No time for soft heads.(Hard Heads, Soft Hearts: A New Reform Agenda for Australia)(Book Review)

Hard Heads, Soft Hearts: A New Reform Agenda for Australia, edited by Peter Dawkins and Paul Kelly; Allen & Unwin, 2003, $24.95.

IN APRIL 2002 a conference of 400 leading Australians considered the most serious economic problems facing Australia. This summary reports their principal proposals for reform. Many of the recommendations would require increased government expenditure, while the taxation reforms proposed would reduce government revenue.

Most of the problems are primarily the products of, or are exacerbated by, perverse economic stimuli. Consequently, they should be mitigated by economic incentives that "promote equity and growth" rather than by regulation, for "the notion that Australia can realise an egalitarian ethos with policies that retard growth is a hoax".

Unemployment, "and especially the incidence of jobless households, remains Australia's major economic and social problem". Our "poor performance on employment and unemployment [is] partly due to an undue emphasis on having high minimum wages". The withdrawal of unemployment and similar benefits when unemployed persons become employed and become subject to income tax results in high marginal tax rates, discouraging them from seeking work. Payroll taxes (suggested in the agenda as a source of revenue) and the superannuation guarantee (not mentioned), and ludicrously interpreted dismissal protection raise the cost of labour, reducing the demand for it. Tax reform will not eliminate unemployment, but should markedly reduce it.

"Higher education has been an area of policy disappointment." The decline in university standards can only be only partially explained by the decline in funding. The universities suffer from bureaucratic intervention. They should be free to determine the courses they wish to offer and the level of fees they charge. HECS is an investment, financed by the government and reimbursed by those who benefit from higher incomes made possible by their education. It should cover the higher fees and postgraduate education. "There are strong arguments to further increase the performance of Australian [primary and secondary] students." "Important decisions, including the selection of staff, should be made locally."

"The decline in fertility rates will, if continued, result in a declining population" and in the ratio of earners to non-earners, but "a growing and talented workforce will help to maintain Australia's productivity, investment and living standards". "The trend towards earlier retirement has become particularly important in the last three or ...