NBN lessons in Abbott's PPL heresy

Despite the PPL scheme's critical flaws, Tony Abbott's approach on the issue has attempted a joined-up thinking that should be applauded, and remembered in NBN debates.

It's time to say something nice about Prime Minister Abbott's shelved $5.5 billion a year paid parental leave scheme.

While nearly all commentators have dismissed the scheme as being too expensive and offering limited benefits when compared to spending in areas such as childcare, there was a refreshing style of reasoning behind the scheme.

No, really. Hear me out.

Abbott did not put forward a business case or cost-benefit analysis for the plan, but made it his 'signature policy' because he believed, rightly or wrongly, that putting parental leave on the same footing as other kinds of leave would change the workforce in ways that those kinds of studies fail to capture.

Essentially, Abbott's gamble was that he could convince cabinet and the voting public to accept his signature policy because of very deeply held convictions about the way the world works.

Female workforce participation, for instance, must rise if we are to stand a chance of maintaining our standard of living as our demographic structure becomes top-heavy with retirees.

Drawing on his political and life experiences rather than any consultant’s report, Abbott stuck his neck out and said that if women in particular maintain a strong link with their employer over their maternity leave period, they'd be more likely to return to work.

The skills and educational attainments of women, that just two generations ago the women's movement was fighting to make possible, were going to waste -- in Abbott's view at least.

He stuck his neck out, and is now wearing the political embarrassment of his signature policy hitting a senate roadblock, and therefore having to be filed away somewhere it can do no further harm.

This commentator does not support the PPL scheme in its present form, though given it is largely directed at women, it would be nice to hear less from commentators of my gender, and more from theirs.

What I am praising in Abbott's PPL plan is the joined-up thinking Abbott has at least attempted with this policy.

In public life such thinking is anathema, in most cases because it offends not only unimaginative bureaucrats, but is also too demanding for commentators who prefer to push partisan barrows rather than imagine a better future themselves.

The case in point this week is the reasoning behind the recommendations of Bill Scales' report on the history of the development of the policy we know as the NBN.

Scales has, unwittingly, drawn a clear line between visionary thinking and safe thinking, and urges Australian governments to come down on the side of safety.

His fourth recommendation states: "Large public sector infrastructure projects with costs above $1 billion should be subject to a cost-benefit analysis study and the results made public prior to the commencement of the project."

Well, yes, that's a good idea, but the implication of the recommendation is dangerous, and will stand in the way of building a better country.

That is not the same as saying that governments should wantonly throw around taxpayer funds -- the charge being levelled at Kevin Rudd and Stephen Conroy over the NBN -- but that cost benefit analysis alone cannot be the basis for proceeding or scrapping the NBN, paid-parental leave or, in fact, some of the best public infrastructure projects in the country.

Heresy, I hear you say.

Not really. Economists know a huge amount about how to inject rigour into cost-benefit studies. Each assumption can be scrutinised, and terms of reference broadened or tightened to give degrees of confidence that the analysis is correct.

However the kind of reasoning Abbott was using on the PPL plan broadens the 'terms of reference' so far that no Productivity Commission report can say definitively what the result will be.

Abbott was intending to take a political punt because he knows we face a grave problem with workforce participation and productivity. Reading a report that just says 'no' to his solution is not enough for a politician ­-- hence his huge political gamble.

But he is not the only public figure to take such a gamble. Peter Newman, one of the country's leading infrastructure minds and one of the ten members of the Infrastructure Australia board, has spent his entire career gambling public money on projects that consultant reports said wouldn't fly.

They not only flew, but in just about every case have hugely exceeded projections for the benefits flowing back to taxpayers.

As Newman told me a couple of years ago: "In 1979 when we lobbied to reopen the Perth-Fremantle line, every planner in Perth was against it -- so we had to do it politically instead of getting them to agree, and it was a huge success. Then they said electrification was a waste of time. Then they asked 'how could you consider building the northern and southern lines?' because they had no conception of what it would do to the urban development along the line."

Newman's job, since the 1970s, was to visit other cities around the world and ask: why do they function better?

That is a very different question to: does the reopening of the Perth-Fremantle line have a positive net-present-value -- the question a cost-benefit analysis tries to answer.

The latest example in Perth is the $1.6bn Perth-Mandurah train line, which was completed in 2007. The history of that project, like all the other public transport projects Newman advised on, was that it was seen as too expensive.

The Coalition state government of Richard Court listened to the consultants, and decided to route the Manduarh train link via the Armadale line -- a line considerably further inland, running along the base of Perth's Darling Scarp hills.

However a political solution came with the election of the Labor government of Geoff Gallop in 2001. It decided, based on the bigger picture vision of people such as Newman, that building a direct line would radically change the behaviour of Mandurah commuters.

Before the line existed, 14,000 people a day commuted by bus to the Perth CBD. Within a year or so of the line opening, well in excess of 50,000 people were making the same journey by train -- and not on a longer, inconvenient trip via the Armadale line.

Even the optimistic state government was so surprised by the patronage, that it had to rapidly find tens of millions of dollars to build new carparks along the line for park-and-ride commuters.

Newman knew this would happen. Anyone who had studied the big picture of what such transport projects had achieved abroad, knew this. And yet the consultants had branded it too expensive.

We should, by all means, demand cost-benefit-analysis statements for projects over $1bn.

However, when politicians make cogent arguments as to why a bigger picture view is needed, knee-jerk criticism is not helpful.

Ten years ago, John Howard first made access to high-speed internet a priority, announcing a plan to eliminate urban blackspots during the 2004 election campaign. He said then: "We will make sure Australian businesses and families have access to the modern communication tools they need in the 21st century to live and work smarter."

A decade on, Australia ranks 55th in the world for download speeds according to the Speedtest index compiled by online research and software firm Ookla. Our download speeds are worse than our poorer neighbours Vietnam and Thailand. They are around half the speeds available in the UK and US.

In that context, the voting public should ask why successive Coalition and Labor governments have failed to create a truly competitive market or, where one is unlikely to be possible, successfully intervened on behalf of all Australians.

Saying "the consultants said no" just won't cut it.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles