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Reimagining the Australian Settlement

Speech to the Royal Society of the Arts, 5 November 2008

Good evening, ladies and gentlemen. I’d like to thank Paul and the RSA for inviting me tonight to share some thoughts with you under the banner of “Australia… Past, Present, Future.”

Paul has specifically asked me to offer some insights on Australia’s future which, as I reflected on it, is rather tricky - something of a double-edged sword.

On the one hand, it is a wonderful intellectual challenge, particularly for someone who runs a think tank, to draw new ideas from our own work, and the social trends presented by Mark, into a coherent picture of what our future will look like.

On the other hand, as you all know, predicting the future is something of a mug’s game. Twelve months ago, who would have guessed that the US and the UK would be nationalizing some of their biggest companies? All of us, including me, who would have laughed this idea down would look rather silly right now.

So the best I can do for you is to weave together a set of emerging themes into ONE possible vision of what Australia’s future could look like, based on the view from here tonight. This vision is called the Investing Society. It’s important to say that this forecast is inevitably subjective. The Investing Society is an unashamedly positive vision that I think we can achieve if we make the right policy decisions and which I think we should pursue over time. It is based on a set of progressive values that have underpinned Australia’s development to date, values which I’ll explore in more detail a bit later on.

The way I’d like to approach the discussion tonight is to first talk briefly about the global scene before moving on to explore Australia’s prospects in more detail. I want to examine the Australian situation using a well-known historical frame: the Australian Settlement. I will borrow from Paul Kelly’s seminal book The End of Certainty to consider how the Australian Settlement is faring, and to ask “what next?” for the ideas and structures which have underpinned the first century of the Australian federation.

I will discuss seven areas of Australian life – the economy, employment, tax, climate change, education, policymaking, and international engagement – and consider what each of these will look like in an Investing Society. For the most part, I will keep my argument broad, but I will occasionally dip into a specific example from Per Capita’s work or elsewhere to bring some colour to the discussion. I’ll conclude with some brief comments on the role of institutions in bringing about a new settlement.

Let me start with the global scene. There can be no doubt that we are living through a year of monumental change. The complex financial system that lubricates the global economy has ground to a sudden, crunching halt. The world seems likely to enter at the very least a mild recession, and numerous commentators have even warned in the last month of a prolonged depression.

The international financial institutions have so far failed to provide a meaningful response, and it has been left to national governments and central banks to cobble together a set of increasingly desperate, stop-gap solutions – a sort of international financial triage in a very crowded emergency ward. So far these solutions have worked, but no-one is positive that they will continue to do so.

The solutions that have been embraced are remarkable for their provenance. Nationalisation was a favoured tool of early 20th century socialists and here we are seeing it harnessed by the flag-bearers of free-market capitalism, albeit in the context of a last resort. After two decades in which the primacy of free market solutions has been trumpeted loud and often, the tune has now changed.

This story sits within a wider political context. When Francis Fukuyama declared the end of history in his famous 1989 essay, he proclaimed the victory of economic and political liberalism over any other organizing system as the inevitable political structure for humankind. Ideology was dead, cheered the pundits. Many conservative commentators extended this argument beyond Fukuyama’s original claim to herald the beginning of a unipolar world of liberal, capitalist democracy under the economic, military and moral leadership of the United States.

For perhaps 10 years, this argument seemed credible. The global economy boomed. Countries from East Germany to East Timor embraced democracy. The US finished the 20th century with a decade of sustained economic growth, rapid productivity gains, a fiscal surplus, successful interventions in Bosnia and Kosovo (although not Rwanda), and highly ranked in global attitude surveys.

As we know now, the naughties have been markedly different. Economic expansion has continued for the first half of the decade, although its principal driver, China, demonstrates no real democracy to speak of. Asia is on the rise, economically and militarily. Western liberalism has come under physical and ideological attack from Islamist fundamentalism. Russia is increasingly bellicose. The United States has lost its way as a global beacon – economically, militarily and some would argue, morally. And then the world’s financial system froze.

A consensus has emerged amongst scientists and policymakers that climate change is real, and that existing market structures are incapable of responding to it. Multilateral institutions – the IMF, the World Bank, the UN – are failing because they were designed in a tripartite consensus by a handful of actors immediately after WWII. Now, we need hundreds of actors to agree to any multilateral agreement. Game theory tells us that this might not be possible, and we may have to settle for partial, sub-optimal agreements.

