Australian Travel Notes from a Policy Wonk

Here are some notes on Australia, mostly from and for policy wonks.

Australia has a private pension system. In the 1990s a Labor government, with the support of the trade unions, created a system of private pension accounts to supplement the basic, means-tested state pensions that Australia has had since 1909. Employers are required to pay 9% of an employee’s wages (scheduled to increase to 12%) into the private accounts. The funds can be withdrawn at retirement (age 60 for new workers), at age 65, or in exceptional cases with disability. Workers can invest their funds with very few restrictions–workers, for example, can choose among a variety of mutual funds (such as Vanguard etc.) or invest with non-profit funds run by trade union associations or they can even self-manage. The accounts, now totaling more than 1.4 trillion, have increased savings and made Australia a shareholder society. Some issues remain including fees which are probably too high (better default rules could help) and a lack of annuitization (annuitization of some portion of the lump sum payment should be required to avoid moral hazard)–see here for one critique–but overall the system appears very favorable relative to the American system.

Australia farmers pay for water at market prices. Water rights are traded and government water suppliers have either been privatized or put on a more stand-alone basis so that subsidies are minimized or at least made transparent.

Australia has one of the largest private school sectors in the developed world with some 40% of students in privately-run schools.

Australia has a balanced-budget principle (balanced over the business cycle) which has been effective although perhaps more important has been a widely held aversion to deficits combined with an understanding of sustainability and intergenerational fairness (factors which also played a role in the decision to create private, pre-funded pensions).

Prostitution is legal in much of Australia and some of Sydney’s brothels have made significant capital investments.

The Australian civil service is of very high quality. I spoke at the Department of Prime Minister and Cabinet, the Treasury and the Department of  Industry, Innovation, Science, Research and Tertiary Education (whew) and in all cases I found the civil servants to be highly informed and sophisticated. I was not the first to bring up the term rent seeking or to laugh at the latest political shenanigans which everyone acknowledged had been done for votes and not for sound reasons of public policy. All consistent with Yes, Minister but it gave me a different perspective.

More than a quarter of the Australian population is foreign born but there is very little cultural or economic tension about immigrants within Australia (with minor exceptions over refugees (“jumping the queue”) and occasional minor flare-ups over job visas). From cab drivers to MPs the word on immigration was, “Not an issue, mate.”

I had some of the best Thai food I have ever had anywhere. Spice I Am was excellent (thanks!) and Home on Sussex was outstanding.

The Manly ferry is a great way to see Sydney’s magnificent coastline.

The world owes Sydney barristas (New Zealand also) an enormous debt for the flat white, perhaps the best form of coffee yet perfected. The flat white has made its way to London but is only now becoming available in a few high end coffee shops in New York.  I eagerly await for this trend to extend to Fairfax as I am already jonesing for another.

Australia has great natural beauty. The British should have left the convicts behind and moved everyone else.

Addendum: And here is Lars Christensen on Australian monetary policy, also very good, and Reihan Salam with more on education.


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