Bob McMullan (Fraser, Australian Labor Party, Shadow Minister for Federal/State Relations) Share this | Hansard source

I rise to support the amendment to the Australian Technical Colleges (Flexibility in Achieving Australia’s Skills Needs) Amendment Bill (No. 2) 2006 moved by my colleague the member for Perth. When the Leader of the Opposition took that job, he gave high priority to the task of ending the blame game and getting rid of the attempts by one level of government to explain away their failure by blaming the activity on the other. Australians are sick and tired of the blame game—and if the speech by the member for Mitchell had been broadcast, they would understand why. I have never heard a more old-fashioned, tired exposition of the blame game than that which we just heard. There was not one step forward in what he had to say. It was a straight 1990s exposition of the modern Liberal Party. In the 1970s, he would have been kicked out of the Liberal Party for saying all that, but these days it is the modern Liberal Party version and it is sad.

The question of our skills crisis is a very serious one, but the most remarkable thing about the skills crisis is that everybody knew it was coming. Nobody has been taken by surprise, but nobody thought that the federal government setting up a parallel system of vocational education and training colleges was a sensible solution—not even the Howard government in 2003. They did not think about it in 1997, 1998 or 1999. Everybody who has ever been engaged in the political process knows what happened. In the run-up to the 2004 election, the people in the policy think tank said, ‘The research says we have a problem with skills. The public has perceived we are not doing enough, so we have to dream up a policy for the election.’ Because a proper solution would have required lengthy discussion with the states and an agreed program of reform, it was incapable of being done in the time available. In the eight previous years, no effort had been made to do that. That option was not open, so they dreamt up this nightmare of a parallel system of Australian technical colleges.

Think about this analogy: what would people say if the federal government said, ‘We have a clever idea. We are going to set up federal government hospitals in Bundaberg because of the problem the Queensland government has with health’? No sane person would have thought that was a good solution. Everybody knew there was a problem at Bundaberg hospital, but nobody thought that the Commonwealth should set up some hospitals and then it would all be solved. We could have it run on AWAs—that will solve the problem! That is just a very sad example of what is worst about the management of federal-state relations. The Business Council of Australia articulated their concern about the profound crisis in our federal system and released a report that said the shortcomings in our federal system—the waste and the duplication—are costing Australians $9 billion a year. What was the example they used to highlight the worst of it? It was the Commonwealth’s attitude on vocational education and training—and that is before we had this mad system! The report stated:

The Commonwealth/State agreement on Skilling Australia’s Workforce provides a good example of where funding ... in fact provides perverse incentives and opens the way for the imposition of overly prescriptive requirements on the States ... The agreement:

• does not provide incentives or rewards for improving quality of training,
• imposes maintenance of effort requirements in both activity and spending which are disincentives to efficiency (so it rewards the more inefficient States), and,
• imposes highly prescriptive requirements at provider level which have nothing to do with training outcomes.

That is dead right. So what is it that we are trying to achieve? Any sensible person who sought a reform of vocational education and training would talk to the states. It would not be easy, but the previous government did come to an agreement, which this government abolished. I am not advocating that we go back to that model. We need to go forward, but we need to go forward to a new sort of agreement that is about outcomes and not about inputs. This government is about regulating the inputs in schools and not worrying about the outcomes.

All the contemporary literature and the good analysis, both Australian and international, about the efficient operation of federations say that the central agency—in Australia it is the Commonwealth government—should primarily be about funding in the areas that are best done locally. That is not everything; it is not defence or economic management, which should be done centrally. The advantage that federalism brings in vast countries like Australia, the United States and Canada is that it allows the delivery to respond to local variation. But if you have that in an unfettered way, what you get is widening differentiation between the states and regions in the country because the strongest have the capacity to do the most. The federal body can have an equalising function and a standard setting function to say, ‘We have a national interest in what is going to happen with regard to skills.’ Ten years of neglect have created a profound national crisis in schools. We need to address it by setting outcomes that we require the states to achieve and providing an incentive system so that those who achieve it get rewarded, and those who do not achieve it do not get rewarded. That is the way we go about getting reform.

If you tried to imagine the worst possible mechanism for getting a broadly based enhancement of Australia’s skills training regime, you would invent a parallel scheme. We have three out there: there is private vocational education and training, there is the TAFE system and now there is the Commonwealth system. Even if the Commonwealth system were magnificent, its scale is totally trivial compared to the scale of the problem we face. The minister, in his first answer in question time yesterday, made it clear that the system is not going to achieve the specified outcomes. If his ambitious outline of what is going to happen this year were to come true, we will still only be getting to 2,000 students by the end of this year—far fewer than the Prime Minister promised at the last election. But that is very convenient, because it means that he can promise it again at the next election—and he will. It is typical. This problem arises on a triennial basis, just before every election, but in between nothing happens.

This system is entirely trivial compared to the scale of the national skills problem. Its dollars would be much better spent on incentives for the improvement and reform of the state system, where most of the training is going to take place, even if this scheme comes to its full and comprehensive fruition as promised—and I do not believe it will. As the title of this bill says, we need to ‘achieve Australia’s skills needs’. As Dr Peter Kell from Wollongong University said:

A skills shortage is no accident when you under invest for 10 years.   

That is absolutely right. All the international data says that Australia has been falling behind the pack in investing in post-secondary education. The government cannot say that it did not know this was coming. It was advised on a number of occasions by the Reserve Bank. The Reserve Bank warned that declining skills in the workforce was a looming problem:

Localised prejudices are certainly evident in some official wage measures as well as through business liaison which points to substantial increases in wages for skilled employees.

