Gary Banks 2: How reports succeed and fail

Former Productivity Commission head Gary Banks explores why reports succeed and fail – and why failure now is not necessarily failure forever.

Presenter: David Walker

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David Walker: In this episode of Shorewalker On Reports, we hear again from someone who has had a real influence on Australian government policy – former Productivity Commission chair Gary Banks. Gary joined the Productivity Commission’s predecessor, the Industry Commission, in 1990 and in 1998 became its founding chair. The Commission is an independent body and it’s charged with finding out how Australia can have a more productive and efficient economy. That is, in turn, a key to higher living standards.

Gary Banks ran the Commission until 2012. And he established a reputation for being willing to push governments –particularly the Labor governments of Kevin Rudd and Julia Gillard.

In a previous episode of Shorewalker on Reports we heard from Gary about the role that reports play.

In this episode we look more closely at how reports get put together – and at the challenges that people have to confront during that process. And we focus on Gary’s time as the first head of Australia’s national productivity watchdog, the Productivity Commission.

I want to start by replaying comment Banks made in that episode about a principle that he thought was important. A report should often make arguments for particular actions, yes. But a report should also put out the full panorama of evidence on an issue, and let that evidence be examined.

Gary Banks: A chap called Daryl Huff wrote a book, years ago called How to Lie with Statistics. I was in first year at Monash University, and I thought this was outrageous. But he was making a point. And that is, you know, you can manipulate statistics. And you've heard the concept of policy-based evidence, you know, so the whole process of research and evidence can be debauched. You know, if it's used in the wrong way. So, and it does, it does happen. And it's a natural tendency, and it's a natural political tendency, I think, you know, to do that. And another reason for having studies that are public is that a study, if it's done well, will show the bigger picture based on the broader data. So that if, if, for example, a minister or senior executive in a company or whatever, chooses to cherry-pick and manipulate the data, the evidence is there, and journalists and others can go to that, or others who have a different view can go to that, and use it. So, you know, one of the functions of a study, if it has shelf life, is that it can remain there, in a sense, to prevent data being misused or just manipulated in ways that that would be, you know, would be wrong from a policy point of view, even though politically it may have attractions.

David Walker: When the Productivity Commission wrote a report, a crucial issue was often this: how much licence did the Commission have to get a good outcome? The Productivity Commission’s reports to government are limited by their terms of reference – essentially, restrictions on what they can examine. And so many contentious enquiries have to provide their advice rather diplomatically, working within those terms of reference.  

Gary Banks: The way in which that the organisation is being asked to provide that advice can make a big difference to how well you can do it. And so the way in which a study is set up and framed – and it may be by the person who commissioned it, or it could be by the people who are involved in the study – is really crucial, to make sure that it's understood and how it will be how well it will be done. I mean, there's that famous American baseball player called Yogi Berra, who has wonderful and sort of mangled sayings, which always somehow make sense. And he says: “If you don't know where you're going, there's a risk that you won't get there” – or something like that, you know. So I think, you know, clarifying, you know, where you're going and why the study is needed is very, very important at the start. And it's particularly important if you've got a big team working on something that everybody has a common sense of where they fit into the bigger picture. So that is very important. And there have been occasions I think, in the life of the Productivity Commission and its predecessors, where a bit of a tussle has taken place with the treasurer of the day as to how to frame an inquiry to ensure that the Commission had sufficient scope to address the thing properly – In other words, that certain things weren't being ruled out that may well have been crucial to getting a good a good outcome.

David Walker: In 1996, Australia’s new conservative government under John Howard asked the Productivity Commission under Gary Banks to look at Australia’s private health insurance system. The terms of reference specifically asked the Commission not to look at other parts of the health system – which presented in interesting problem.

Gary Banks: So the government at that time had a problem with private health insurance – the same problem it's got right now. And that was that premiums were going up too fast. It's very much a cost-driven system. Costs were going up and that was flowing through into premiums. So the Commission was asked to do an inquiry into private health insurance, and this was in about 1997. But the government didn't want the Commission, you know, wandering all over the health system and making recommendations about things that the government didn't want looked at. So it was explicitly ruled out. On the other hand, it's very hard to do a study of a significant part of the health system, like the private health insurance system, without thinking about the context in which it's operating.

So I headed that inquiry. And my approach to that was to meet the spirit of what the government wanted, but not the letter, in the sense that we looked at different scenarios in which the private health insurance system would operate in the future. So we weren't saying which scenario we thought was the best one. But we said it was better to have a private health insurance system that was robust enough that it could operate in under different systems. We did it that way. And we got away with it. You know, I think everybody understood that how well a particular cog in the machine sentiment depends on how the machine more generally is operating. And people accepted that, including the government.

David Walker: Some years later, Banks headed the Howard government’s regulation taskforce. On this occasion, he knew that the government wanted a fairly small, limited report, with maybe a dozen recommendations. Banks and his taskforce came up with quite a few more than that.