So it seems that the end of history might have been shortlived, or more likely, premature. History has restarted, and is back with a bang. It looks like we’re right in the middle of one of history’s periodic transformations. And when historians look back, they may nominate yesterday as the restart of history.

About six hours ago, the polls closed in Hawaii to bring the US election to a close. Barack Obama has won the election, on a promise to be a new kind of politician, working outside the closed Washington establishment and the traditional partisan divide. While it’s hard to tell what this will mean in practice, it’s clear that we are in a period of great upheaval politically and intellectually and Obama will need to improve on the responses we’ve seen so far which have been necessarily short-term. One thing seems likely though… As the commentator Bruce Wolpe observed on the ABC’s Insiders program last Sunday, the 28 year experiment with Reaganism – with its rhetoric of small government, tax cuts, and deregulation – looks to be over.

The global financial crisis does not mean we need to discard markets or the capitalist system, both of which have served us well. And it’s not as if markets can be turfed out anyway. As Mikhail Gorbachev noted, “the market came with the dawn of civilization… it is not an invention of capitalism.” Instead of turning our backs on markets, we need to think creatively about new ways of harnessing market mechanisms in pursuit of society’s ends, and about the role governments should play in this.

So what does all of this mean for Australia? Let’s move from the global picture to the national picture to see what some of these new solutions might look like, and what they tell us about Australia’s future. History is on the move here too, and is asking demanding questions of us.

For a creative way of thinking about Australia’s future, I want to borrow from Paul Kelly’s book The End of Certainty, and in particular, its notion of the Australian Settlement. Kelly mapped the first 80 years of our federation as the original Australian Settlement. He writes that, “the generation after Federation in 1901 turned an emerging national consensus into new laws and institutions. This was the Australian Settlement.” Kelly argues that the Australian Settlement remained in place until the 1980’s, held together by a bipartisan consensus and underpinned by five core principles: White Australia, Industry Protection, Wage Arbitration, State Paternalism and Imperial Benevolence.

What were the values which inspired this settlement? I would argue there were three: prosperity, fairness and community. These are the progressive values that have defined Australia. Industry protection delivered domestic prosperity, and increased the size of the pie. Wage arbitration and state paternalism guaranteed fairness, ensuring an equitable distribution of the pie.
And imperial benevolence and even White Australia gave most Australians, though not indigenous people, a strong shared sense of community.

The Settlement was ultimately dismantled by the Hawke-Keating governments, using the Accord, financial deregulation, trade liberalization, and engagement with Asia. Again, proponents for these actions were found on both sides of politics and were opposed by traditionalists within each of the major parties.

When Kelly completed the book in 1992, he outlined three potential successors to the Australian Settlement: the “sentimental traditionalists” who wanted to adapt old ideas for a modern age (personified by Malcolm Fraser); the free market purists who argued for a rapid expansion of markets (represented by John Hewson); and those who argued for a “new political synthesis between market oriented reforms and a revived role for government intervention (led by Paul Keating)”.

Kelly wasn’t to know that Keating would beat Hewson in the 1993 election, the victory for the true believers, and if he had, he might have guessed that those calling for a new political synthesis between market and government had won. But this isn’t what happened.

Instead, I think the free market purists won the battle for succession to the Australian settlement post-1992. Keating’s election merely delayed this succession.

After John Howard won office in 1996, the free marketeers introduced a GST, continued to reduce trade barriers and increase migration intakes, pursued labour market deregulation, and encouraged a consumer individualism made possible by easy access to credit. The only exception to this free market purity was the use of government to funnel welfare back to the middle-classes (which I would describe as ‘cash-back government’).

Arguably, this second settlement served Australia well. We have enjoyed 16 years of strong economic growth and we are experiencing generational lows in unemployment. Our financial stability is the envy of the developed world. We have continued to open our economy by reducing trade barriers, and managed a balanced engagement with both America and China.

The second settlement has had its downsides though. Income inequality has grown; disadvantage, although reduced, remains concentrated; and xenophobia has occasionally reared its head. And it seems even the long period of growth may now be over.

This second settlement continued to incorporate the core Australian values, but gave greater weight to prosperity, in the form of rampant consumerism, than either fairness or community.

Now, I put to you, this second settlement is gradually drawing to a close. This is the crux of my argument tonight. Over the next decade or so, Australia will negotiate the third settlement of its Federation.

Why, you might ask? If the first settlement lasted 80 years, why would the second be over in 30? Well, the rate of change is much faster, driven by technology and globalization, so historical cycles are much shorter. In 1983, few people picked China to become the dominant world economic power by 2008. Fukuyama’s end of history lasted a mere 11 years.

But for the most compelling reason, look at these two quotes and ask yourself who they are talking about (A) and in what decade (B)…

A) “They governed with caution, dedication, lack of inspiration, a pacification of sectional interests, and an appreciation of Australia’s national insecurity complex. They sought not to make Australia great but, typically, to develop its resources for economic benefit and to exploit its national inferiority complex for political success.”

B) “It is the decade of creative destruction. It has witnessed business shake-up, financial excess, economic restructuring, individual greed, the making and breaking of fortunes, and for many, a struggle to maintain financial and family security. Despite the hopes it engendered, the decade is ending in pessimism.”

No, neither one is talking about John Howard’s government in the naughties. They are Kelly’s arguments. The first describes the conservative parties of the first settlement. The second outlines the transformative processes of the 1980’s. Kelly was arguing that Australia needed to move beyond the original settlement and describing the process of negotiating a new one. What is striking to me is how relevant these words are to Australia today, as we look beyond a second settlement.

Today I want to propose a third settlement. A new settlement, which I will call an Investing Society. The Investing Society is the logical successor of the third option outlined by Kelly in 1992: to quote him, it is “a new political synthesis between market oriented reforms and a revived role for government intervention”. The settlement rebalances the core progressive values of Australia, promoting prosperity while renewing the emphasis on fairness and community.

My call for a third Australian settlement is not just a response to an impending economic downturn. We need to look beyond the cyclical elements and consider the structural ones. The need to adapt to climate change and a low carbon economy presents enormous structural challenges. Australia’s education system requires fundamental rethink, both in the level of investment we make in it, and in its institutional framework. How are we to deal with the unexpected social costs of our recent prosperity? Can we continue to strike a balance in international relations between our traditional allies and our North and South Asian neighbours, with India and China on the rise?

As I said earlier, predicting the future is a mug’s game, so my outline of Australia’s future is necessarily impressionistic. I’ll cover a broad sweep of policy areas and describe how an Investing Society would approach each one. I’ll also touch on the institutional adjustments necessary to bring about this Investing Society.

Let me begin with the economy. Broadly, the Australian economy is in good shape and should weather the global financial crisis, albeit with a slowdown and perhaps a mild recession. Our banks remain well-capitalised, deposits are underpinned by a new insurance scheme, and a fiscal stimulus will flow through the economy by Christmas to ward against any potential downturn driven by a drop in global economic activity.

The last point hints at one early development in the new Australian settlement – fiscal economics is back. Many of us thought Keynes had gone the way of the dodo, yet in the last year, we have seen government embracing a new-found role in providing insurance, credit and even equity capital to private sector companies. In the old days, government taking shares in companies was called public ownership - although no-one is willing to declare that renaissance just yet.

Happily, Australia is well-placed to deliver this fiscal stimulus, this new set of public investments. Our budget surplus is strong, and we have a long list of infrastructure projects that are due. Interestingly though, now that our capacity is less strained by export demand, I think we’ll find the traditional big-bang project approach to infrastructure spending less effective than a set of distributed investments in soft infrastructure – schools, hospitals, and housing – which disperse the fiscal benefits more widely.

Despite our apparent economic good health, I would argue that the free market economic frameworks on which our economy is built are too narrow. They assume that people are rational, utility-maximising actors, without drawing on recent learnings in behavourial economics which tell us that people are anything but. They fail to adequately integrate and value risk, and to provide appropriate discount rates for social investments. And above all, they fail to capture externalities – the social costs and benefits created by a given economic activity.

So the Investing Society is likely to embrace what I would call ‘full-cost’ economics. Full-cost economics relies on a holistic understanding of both private and social cost/benefit. Most investment decisions are based on a calculation of private costs and benefits. An individual or a business will decide what their costs will be, how much they’ll generate, and whether the net gain is worthwhile.

In theory, governments make a slightly different calculation, as their costs are ‘social costs’, either met directly by the taxpayer or borne elsewhere as externalities and opportunity costs. ‘Social benefits’ are more complex again and require even more detailed consideration. I’ve included a list of examples of social costs and benefits on the slide above.

In an Investing Society, quantifying these will be extremely challenging. But when we decide how much to invest in an area like early childhood or employment services, we should certainly try to account for the full range of social benefits. Governments and businesses will take social costs and benefits onto their balance sheets, and reallocate capital accordingly to deliver the highest overall return.

Another hallmark of the Investing Society is that it requires us to rethink the mix in our economy between consumption and investment, and the role of debt in funding both. Consumption has underpinned our recent economic boom. During the boom, retailers recorded ever-increasing profits, and month after month, commentators expressed surprise at the resilience of the Australian shopper in the face of interest rate hikes, petrol price rises and sharemarket jitters.

Two points are significant here. The first is that much of this consumption has been funded by debt. Over the last 10 years, our net private foreign debt more than tripled.

Much of the debt is owed on mortgages and credit cards, but our ultimate creditors are the citizens and governments of Asia. The entry of over a billion people into the global labour market, from an avid saving culture, has funded the consumption boom in Australia, the US and elsewhere.

For now, Australia’s debt position appears sustainable, but the global financial crisis is placing extreme pressure on mortgagees, credit card holders and leveraged firms. This is why in the Investing Society there should be a new savings culture for Australia. A leap forward as great as the development of our superannuation industry is required – both as a buffer against shocks and a catalyst for new investment opportunities.

The second key point is that, even with a new savings culture, Australia will continue to carry considerable debt. Of course, debt in itself is no bad thing – provided the debt is invested in value-creating assets. Debt-funded retail consumption offers enjoyment for today, not a source of new value for tomorrow: there is a finite capacity for our society to shop using debt. Equally, residential property investment is not value-creating, unless it is creating new supply or upgrading existing stock. Simply buying a property for capital growth might create a nominal gain, but it is not economically productive – no new asset is created.

This is why an Investing Society will facilitate investment in the value-creating assets that will sustain the country’s prosperity like education, infrastructure, and water and energy technology.
The role of government here is that of market designer: to set “the rules of the game” so as to align producer and consumer incentives with public policy goals.

Let me turn briefly to two other aspects of the future Australian economy: employment and tax. Employment is a classic example of our failure to capture externalities, in this case, social benefits rather than costs. Here’s a piece of Per Capita analysis to show you what I mean. This confirms what we’ve known for a long time - that jobs are a good thing. They offer economic spill-over effects into communities, promote personal self-worth and counter intergenerational poverty transmission. Yet we have a perverse situation where a government policy – payroll tax – that PENALISES employers for creating jobs. In an Investing Society, this poor policy will be junked and replaced by a corporate tax credit based on the number of full-time employees on the payroll. Corporate welfare, you may say, but it stimulates employment more directly than an across-the-board corporate tax cut, and does not discriminate artificially between industries, as sectoral employment subsidies do.

Talking of tax, let me show you a picture. Remember this guy? In many ways, Mr Packer was a model citizen. He created thousands of Australian jobs, and pioneered new industries in television, magazines and sport. But in one respect, I disagree with Mr Packer’s view of citizenship. When appearing before a Federal Parliamentary Inquiry in 1991, Mr Packer shared this gem,

“I am not evading tax in any way, shape or form. Now of course I am minimizing my tax and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra.”

Like Kerry Packer, many Australians view taxation as government theft and seek to minimize it in any way possible. Our politicians are addicted to tax cuts. Yet as human beings, we have a wonderful ability to sustain cognitive dissonance – to believe two completely contradictory things at the same time. We repeatedly tell pollsters that we want better public services, in health and transport and education, yet at the same time, we also want to pay less tax. Well, the sums don’t square.

As we go into the Henry Review next year, everyone will be talking about the mechanics of tax – rates, scales, rebates, credits. But the question which we really need to answer about taxation is not how, but why? I think we need to re-examine the philosophy of tax – to reposition tax as social investment, and make the public argument for the benefits of tax.

Other countries already do this. Several states, including India, Turkey, Japan and the Philippines publish the list of the country’s top income tax payers to celebrate their contribution to the nation. In the same vein, Sweden, Norway and Finland publish every citizen’s tax return. As crazy as it sounds in Australia, an Investing Society must find similar ways of celebrating taxation and linking it to the long-term good of the country.