The Productivity Commission was also warning the government as follows:

The challenge for Australia is to further strengthen and improve the national training system so it delivers what Australian business communities and individuals need to build their own personal, and our collective, economic and social prosperity.

All the proposals for reform in our federation look across a range of issues, and high up on the agenda is doing something better about our federal-state relationships as they relate to skills. There is more to do about preschool—a very big issue. It is a question of long-term investment in enhancing the economic performance and social equity of this country. The neglect of preschool education has been a scandal. Investment in preschool education is not going to do much to address our current skills crisis, but it is an investment that needs to be made. More needs to be done in schools, particularly in the area of maths and science, which has been highlighted by the conference being held here in Canberra today. More needs to be done about university, where the international data is humiliating for Australia. Our performance is so bad compared to all those with whom we hope to compete. It is flying in the face of the data that says that investment in that area of education is critical to modern successful economic performance. Central within those three areas where our performance is lagging and where reform is needed is the need to do something about skills.

We all welcome the fact that under this bill there will be an increase in spending on the training of Australians, but the way that it is being done is a scandal—a waste, a duplication and a scandal. Everybody knows this policy has not been a success. The poor previous minister carried the can and got dumped. I am sure a lot of people blame the department, but neither the minister nor the department are responsible. I did not think the previous minister was one of the stars of the government in any of his previous positions, but it is not his fault. This policy is a dog. It could not work. The best will in the world could not make it work. And, if it succeeds, it makes no significant contribution to solving the problem. Everybody knows that. They knew it on the day it was announced. The Prime Minister knew it on the day he decided to announce it. Everybody knows the policy has not been a success. It could not have been a success.

By the end of last year only five of the promised colleges were functioning. The new minister said yesterday in question time that, while more colleges would be coming online this year, the total number of students will still only be 2,000—absolutely irrelevant to the broad sweep of the challenge facing Australia. We have been experiencing strong economic growth. The world has been driving demand for what we want to produce, and we have been riding on the back of that boom. There are now all sorts of long-term issues about the sustainability of that boom and the lack of investment in other areas of the proceeds of the boom to guarantee our future prosperity. Nowhere is it more stark than in this area. The very failure to invest some of the proceeds of that boom in skills is putting the boom itself at risk because the skill shortages are contributing to pressures on the labour supply in particular industries and regions, particularly those booming the most.

The Prime Minister, as we all know, is a very clever politician. He saw in the lead-up to the last election that he had a political problem. One wishes he had seen that the nation had a social and economic problem. But we all know he is very clever with these political quick fixes. He saw a political problem and he came up with a political solution. He announced on the day, to the incredulity of everybody who knows anything about the area, that the Commonwealth would set up its own system of technical colleges. It would have been funny if it were not sad.

I empathise with the challenge faced by the department in implementing this extraordinary policy. It is an example of the worst sort of federal-state relations—a knee-jerk reaction to solve a political problem for the Commonwealth—which involves duplication and inefficiency.

What did the BCA say when, with the very comprehensive economic analysis that they commissioned, they assessed the $9 billion cost to the Australian economy of the waste, inefficiency and duplication? They said that the lines of responsibility are not clearly defined. How could that be more clearly illustrated than here, where we have a conscious decision to duplicate a federal system? It is not a takeover—I do not think I would have agreed with that, but at least it would have clarified the line of responsibility—but it is a duplication. It is a classic example of waste and inefficiency.

The establishment of Australian technical colleges in parallel with the TAFE system cuts across all good principles of how a federation should work. We need a new round of economic reforms. All the analysts—driven by the Business Council of Australia but including independent advisors such as Professor Garnaut—say that the next big wave of micro-economic reform is going to have to come from, or include within it, reform of federal-state relations. And there has been no more adverse step in the reform of federal-state relations than the decision to establish a needless duplication in the training system to meet our national skills crisis.

I am a great believer in the benefits of competition, and I think that opening the forces of competition in our training system is worthwhile, but I am not a fan of different levels of government duplicating the same area of activity. The system loses cohesiveness and the duplication outweighs any potential advantages. You get a misalignment of priorities.

At its best, federalism suggests that needs will be better met at a local, regional or state level, through the principle of subsidiarity: carrying out the function at the lowest level at which it can be most effectively delivered. That is certainly not exemplified by the Commonwealth’s setting up of a parallel system of technical colleges. The Commonwealth should be focusing on training outcomes and on incentives to the states and the other suppliers to meet those outcomes. They should have an incentive based model—as in all the best federal-state relations reform models—that will encourage participants to meet that requirement, be an incentive for innovation and get the best benefit out of competitive federalism.

The Commonwealth should focus on setting priorities that ensure Australians have access to more training, better training and more appropriate training. Money currently being wasted on the pointless duplication of the TAFE system by the Australian technical colleges should be invested in our skills sector by providing incentives for innovation, reform and better outcomes.

I repeat what I said in opening: I welcome the increase in funding for skills education but I call on the Howard government to stop playing politics with this issue that is so vital for Australia’s future. We need to be smart in how we spend our money. We need to develop our human capital and, through this, maintain the momentum that will eventually build a better future for all Australians by finding ways for all to participate and achieve in our economy. And we need to focus on reform of our federal-state relations. There is no worse example of bad practice in this area than the duplication inherent in the system of Australian technical colleges.

See this speech in context