Home' Future Building Australian Infrastructure Review : Volume 3 Number 2 Contents futurebuilding 73
Volume 3 Number 2
Public Sector Reform Panel
KS: The current budget position in the states is
the burning platform, and I do think that each of the
state governments has to get moving to be able to
even fund their operating expenses.
We are starting in a position where in New South
Wales -- at least for the last ve years -- the increasing
debt has been used to cover operating expenses; it
hasn't been used to cover capital.
The other important thing is the need to be
ef cient in our service delivery, and one of the
examples that the NSW Commission of Audit came
across was the John Hunter Hospital in Newcastle,
which was a successful PPP.
But it could have been a lot better
had more services been included in the
We need to be much more exible with those
things. It doesn't look like much over a one-year
period, but over a 20-year contract, it's a lot of money.
TM: When the Productivity Commission
evaluated the economic impact of NCP, they
concluded that it had contributed around 1.5 to two
per cent of GDP growth.
Five years ago, when the Productivity Commission
did modelling and an analysis of what was then called
the National Reform Agenda, they concluded that
over a 25-year period, if it was fully implemented, the
National Reform Agenda would add between nine
and 12 per cent to GDP at the end, recurring every
year. That's what stimulated both sides of politics to
have a go.
There is now a massive microeconomic reform
program underway in the Australian hospitals sector
to help deliver both greater ef ciency and the
aspirations behind the National Reform Agenda.
Service delivery can always yield ef ciencies,
particularly if you deploy more public servants to the
front line and diminish the size of many head of ces
in the big systems. All the action should be at the
point where services are delivered, through hospitals,
schools or TAFEs.
That's happening in New South Wales, it's
happened in Victoria, it's sort of happening
in Queensland and it's certainly underway in
But those reforms are not going to put a lot of
money on the table for infrastructure investment,
unless you see some share of the GDP growth that
will eventually come as a result of those reforms.
The infrastructure investment challenge is more
immediate, and it has to have a different sort of debate
in order to take the public in the right direction. The
best way to do that is around particular projects that
are highly rated, that people will nd some sense in,
and that people want to support.
BL: While health service delivery is not
infrastructure, the various Commissions of Audit have
shown that health operating expenses are a major
constraint on the ability to fund infrastructure -- or, in
fact, anything else -- and we are facing a situation in
which every state will have the cost of its healthcare
delivery eclipse its revenues by about 2042. What
sorts of things do you think governments will need to
start to front up to in order to bring operating expenses
down and start to repair their nancial positions?
GS: This is a really sensitive political issue. Back
in the early 2000s, three or four of us got together to
have a look at the funding of operating expenditure
There's one thing that's really interesting about
health: it's seen as being something that's different.
Health is ripe for being subjected to the disciplines
of competition, but everyone who's involved in
health will tell you that it's not appropriate and that
competition should not apply.
There's absolutely no reason why we can't
introduce competitive disciplines into health. It
basically says to everyone, there's a Medicare base
that's a safety net for everyone, but beyond that you
are entitled to actually choose the place from which
you acquire your healthcare, with funding from
government through some form of a voucher system.
It doesn't matter whether you go to the Alfred
Public Hospital or the Epworth Private Hospital --
either way, you're funded for your healthcare.
Then what happens, of course, is you impose
some real competitive disciplines between the
Epworth Private and Alfred Public hospitals, and it
starts to get really interesting.
But the moment you mention that, it becomes
subject to all sorts of manipulations of the truth; that's
why it's fundamental to remember that there is a
foundation there -- a protective foundation, which is
the Medicare scheme.
A colleague of mine -- Simon Blair, who's now
Group Executive, International Financial Services
at the Commonwealth Bank of Australia (CBA) --
went over to see the World Bank on this issue. He
found that this concept of introducing market-based
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