The sneakiest tax on Australians and Australian businesses is rushed reform. It is one that stifles our productive capacity and curtails the ability of business to operate with certainty for any reasonable period of time. In the tertiary education sector, this is now a substantial cost for all sector participants, including students.
We all know Australia has a productivity problem. It is routinely made worse in ways that would cost almost nothing to fix.
Labour productivity in Australia has grown by less than 0.3% a year since 2015, against a 60-year average of 1.6%. As a result, real wages have stalled and the budget feels permanently stretched. Had productivity kept to its long-run average over the past decade, income per person would have been about $4,600 higher than it is today.
Enhancing our national skills profile and utilisation is the surest lever we have to lift productivity. The services sector now makes up 80% of output, so our people are the economy’s main capital, with nine in ten new jobs expected to need a post-school qualification. Yet the share of Australians getting work-related training has fallen from 36% to 23%. We are asking a less-trained workforce to carry a heavier load.
The key issue here is that reform of the tertiary education sector must be a first order economic policy issue. We have seen recent examples of policy made on the run and then delivered to the business community as something to accept rather than something to engage with and work on in a collaborative way.
We can’t afford those mistakes.
In international education, Australia’s largest services export and the most significant sector for some jurisdictions, we’ve had policies floated with little to no warning, rejected by the sector – and ultimately the Parliament – and now visa arrangements have the capacity to decimate parts of the sector and consign long-term high-quality businesses to history. Broadly, we see that genuine providers do not oppose managing growth in a sensible way; they just do not get a say in how and simply cannot tell what the rules are.
The opposite can be just as bad. More than a decade ago, rushed arrangements to implement an income contingent loan system into the skills sector were pushed without the safeguards that proper scrutiny would have demanded, and which were actively sought by the sector. That cost taxpayers more than $7.5 billion.
The solution is to consult early and widely with stakeholders; with peak bodies, with employers, unions, students, and regulatory agencies.
Options should be tested and costs and benefits weighed, as the Government’s own rules already require. The OECD has found that rules and regulations which are shaped by those they affect tend to be better designed and more likely to be followed, leading to more positive outcomes.
Policy uncertainty is the enemy of business and economists have shown that uncertainty tends to discourage firms from investing in infrastructure upgrades, and crucially, in new staff.
Business regulation compliance costs may already be as high as 4% of GDP, and every poorly designed rule, regulation or new government instrument adds to that bill. And it’s a bill that is ultimately borne by taxpayers.
Higher wages, a stronger economy, a modern tertiary education sector delivering a workforce ready for our future all need regulatory systems that are reformed with their partners, not around them. Consultation is not red tape. It is the cheapest and most effective productivity reform on offer.
Felix Pirie is the Chief Executive Officer of ITECA.
The Koala thanks Felix and ITECA for permission to publish this piece, which first appeared in the ITECA Newsletter (19/10/26).