Let me move on now to my fourth policy area, climate change. This is arguably the biggest challenge and the defining feature of the third Australian settlement. There is now near unanimity amongst scientists, and an emerging consensus amongst policymakers, that we must move urgently to a low-emission economy in order to have any chance of avoiding the worst effects of climate change. A low-emission economy will look markedly different to that which we have today, and the only way to get there is to integrate the cost of emissions into our daily economic activity. It is all about full-cost economics: bringing a social cost – in this case, carbon – onto the balance sheet.

The Rudd government is right to be pushing ahead with an emissions trading scheme. The preliminary modeling released by the Treasurer at Per Capita’s conference in Brisbane last week looks promising, although it comes with the same caveat as this presentation about the perils of predicting the future.

The outlines of an ETS sketched by Ross Garnaut are broadly the right ones. Permits to emit CO2 should be auctioned annually, with a declining total volume of permits over time.

Trade-exposed emissions-intensive industries should either be given a temporary adjustment holiday period of no more than five years, or a discounted carbon price with the discount progressively reducing to zero over the same period. In exchange, these industries must use any partial exemption from a trading scheme to invest in developing their own low-carbon energy sources. As Garnaut suggests, the receipts from an ETS should be used to assist with industrial adjustment, develop low-carbon technology and help low-income households meet higher energy bills.

But carbon trading is only half the solution. We need to focus aggressively on demand reduction – reducing our energy intensity. According to the International Energy Agency, greater energy efficiency might account for up to two-thirds of total emissions avoided. When under threat, Australians can and do adjust consumption accordingly. In 2007 when drought threatened Queensland’s water supplies, the public responded to a government campaign and cut per capita water consumption from 300L/day to 130L/day in a matter of months.

But it is only when the crisis is immediate and dire that households will act. This is why households aren’t the place to start – information asymmetries and transaction costs means that householders typically demand about a 30% return on investment from spending on energy efficiency. Instead, energy efficiency in the Investing Society must begin with commercial applications. Let me give you just one possibility.

Public buildings, like hospitals, universities and libraries, need electricity, heat and sometimes steam. Distributed co-generation, where these buildings draw gas from the mains to drive a small, on-site generator, allows these buildings to meet all their energy requirements with at least 30% less emissions than existing coal-fired electricity sources. It also creates significant employment in the installation and maintenance of small generators. Surplus electricity can be sold back into the grid. Some simple policy measures, like feed-in tariffs, are needed to make this happen and these are starting to be put into place. These small-scale measures are the beginnings of the Investing Society’s low-carbon future.

I’d like to move on now to my fifth area of interest, education. An Investing Society must build its human capital if it is to prosper in a highly competitive, globalised economy. In Australia, we have fallen behind in human capital investment. OECD research shows that Australia has underinvested in early childhood and tertiary education relative to other rich countries. Given this, it is little surprise that Australia’s labour productivity has stagnated in recent years. As other countries out-invest us on education, we are becoming less competitive in high-growth, high-value service sectors.

Let me outline two areas that must change – merit pay for teachers, and creativity in the classroom.

Even with innovative recruitment programs to boost intakes, retention of talented teachers remains a major challenge for education providers. One reason is that salaries in the public system are capped by political constraints, but a more powerful factor is that good teachers are not rewarded for good performance. Studies show that teacher quality has diminished in Australia in recent decades and that relative pay has been a significant causal factor in this decline.

Merit pay - higher pay for better performance – is the most effective way to reverse this trend. Today teachers’ pay is primarily based on length of service, rather than classroom performance – a classic misalignment of incentives. It is important that any differential pay is tied to teaching performance itself, not simply additional qualifications, as a host of studies have shown that teachers with postgraduate degrees do not add greater value than less qualified teachers.

But how do we measure good and bad teacher performance? One of the most promising approaches is the concept of ‘value-added’, which measures gains in students’ test scores from one year to the next. One trial of ‘value-added’ bonuses paid to teachers in Israel found the offer of bonuses significantly improved educational outcomes. Importantly, the performance of the teachers who failed to gain bonuses did not deteriorate. Australian governments should pilot similar schemes to assess whether merit pay appears effective in a local context.

