Lack of policy leadership in Australia

Leadership is still about "that vision thing." But it's also about being able to prosecute it within your sphere of influence for challenges you can respond to.

For those of us enthusiastic about public policy, the Australian debate is rather depressing. Sound bites rule. Substance doesn't seem to matter. Scant regard is paid to outcomes. What's most concerning is that the lack of policy leadership is intertwined with the enormity of the challenges we face.

Broadly speaking, the private sector is fine. Australia's relative ease in sailing through the global financial crisis' choppy waters demonstrates the importance of a flexible liberal economy. If Australia had industries propped up by the false foundations government regulation and protectionism provides we would have struggled to adapt.

We haven't struggled. Not that everything is perfect. But considering events overseas, every morning Australians should wake up and be thankful for their good fortune.

But our political leaders have lost the plot on influential leadership resulting from the international alignment of Australia as a country worth emulating because of survival through the crisis.

The Rudd and Gillard government's efforts to 'show leadership' in tackling climate change by introducing a carbon tax, succeeded by an emissions trading scheme, is foolhardy. No one disputes the government's commitment to cut emissions. But it's an absurd proposition to suggest we are going to take on significant economic costs for a global environmental challenge and then expect the rest of the world to follow.

Based on the government's logic, the rest of the world would have followed our lead in unilaterally liberalising their trade barriers in the 1980s and 90s. After all it would have been in their economic interest. But they didn't. Instead many have maintained trade barriers ranging from heavy industry subsidies, tariff protection to local content restrictions that make their economy less flexible, dynamic and capable of responding to economic downturns. In short, they're worse off.

So if countries won't follow us in helping themselves, it remains a fascinating proposition that they'll follow us in imposing economic pain. The European Union's longstanding emissions trading scheme also shows it unlikely.

You cannot lead by sound bites when you're extending beyond your zone of influence.

Australia can reasonably have an impact by imposing a domestic carbon price. But greenhouse gas emissions are a global challenge, the externality is also global, and can therefore only be addressed with a global carbon price.

Australia showing leadership may make us feel warm and fuzzy, but it doesn't address the challenge if there is no global price to feed into.

Considering a World Bank Carbon Finance Unit survey of international carbon trader found around only 20 per cent believe there'll be a new international agreement that could provide the pathway to imposing one by 2020, shows we're over reaching.

What's sad is that while we are trying to lead from the front, while other countries are walking in the opposite direction, we need leadership to address challenges we can directly influence. The real leadership challenges are at home in the public sector reform to convert many of our public sector institutions onto a more sustainable footing.

As the government's intergenerational report outlines by 2050 Australia's health bill will increase by three and a half times compromising the sustainability of taxpayer-funded universal healthcare. Worse the number of working people to pay the taxes to support it will also decline.

In many ways it is the same challenge that faced the Hawke/Keating government over the sustainability of taxpayer-funded pensions. Millions of Australians had paid taxes their entire lives with the reasonable expectation that other taxpayers would foot the bill when they decided to give up work. Nice idea. But it has struggled to work in practice.

The ongoing crisis of the American social security system provides a clear example of how the interests of working Australians could have been compromised if government didn't show leadership.

But the Hawke/Keating government rose to the challenge and our compulsory superannuation scheme now provides a more sustainable scheme to provide certainty to us all when we retire. It was a known challenge. It was within the government's sphere of influence. It required a mature discussion with the public. Leadership was shown.

Now it is needed in health. As the government's own reports show, Medicare is unsustainable in its current form. And the revenues provided from the present mining boom provide the opportunity to structurally readjust Medicare to make it sustainable.

The establishment of superannuation-inspired Medicare health accounts where individuals contribute to saving for their health costs could be one solution.Individual Medicare health accounts, coupled with tax cuts reflecting the reduced expenditure by government for healthcare, would enable working people to save for their healthcare throughout their lives. Considering around a third of all health costs are incurred in a patient's final years everyone would have plenty of time to make sure they are sufficiently protected.

Of course any scheme would require equalising government contributions to ensure those who were not working, did not earn enough, or have overly burdensome health costs don't miss out. But it would mean we were directly subsidising those who need it most, unlike the current private health insurance rebate, which is not.

What such a scheme would also do is drive competition in the health sector, which is currently an option for those in the private system, and not for those in the public system. Using the power of competition would drive up standards in the interests of patients and would start to address the shocking information asymmetry between those who provide, and those who receive healthcare.

But most importantly it would put Medicare's universal healthcare principle on a sustainable footing.

But structurally adjusting from the unsustainable Medicare of today to a sustainable system requires mature debate led by responsible leaders.

The same leadership challenge exists if we are to reform education and move towards a system that provides choice for the rich and the poor.

Currently well off Australians buy their way out of the public health system, into independent schools, increasing their choice in values-based education as well standards. Meanwhile, less well off Australians are trapped in a one-size-fits-all public education system where competitive pressure doesn't drive up standards and kids are locked into their local school.

Under the current system wealthier parents can even game the system by purchasing a house close to a better school than their local one, to improve the standard of education for their kids. Poorer families cannot. Introducing a vouchers system where education funding is tied to a student, enabling them to move between schools that increase choice for all parents and children while driving competitive pressure, requires significant structural reform.

Like in health, the leadership effort to do so would be well worth it. But in a hotly contested political environment, doing so would require our politicians to lead us beyond our comfort zone. That means the onus is back on us.

As the citizens whom they serve, we have a responsibility to engage in constructive discussion about future policy challenges and not to be played like a fiddle. In many ways the leadership dilemma rests on our shoulders.