South Australian Productivity Commission Bill

Second Reading

Adjourned debate on second reading.

(Continued from 24 July 2018.)

The Hon. F. PANGALLO (11:44): I rise to speak about the government's South Australian Productivity Commission Bill. My colleague Connie Bonaros and I are supportive of establishing this important statutory authority. I must say it has been a long time coming. The aims of such a review and advisory body are to help the government drive micro-economic and regulatory reforms by providing good independent policymaking advice that is evidence-based and collated by credible experts in the fields of economics, industry, commerce and the like.

If much of this information is adopted by the government of the day, there is added incentive to lift the economy, create business confidence and boost investment and employment in the city and our regions, as well as reduce regulation and, importantly, lower the cost of living. It could also help renew public trust in the decisions made by government.

It would be hoped that with a productivity commission in place there would not be a repeat of the poor policies and decisions made in areas like health and energy that we experienced with the previous government. Transforming Health, also cynically known as transferring health, is the standout disaster which greatly undermined the public's faith and confidence. Unseen bureaucrats and advisers—no doubt some lacking the expertise required—meddled and bungled their way through so-called reforms to our health system without the proper consultation with those who worked within it and without considering the public interests of South Australians.

The same with the rushed, unsustainable energy policies that led to worsening the statewide blackout in 2016 and giving us the most expensive electricity in the world. The Labor government had to press the panic button and throw almost $1 billion into infrastructure to try to stabilise the situation. As Professor Gary Banks, the first chair of the federal Productivity Commission, said,

Long experience within the OECD and more widely tells us that 'institutions'—organisations, processes and rules that shape decisions within the public and private sectors—are fundamental to economic success.

The federal Productivity Commission, which was formed in 1998, is the benchmark model we would like introduced in South Australia. It operates within the Treasury department and from the direction of the Treasurer. Importantly, it is independent and transparent and takes a broad view of the economy and the community. Its modus operandi enables it to cover any sector of the economy, industry, environmental and social issues. Among the broad scope of issues, it has tackled national water reform, competition in the financial system, regional economies and even complaints of anticompetitive behaviour in the hearing industry.

While the federal Productivity Commission does not have any executive powers and the government is not obligated to act on its reports, many of its recommendations are often accepted and incorporated in policies. Fortunately for South Australia, however, the federal government has not adopted its most recent report into fiscal equalisation of the GST. It also did not follow up on the recommendations made in other inquiries, though there was a piecemeal attempt at pokies reform under the Gillard Labor government in order to secure a majority government that was then repealed under the Abbott coalition government. Nevertheless, the views and findings of the federal Productivity Commission do command a high degree of respect.

In the South Australian legislation, the object of the state-based commission is like the national body and includes investigating opportunities to improve economic growth and productivity in our economy, achieve a better standard of living, improve efficiencies and services delivered by government and explore ways to stimulate investment, regional development and jobs.

It also takes into consideration the interests of the entire community by inviting public submissions in open inquiries. The bill in its current form dictates that the commission must conduct inquiries directed to it by the minister. It is to report and advise the minister on matters referred to the minister, conduct policy and research in consultation with the minister, but it remains independent and is not subject to direction. It must not be seen to be just another voice of government, spruiking its policies and agenda, but one that retains authority and veracity, otherwise its credibility will be immeasurably damaged.

The composition of the commission is crucial to its standing and independence. Professor Gary Banks AO, the inaugural and well-respected former chairman of the Productivity Commission, said that statutory appointments of chairmen and commissioners over the years have worked best where those concerned have been people of real world experience, but without representational interests or being political.

The bill before us has a commission chair and four other commissioners to be appointed by the Governor or, to put it bluntly, on the instruction of the government for a period of up to five years. They will require qualifications in specific fields of law, economics, industry, commerce or public administration. Support secretariat staff will be drawn from the Public Service and through external recruiting.

It is understood that the commission's budget will be around $2.5 million per annum, including salaries, and we have been told that it could undertake up to four inquiries a year. The opposition has already indicated it will challenge the method of appointments in a raft of amendments, and it is also keen for either houses of parliament to have a say on the inquiries to be undertaken.

SA-Best is open to these amendments; however, some may have to be tweaked. So, again, it is crucial that the make-up of the commission is not seen as just another job for those politically aligned. It should be apolitical and nonpartisan. We do not want to see a repeat of the situation we have witnessed in Canberra, where recent Treasury appointments and the position of Productivity Commission chair have gone to current and former political staffers of the current Liberal Coalition government.

