services have this year felt the heat of customer anger thanks to hiccups in processing online or phone-based transactions. The Deloitte Access Economics report also has some cold comfort for public servants already looking over their shoulder for the next round of jobs cuts. Under the heading of “Transitional and redundancy costs” the consultancy says that there is “potential to reduce staff time required on traditional activities by roughly half for 50,138 government staff over ten years.” “There may be some costs required to smoothly transition 2,507 individuals each year into new job roles in Australia,” the report says, noting a redundancy cost as one option. “Based on the current average annual salary for these various roles, it will cost the government roughly $16.9 thousand in redundancy costs per individual or an annual cost of $42.4 million for ten years. This is a net present value cost of $318.7 million for government,” the report says. It notes that as New South Wales has illustrated, retaining and retraining staff in new digital roles is also a firm option, but one that carries some training costs. [post_title] => Digital Transformation of government worth $20.5bn for Australia: Deloitte [post_excerpt] => Is the price of face-to-face service skyrocketing? [post_status] => publish [comment_status] => open [ping_status] => open [post_password] => [post_name] => digital-transformation-of-government-worth-20-5bn-for-australia-deloitte [to_ping] => [pinged] => [post_modified] => 2015-07-30 21:53:48 [post_modified_gmt] => 2015-07-30 11:53:48 [post_content_filtered] => [post_parent] => 0 [guid] => http://www.governmentnews.com.au/?p=20777 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw )  => WP_Post Object ( [ID] => 18366 [post_author] => 659 [post_date] => 2015-03-03 10:22:16 [post_date_gmt] => 2015-03-02 23:22:16 [post_content] => Poor procurement practises cost Australian government $2.5 billion - the equivalent of a second Sydney Airport - a report has found. The 2015 report Economic Benefits of Better Procurement Practices, commissioned by Consult Australia and written by Deloitte Access Economics, found that direct savings of 5.4 per cent with flow-on savings estimated at up to $87 million per year could be made by improving procurement. The report said projects could be delivered and savings could be found from better government project briefs and contracts, improved delivery models, e.g. design and construct, PPPs and alliance contract, and verifying background information. More than one-third of the companies surveyed (37 per cent) said that unclear project briefs translated into higher project costs in 12 per cent of cases. It meant that sthere was less competition as some firms were put off from bidding and some firms did not conform to the project brief. Just over one-third of companies said they had to do extra work to verify some of the information contained in project briefs and they said it would be useful to have more information, particularly geotechnical information, environmental impact statements and relevant public sector financial data. The report suggested changes to combat sloppy procurement including:
- Procurement teams with a mix of practical, legal and procurement skills
- Reallocating resources to focus on better specification of project objectives, including early engagement with industry, identifying end user needs and re-testing business case objectives
- Removing illogical contract clauses
- Develoing and applying limited liability guidelines to keep project costs lower
- Streamlining compliance processes to reduce bid costs
- Verifying information contained in briefs to avoid costly duplication by tenderers
- Evaluating and adapting procurement frameworks to encourage innovation, including being open to new delivery models, early market sounding options with industry and continuing to provide opportunities for unsolicited proposals
By Julian Bajkowski
The Gillard government has kicked off a major industry and publicity push to sell the productivity dividends of teleworking to business, the public sector and the electorate as it seeks to drive home the tangible benefits of the National Broadband Network.
Prime Minister Julia Gillard on Monday signed the Commonwealth up to the goal of having at least 12 per cent of its public service employees regularly “teleworking” by 2020, a relatively modest target that is could be achieved well ahead of time.
Regarded as an executive luxury until recently, the capacity for employees and contractors to remotely connect into their workplace systems has now become a key focus for employers, spurred on by the falling cost and increased power of newer computing systems.
One imperative to investment in teleworking technology is the lowered barrier to entry for employers. This means that they can harvest big productivity gains and cut costs like travel, accommodation and excess office capacity by connecting workers by digital rather than physical means.
In blunt economic terms, it means that the relative price of investment in employee teleworking capacity is now lower than it has ever been.
However as demand for services, like remote connectivity into data intensive workplace systems and video conferencing, increases the speed and capacity of older broadband services emerges as a key constraint – a problem that the government maintains justifies its investment in the fibre-optic powered National Broadband Network.
“The government’s investment in the National Broadband Network will give more employees and employers the confidence to engage in telework by delivering reliable, affordable high-speed broadband to all Australian homes and businesses,” the Prime Minister said.
The government is also citing research from Colmar Brunton and Deloitte Access Economics, which estimates the lift that teleworking can deliver to Australian gross domestic product (GDP) at $3.2 billion while creating up to 25,000 new jobs, 10,000 of which would be in regional Australia.
The same research also found that 74 per cent of people “with family or carer responsibilities who are not in the labour force would take up telework if it was available to them.”
Those findings tie neatly into employer concerns over the retention of long-term staff, particularly women who often leave the workforce early because of the difficulties in maintaining more conservative modes of employment that lean towards office-based, five-day -week jobs.
However employers and industry now appear keen as mustard to be seen to be endorsing Monday’s Telework Congress in Melbourne alongside the PM.
The Australian Industry Group chief executive Innes Willox, Medibank Private personnel chief Ilona Charles and IP Australia’s acting director of employee performance Chris Menadue all delivered presentations alongside Communications Minister Stephen Conroy Workplace Relations Minister Bill Shorten at the event.
Equally keen to promote the telework concept are technology vendors who are competing to snap up a lucrative new market where spending is shifted from office leases to connectivity services.
In a fortuitous coincidence of dates, networking and mobility specialist Citrix has reckoned that “by 2020 organisations are set to reduce office space by almost a fifth (17 percent).”
While it is understood that in Australia that figure is predicted to be closer to 15 per cent, Citrix estimates that “the workplace of the future will provide just seven desks for every ten office workers, with each person accessing the corporate IT network from an average of six different computing devices.”
Citrix says that ratio falls to as low as low a desks for just six out of ten workers in locations like Singapore where office space commands a high premium.
Technology cohort Cisco was not about to be outdone on the telework research front, with the company’s general manager of government and policy, Tim Fawcett, saying his research indicated that for every two hours saved from a commute, staff give one back to their employer.
The commuting scenario was driven home by Ms Gillard who said that many people now make “long journeys to get to their workplace” and offered a surprisingly conservative estimate of Sydney’s notorious commuting times that are caused by choked roads and overcrowded trains.
“To give you just a few quick statistics on that if you were travelling in Hobart or in Sydney: in Hobart you can easily lose a week of the year just in your commute; in Sydney you can lose 12 days of your year in the commute,” Ms Gillard said.
Government News’ own calculations (based on a kitchenette straw poll) found that a 45 minuteas each-way journey (which is an arguably typical travel time for many commuters in Sydney) adds up to 8 hours a week: the equivalent of a day’s work, or 48 days a year based on a 5-day-a-week job with four weeks annual leave.
Deloitte wins tender.
Is the price of face-to-face service skyrocketing?
Tips for better procurement.
By Julian Bajkowski The Gillard government has kicked off a major industry and publicity push to sell the productivity dividends of teleworking to business, the public sector and the electorate as it seeks to drive home the tangible benefits of the National Broadband Network. Prime Minister Julia Gillard on Monday signed the Commonwealth up to […]