The wisdom of serious reform:  The forthcoming August 2025 Government Roundtable seeks a better future for all Australians. And, indeed, our society has well-known and well documented lists of policies that can reliably deliver on that desired outcome.

To illustrate, the Australian Council of Learned Academies (ACOLA) has estimated if all the individual policies proposed by major analysts and agencies in 2015 had been implemented then, for both structural reform AND investing in our future, consumption per head would have been some $7700 better off today, ten years later.

We did not seize this opportunity and instead failed to rise above conventional party and interest group zero-sum politics. Yet good government could have taken the people on such a journey. Public attitude analysis for ACOLA in 2015 demonstrated that a clear majority of the population was supportive. Only 23% were resistant.

The breakthrough needed was leadership and communication. This had been a key for the preceding Hawke-Keating-Howard reform era.

Roundtables back then were one of the vehicles for such communication, so it is good that they, at least, have now returned to assist with consensus building.

Many of the policies needed are again well-known and well-documented. But acceleration can be added through new policy ideas as well.

A distinctive Australian way forward

For such acceleration, some further use of the distinctive Australian policy innovation of income contingent loans could add extra value to the common available policy reform packages under consideration. Contingent loans could especially be applied in two new key fields where known problems continue to exist: boosting business research and development and assisting businesses to better manage disasters. The use of contingent loans for these will ensure repayment with innovation success and with economic recovery and hence budget sustainability.

This approach would be distinctively Australian as the contingent loan system was pioneered in Australia through HECS in higher education funding.

• Compared to grants or tax concessions, this can ensure a lot more money is available at potentially no net cost to the taxpayer.
• Compared to conventional loans it does not oppress the lives of those unable to repay the loan.

Further:

• Such loans can be efficiently and effectively administered through the BAS tax system.
• Extensive research and modelling exists to guide introduction of these schemes.

Alternative schemes in these areas have either not worked well and/or they have been exceedingly expensive eg R&D Tax Concessions and JobKeeper.

Enhancing productivity through R&D

The deficiencies in Australian R&D activity are well documented e.g. Australia’s GDP share is now only 60% of even the OECD mean ratio. Accordingly, new assistance is here suggested via a revenue-contingent loan (RCL) for start-up companies which repay this initial outlay to the government when financially viable. This will be particularly important for traversing the cash flow deficit stage for long pay-off innovation known as the “valley of death”. As well, the RCL is only repaid at a low percentage of the company’s annual revenue and would be based on revenue information which is simply and legally required through the quarterly Business Activity Statement. The scheme could well extend beyond start-ups.

Successful start-up companies could be required to repay more than the initial outlay to ensure that the scheme is financially neutral for government. There could be an initial outlay by government for several years but then no drain on the public purse. Careful selection should still be required to assess potential in the companies, and this could operate in conjunction with commercial advice and research scrutiny from universities. The possibility of false bankruptcies is also addressed through this selection and through mechanisms such as making a valid part of the debt obligation still to be shared by the owners of the enterprise.

Enhancing resilience for disasters

Recent times have seen Australia facing major health and economic crises such as the 2020 Bushfires, the 2020 Covid Pandemic, and the 2022 Floods:

• The 2019-2020 Bushfire Season saw 18 million hectares and 2600 homes destroyed.
• The level of GDP was estimated to have suffered a cumulative loss from the 2020 Pandemic of $158 billion compared to its pre-pandemic trajectory.
• The 2022 Eastern Australian Floods are calculated as the fourth most costly global disaster in 2022.

The top task always is to prevent and fight such disasters. But more attention is needed, and in advance, on recovery. Recovery is often lost sight of after the headlines die away or ad hoc fixes are adopted.

Contingent loans to affected businesses can prevent economic and social collapse for the affected individuals and communities and especially support those most adversely affected, and yet without there necessarily being a full debt burden for the whole community into the future

Partnership would be crucial here too, as with R&D such as with arrangements of joint bank and government lending with the government providing a revenue-contingent loans alongside commercial bank loans. The government loan could even repay the bank loan in the very short-term until business reopens and recovers, with monitoring through the BAS system. The system can be complementary to grant schemes for extreme disaster.

The key here is to ensure that the schemes are fully in place and ready to be administered prior to disaster events, including in association with partners.

Reaching out and taking a lead

Ways forward are there. The further challenge is for government to reach out and lead on good policy for the sake of productivity and resilience and sustainability.

Acknowledgement

Thanks are due to Ken Baldwin and Bruce Chapman for comments. But responsibility for the views rests with the author.

The views expressed in this article may or may not reflect those of Pearls and Irritations.