Treasurer Scott Morrison raised eyebrows when he replaced Treasury secretary, John Fraser, with his own chief of staff, Philip Gaetjens, while finance minister Mathias Cormann's former chief of staff, Simon Atkinson, is taking up the deputy's job. Mr Morrison also appointed Michael Brennan, who once worked for Senator Nick Minchin, to the plum job at the Productivity Commission. While they may be eminently qualified for the positions, their choice does not pass the pub test for being independent and at arm's length from their previous masters. It only serves to give the Labor opposition plenty of ammunition to fire. Again, I refer to some well-heeded advice from Professor Gary Banks:

Choosing the wrong person to head an inquiry—typically a confidant of a minister, or someone who is known for strong opinions on a topic—can be fatal to the inquiry's public credibility and thus to its value as a vehicle for reform. The minimum requirement for such appointments could be described as 'competence without conflicts'. Desirable additional qualities are integrity, openness of mind and independence of character.

My colleague Connie Bonaros and I look forward to the eventual passage of this bill and the opportunities it will present this great state.

The Hon. R.I. LUCAS (Treasurer) (11:53): In closing the second reading debate, I thank the Hon. Mr Pangallo and others who have spoken at the second reading. As we outlined in the second reading explanation, the government is committed to the passage of the legislation. The government indicated its desire, given we only have four sitting days left, to complete the passage of the productivity commission debate today, but I have just been made aware that the Hon. Mr Pangallo has filed some amendments this morning.

The government is not in a position (and I understand neither is the Labor opposition) to indicate that we are aware of the background to the amendments and what would be the government's position in relation to the proposed amendments. So it does create a bit of a dilemma, and perhaps in our planning discussions that we have on Monday afternoons we might have a bit of discussion about, I guess, what is a process that we might all be able to agree on in relation to these process issues, but I will leave that debate for another time.

It will mean that what I propose—having had a quick discussion with the Leader of the Opposition—is the passage of the bill at the second reading and adjournment, at least at this stage, on motion at clause 1 of the committee stage. But, in all likelihood, I cannot see that there will be any change and we will have to adjourn it off to next Tuesday so that both the government and the opposition and, maybe, I guess, other crossbench parties too, have an opportunity—

The Hon. T.A. Franks: It comes in at clause 5.

The Hon. R.I. LUCAS: Yes, I know, but there are a range of issues in terms of having to resolve government and other party positions in relation to this issue. If members want to have a debate at clause 1 on general issues, I am quite open to having that, so we will go into clause 1 and if there are general questions at clause 1 in relation to various issues, I am happy to have that discussion and debate, but if all we are going to do next Tuesday is then go back to a clause 1 discussion again there are a range of other things, such as ICAC and other bills, that we need to process today. I am open to that at clause 1, but if I could indicate that general position.

I indicate, however, that a series of amendments have been put on file and, in general terms, certainly the Premier, who has carriage of this, has a very strong view, and I share on behalf the government that strong view with members of the chamber that there are some amendments which, from the government's viewpoint, are incompatible with the smooth operation of a productivity commission in South Australia; some amendments which are completely inconsistent with any other productivity commission arrangement in any other jurisdiction; and some amendments which, frankly, from the government's viewpoint, would make the productivity commission unworkable.

The notion, as has been flagged, that the Legislative Council controlled by non-government parties could on a series of motions refer a continuing stream of inquiries and require the productivity commission to undertake the work of the Legislative Council majority numbers is, as I said, unprecedented in relation to the operation of productivity commissions and would, frankly, mean that any series of motions that non-government parties in the Legislative Council decided they wanted to have inquired into would, in essence, become the required work of the productivity commission.

Various members have already flagged that they would propose areas such as GlobeLink and, as I understand it, some have mentioned shop trading hours. There was another one mentioned but, anyway, a range of issues have already been flagged as the intention of non-government members in the Legislative Council to, in essence, require the work of the productivity commission to conduct inquiries. As I said, there are no other productivity commissions which are subject to the motion of a non-government controlled upper house of parliament in terms of the workload they would undertake.

Parliament and the Legislative Council has untrammelled power in relation to establishing its own inquiries and, in fact, does do so in terms of select committees or reference of issues to standing committees of the parliament. The Legislative Council has considerable power in relation to establishing its own inquiries and controlling those inquiries because, again, in the Legislative Council non-government members, as has been the custom for 30-odd years, have controlled the numbers on upper house committees, consistent with the position that exists on the floor of the chamber and that is something I do not argue against.

The Legislative Council does have its own vehicle through which it can conduct inquiries. The Productivity Commission is a vehicle through which governments have been able to say, 'Hey, these are important issues and we believe a thorough, comprehensive, independent set of eyes being cast across a particular issue or set of issues would be useful from the community's viewpoint.'