A second area of education reform is creativity in the classroom. The existing curriculum debate is an outgrowth of the culture wars – what types of history and science we should teach. But nobody questions that the curriculum should focus on things like history, science and the 3R's. This assumption ignores a critical element of children’s make-up – their creative brains – and their ability to learn from experimentation and mistakes. British author Sir Ken Robinson, one of the world’s leading education thinkers, has argued that creativity is as important in education as literacy and we should treat it with the same status.

An Investing Society would attribute arts, music, drama and dance a similar standing in the curriculum to maths. This mix may not be right for every kid, but different schools would offer different mixes, and parents could make a decision about what is best for their own child. The emphasis on creativity is not just an emotional preference, but is important because it suits the demands of the 21st century economy. Robinson defines creativity as “the process of having original ideas that have value.”… Isn’t this exactly what the economy demands of our future workers?

Robinson’s work draws heavily on our rapidly developing knowledge of the brain, and now I want to highlight as a sixth point a couple of other policy areas where neuroscience has a role to play.

We are learning about ‘plasticity’ – the ability of the brain to develop in response to positive external stimuli, particularly in the early years, and the importance of early childhood learning in encouraging this development. This learning offers significant economic and social benefits, and is the reason why early childhood is rightly a focus of educators. Let me give you a suggestion for one of the soft infrastructure projects I described earlier – the government could build a set of state-owned early childhood learning centres. This has the triple benefit of providing widespread early childhood development, filling the enormous shortfall in childcare places and distributing a fiscal stimulus evenly throughout the economy.

A second area where neuroscience is informing policy is in risk perception and personal discount rates. Suppose I offer you $100 today or $200 in a year’s time. Most of you will take the $100 today, although a rational economic framework can’t explain this. What neuroscience is teaching us is that we don’t always act rationally – our brain is not wired to do so. This is why ‘soft paternalism’ may be a new policy approach in the Investing Society. This approach makes default choices for us – adopting the rational, long-run policy settings – and allows us to opt out if we choose to. For example, if we are seeking to build a savings culture, the government might raise the default level of personal super contributions from 9% to 10%, but allow us to opt out and remain at 9% by checking a box. Evidence tells us that the majority of people will move to 10%, the superior long-run option both for themselves and for the economy. If you’re interested in learning more about this approach, the book of choice amongst policy wonks is Nudge, by Richard Thaler and Cass Sunstein.

Let me move briefly to my final area of focus, Australia’s international engagement in the third settlement. Kevin Rudd wants Australia to be a creative, engaged middle power. It’s significant that next week’s global financial summit is a G20 event, not a G8 one, and there is no doubt Mr Rudd pushed for this. In the third settlement, it will be possible for Australia to play a constructive role in multilateral fora, but we should increasingly seek to do this from within the Asian firmament. Asia will be the dominant global region of the 21st century, and we are far better placed as a mid-ranking member of that grouping, than as the senior player in the south-west Pacific.

Let me borrow an analogy from a favourite Australian field, sport. For years, we tried to enter the football World Cup through the Oceania qualification route, and were frustrated because we thought this was harder than fighting our way through the more competitive Asian region. We’ve now joined the Asian grouping, and guess what – we’re punching above our weight and leading the entire pack. I would argue that Australia should seek to emulate this type of approach and its ensuing success in the international relations sphere.

Tonight I have proposed a third Australian settlement - the Investing Society. It is “a new political synthesis between market oriented reforms and a revived role for government intervention”. It rebalances the core progressive values of Australia, promoting prosperity while renewing the emphasis on fairness and community. It is based on full-cost economics, debt for investment rather than consumption, a repositioning of tax as social investment, a low-carbon economy, and a remodeling of our educational institutions, policymaking processes and international engagement.

In concluding, let me consider the role of institutions and the allocation of power within the third Australian settlement. We’ve seen that successful settlements have been built on a negotiated consensus amongst the key actors in society – business, unions, political parties, and ultimately the voting public. The process of negotiating a consensus requires concessions from all these actors. So I’ll leave you with some open questions.

Will companies be willing to bring social costs and benefits onto their balance sheets? Will they accept that asking for taxpayer support in the tough times requires acceptance of reasonable regulation in the good times? Will unions accept merit pay for teachers? And will we as Australians accept that unchecked debt-funded consumerism has its limits and over time is economically and socially unsustainable? I hope so.

My think tank, Per Capita, seeks to answer these questions. The RSA clearly does too. For that, and for listening so attentively to me tonight, I thank you.

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