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The Economic Case for Reducing Indigenous Disadvantage in Australia

In Australia, the Australian Football League celebrated the contribution of Indigenous Australians to the game. This year’s ‘Indigenous round’ will be remembered for Adam Goodes’ war dance after kicking a goal. It was also reconciliation week, that is the week where Indigenous people were counted in the census and the historic Mabo decision that recognised Native Title. Yet, despite the mainstream acceptance that the past treatment of Indigenous Australians was shameful, there was little discussion that Indigenous Australians are still living with the effects of European colonisation. Indigenous Australians have a 10 years shorter life expectancy than non-Indigenous Australians; they make up 26% of the prison population in 2008 whilst making up 2.5% of total Australian population in 2006; 17% were unemployed in 2011 compared to 3.6% of non-Indigenous population; and Indigenous people account for 9% of homelessness. These social, health and economic indicators have budgetary consequences for both Federal and State governments. While there exists a strong moral case to reduce Indigenous disadvantage, there is also a very strong economic case for Australian governments: reducing Indigenous disadvantage could save both Federal and State governments $450,000per person over their lifetime.


Is Australia’s Health System Financially-Sustainable?


One of the great social policy achievements of Australian governments was to establish a health system that is able to deliver world best health outcomes at relatively modest cost to almost all Australians. According to the Organisation of Economic Cooperation and Development (OECD), Australian life expectancy is the 6th highest in the OECD at 82 years at birth in 2014. This cost Australians the relatively modest amount of 9.1% of GDP (21st highest in the OECD), which compares favourably to the OECD average of 9.3% in 2012. As impressive as this success is, is it financially sustainable? Can Australia continue to achieve these impressive health outcomes for a relatively modest amount? Or will Australia’s demographics and emerging health challenges force Australians to spend more of their tax and income on the health system?


Does Tough on Crime Actually Reduce Crime?



“Do the crime, do the time”, is the common attitude towards criminals. Surely it is reasonable to expect convicted criminals to be punished? Yes, that is certainly a reasonable assumption to show society is serious in punishing anti-social behaviour such as assault, rape, murder and corruption (to name a few). But many of these criminals will be released back into society after “doing the time”. I went to a one-day conference organised by the Lentara UnitingCare to learn about these issues. What struck me was how much resources are being wasted by a reactive approach to crime. In today’s post, I want to explore the economics of a tough on crime policy. What are the benefits and costs on tough on crime? Is there an alternative? If so, is it a more efficient approach to being tough on crime?


Red Tape and Social Impact



Red tape (i.e. regulatory burden) reduction has been a focus for governments in recent years. However, the focus has been on the private commercial sector and has largely ignored other sectors. In this post I will discuss the red tape imposed on social service organisations. The red tape has implications beyond increasing costs for social service organisations. At worst, it could provide perverse incentives for social service organisations to focus on process and outputs rather than producing and measuring genuine social impact.


The Economics of Racial Stereotypes

During World War II, Australian soldiers were told they had nothing to fear from Japanese soldiers. They were short, wore glasses and their rifles fired puny bullets that would bounce off a strapping young Aussie lad. No worries. Should fix them up before tea then you can go and fight some real soldiers like the Germans once you’ve done with the Japs.


Kindergartens as Engines of Economic Growth

I was flicking through the OECD’s Education at a Glance 2014 to get a quick understanding of how Australia’s education system compares to the rest of the industrialised world. Australia mostly did well in the indicators compared to the OECD average, especially for university education. Although, it was a bit worrying to see that Australian school students’ educational scores stagnate. But there was one indicator that caught my eye, and that was the very low enrolment rates of Australian children in pre-school education (less than 20%) compared to around 75% for the OECD average. This places Australia the 5th lowest for pre-school enrolments in the OECD, with only Indonesia, Turkey, Switzerland and Greece being ranked lower. This caught me by surprise because there is pretty strong education and economic research that demonstrates the long-term benefits of early childhood education.


Indigenous Disadvantage and Impact Investment

I must commend the Australian governments, at both the Federal and State/Territory level for committing to reduce Indigenous disadvantage. As part of the governments’ efforts to reduce Indigenous disadvantage, they charged the Productivity Commission to produce a biennial progress report series – the Overcoming Indigenous Disadvantage (OID) series. The 2014 edition was released in November. I was interested to read this edition to see how efforts to reduce Indigenous disadvantage was faring, and if there was potential to for impact investment to make a difference.


Risk, Market Failure and Government: Case for a Social Impact Bank?

Last week, I attended the All-Energy Australia Conference because of my interest in renewable technologies and energy efficiency. A couple of speakers from the Clean Energy Finance Corporation (CEFC) were highlights for me. The CEFC is an Australian Government-owned financial corporation that was established to address financial impediments to private financing of renewable energy, energy efficiency and low emissions projects and emissions – i.e. it addresses a market failure in clean energy financing. It does this by developing innovative financial products and working with private financiers, principally aimed at reducing risk which in turns reduces the risk premium charged to clean energy projects and companies. Furthermore, it does so by actually generating a profit for the Australian Government; it provides loans and equity on a commercial basis and doesn’t provide grants. It seemed to me that basic model of the CEFC would be useful in catalysing private capital in other policy areas, such as reducing social disadvantage. This blog post will go through my thinking on how a ‘Social Impact Bank’ could work along CEFC lines.


Social Return on Investment and Benefit-Cost Analysis: What is the Difference?

“It is better to be vaguely right than precisely wrong”, so said the famous economist, John Maynard Keynes. Is this the right attitude to take when measuring the non-marketed social benefits from social services programs? Or should all possible effort be expended to precisely quantify the benefits and costs of a social services program? I would argue that it isn’t possible to precisely quantify social benefits because of the difficulty of collecting data. However, that doesn’t mean that we should accept that a social benefit is material without some transparency. And this is where the Social Returns on Investment (SROI) methodology can help improve the rigour of investment decision-making in social programs. (more…)

Ebola and Market Failure

You have probably heard about the deadly progress of the Ebola virus in West Africa. It is spreading at an alarming rate and does not appear to have any cure. To make matters worse, Ebola has a high fatality rate of 70% according to the most rigorous statistical studies. So far, it has claimed over 2000 lives and has now spread into Africa’s most populous nation of Nigeria. There may be unconfirmed reports that Ebola has found its way into Australia. According to the Oxford University professor, Adrian Hill, a vaccine is “doable” but ‘Big Pharma’ has not developed a vaccine because there was no business case. This situation sounds like a classic case of market failure. (more…)