As I think the Hon. Mr Pangallo indicated, at the federal level, governments, both Liberal and Labor, have disagreed with recommendations of the Productivity Commission. They are not binding on government. They are independent, academic, economic insights into particular issues, and both federal Labor and Liberal governments have disagreed. Certainly from the state Liberal government's viewpoint, we disagreed with the most recent Productivity Commission recommendations in relation to horizontal fiscal equalisation. They are not binding and neither would the recommendations of the state productivity commission be binding on either the government or on the parliament. Nevertheless, it is a fresh set of eyes on a particular issue or issues, and it is advice to not only the government but generally to the community and the parliament as well.

The second issue, which is inimical to the sensible operation of the productivity commission, in the government's view, is the notion that the non-government members of the Legislative Council would control the appointment process of the productivity commission. The amendments that are being flagged make it clear that it is not quite the United States Senate confirmation process, although I suppose there would be no reason why the Statutory Authorities Review Committee could not require the attendance of a nomination to appear before the committee, as occurs in the Senate confirmation hearings. The notion that in essence the non-government members would control who could or could not be appointed as productivity commissioners is, as I said, unacceptable to the government.

The Hon. Mr Pangallo has made some criticisms about appointment processes. I think he generously only referred to examples at the federal level, but I am sure he would be aware of many examples of appointment processes at this state level over the last 16 years. What I can say is that the new government, albeit in just its first three or four months, I think through its appointments thus far has demonstrated a much greater willingness than the last government in relation to ultimately trying to make those appointments of chief executives or board appointments on the basis of merit.

Ultimately, I am not naive enough to suggest that there will never be someone appointed who at some stage or another has either been seen to be a supporter, or indeed even a former member, of the same political party as the government, but from my viewpoint it will never be to the extent of the abuses we have seen over the last 16 years. The reappointment processes we have seen recently, where a cavalcade of former Labor members of parliament have not been reappointed or have generously decided to offer their resignations to the incoming government, is a fair indication of the processes that were adopted by the former government.

I think the bona fides of the Premier in particular in relation to the appointment process bears close scrutiny. Certainly, in terms of the sort of people I know he has been contemplating for appointment to the productivity commission and Infrastructure SA, if any of them were to be ultimately appointed, I would be surprised if the Hon. Mr Pangallo, or indeed any other member, would be able to sustain a valid argument against them as being former party staffers or of that particular ilk. The range of persons who have been contemplated have been, in my view, the people who would bring value to the table, whether it be a productivity commissioner or to Infrastructure SA. However, I accept that that can ultimately only be judged when a government is in a position to make an appointment.

As I said, the former Labor government never contemplated, in any circumstances, these sorts of appointments being subject to the final veto right of the opposition members of parliament. For appointing people to economic development boards and a variety of other statutory authority positions, there was never any requirement that the non-government members of the upper house have a veto right over who could be appointed, whether it be Funds SA or any other number of statutory authority-type appointments. For parliament to go down this particular path would be unprecedented, in South Australia anyway, from the government's viewpoint.

There is a range of other amendments that have been canvassed. In relation to the Hon. Mr Darley's amendments, I flag that there are some that I suspect the government will be prepared to have further discussions about with him, although I understand there have been discussions already, in relation to reporting, with the Hon. Mr Darley. I think the Hon. Mr Pangallo has an amendment in relation to reporting and disclosure as well. I think those sorts of areas are ones where there could, hopefully, be productive discussion over the coming days.

The other one I want to flag is that the Hon. Mr Darley has a particular amendment in relation to issues relating to competitive neutrality. At this stage—as a personal response because the government has not yet had a chance to debate it as a government—whilst I understand the issue the honourable member has raised, I think there is, potentially, an alternative mechanism that already exists in the Government Business Enterprises (Competition) Act 1996, which is a piece of legislation that already exists and allows issues of competitive neutrality to be resolved. There might be a way of partially reconciling with what the Hon. Mr Darley is after in relation to issues of competitive neutrality, together with this act and the former act.

We do not really see the Productivity Commission as being a complaints mechanism for competitive neutrality issues. That certainly has not been the traditional role of the Productivity Commission, but there is an existing piece of legislation that, potentially, might mean that a productivity commissioner could, under the terms of the existing act, be appointed as a commissioner to look at competitive neutrality issues under the terms of the Government Business Enterprises (Competition) Act.

These are really just initial thoughts. Given that it looks like we are going to have to delay our further committee stage deliberations on the bill, we will have a day or two to have further discussions with the honourable member, and indeed other members, in relation to whether there might be a compromise position that could be arrived at over the coming days. With that, as I have said, I thank members for their contribution. I am happy to go into clause 1. If there were general questions at clause 1, I am happy to respond. However, I propose that we report progress and continue the debate on Tuesday.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

Progress reported; committee to sit again.