Gary Banks: A lot more. So that was a case where I was, I headed an inquiry and report, but not in my role as chairman of the Productivity Commission. So a task force was created with a number of people to head it up, and I was chairing it. And it was clear that again, the government was on the back foot. Small business always complains about red tape, but suddenly the big end of town was complaining about it. The BCA [peak Australian business group the Business Council of Australia] was complaining about it – you may well remember those days  –  and the BCA was putting a lot of effort into showing what the costs of regulation were. So the government decided that it needed a report to be seen to be responding but also substantively to respond. And at the time, I think the idea was: “We'll get Banks and other members of the task force to do this report; we'll give them three months to do a short, sharp report; and we could imagine them coming out with a handful of recommendations that will be manageable.” As it turned out, we were so successful in getting business engaged in this process – because business is often quite cynical about these inquiries, but on this one, for whatever reason, they were actively involved, and provided all sorts of recommendations and reasons why certain regulations needed to be operated. So we ended up with 126 or so recommendations – not six, which I think the government originally had expected. And in fact, in the end, the government responded to a lot of those recommendations – far more than a half dozen. So in the end, I think the government itself felt that it had been very worthwhile, even though its expectations at the beginning, you know, were for a more contained report. And the other aspect of that was, I think, the politics of the regulatory issues got a lot better, because I think business felt that it had been listened to, which is quite important.

David Walker: By now you may think that Gary Banks has been pretty motivated to seek good public policy outcomes. So where does that motivation come from?

Gary Banks: It probably comes from being trained as an economist, I think, at le ast in the era that I was trained, and [from] reading books that, you know, are essentially about public policy, and how you get good public policy, and why good public policy matters. Economists are really, in a sense, you know, optimisers, and they're people who think about costs and benefits and trying to get the best outcomes. There’s an old word, utility, which is not used anymore, but it's about maximising the wellbeing of the community. And so I think that kind of training leads you in that direction. And then I've always worked for institutions whose job it was to really promote the public interest. You know, we never talked about it in exactly those terms. But that's really what this job was. And in that role, you just see that there are so many forces that are favouring private interests or certain special interests that having some people working on the public interest is a pretty good thing to do. And it's interesting that the people I work with had that sort of view as well. So I think you're right. I, I have been – I don't use the term passionate about myself, but it's been a particular interest of mine, you know, to try to push the case for better public policy, you know, throughout my life, and I've had some successes and some failures. But, you know, that's the way it goes. 

David Walker: It’s worth taking a look at why reports sometimes do not succeed. Banks, like many others, points to 2010’s report of the Taxation Review – headed by former Treasury Secretary Ken Henry -- as a report that never got the traction it needed with policymakers or the public. Banks has written that the Henry Review was hamstrung by a politically-motivated instruction not to look at the level of Australia’s goods and services tax, or GST. If you’re not allowed to look at important parts of the overall problem, he reckons, you reduce your chances of success.

Gary Banks: So this comes down to that earlier point about the important importance of a study having a sufficient remit to be a ble to look at all the things that are important to the objective of the study. And I felt quite strongly – and I wasn't the only one – that it was unfortunate that if we were having a major review of the tax system, that a key component of the tax system was ruled out. And even though the Henry Review found a kind of backdoor way of addressing some of that, it wasn't the same, and an opportunity was lost. And I think at the time, the government of the day thought that looking at the GST would just be politically too ugly. In fact, I think, you know, it might have been part of a process that could have led to reforms being accepted down the track, if they were part of a balanced package of things. So, so that is a case, I think, you know, if a study or an inquiry report is hamstrung by things being ruled out, it limits what it can do.

And of course, in that case, things were made even worse by the fact that the government of the day cherry-picked the report. And so what was a balanced package of recommendations ended up being an unbalanced sort of policy going forward, which focused just on the mining tax, rather than seeing that as part of an integrated package of reforms. I think it illustrates the point, David, that in some areas – tax is one, industrial relations is another – the politics can be so severe that it can be very hard to get the kind of remit that you need to do the sort of report that that an economist would say ticks all the boxes. But that comes down to ‘Why do a report if it can't address things in a comprehensive way?’ So I'd always be pushing to allow the Commission, for example, when I was there, to have a free rein, and reassure the ministers that that wasn't going to turn out badly for them, because at the end of the day, they make the decisions.

David Walker: Ken Henry’s 2010 tax reform report is not the only report to have fallen short of achieving immediate and lasting results. But some reports fail to achieve their immediate aims, and yet nevertheless have a long-term influence. One report often mentioned here is Professor Ross Garnaut's 2008 climate change review, commissioned by Australia’s main left-wing political party, the ALP, in 2007, and delivered after the ALP won government at the end of that year. The Garnaut review did not immediately achieve a lasting carbon pricing scheme. But it won widespread support from policy thinkers of many different perspectives.

Gary Banks: I thought that was an excellent report by Ross Garnaut. That early one, in some ways that report was better than the more recent work that's been done, because he had a relatively free rein, and you could go back to it. But it does come down to the point that he did that report for Labor in opposition. When Labor got into government, it started to see things rather differently; different pressures came to bear and so on. But the report was still there – and I think has been a valuable contribution that was made at the time.

I mean, the very first report ever done – worldwide, probably, independent report – on what was called greenhouse was done by the Industry Commission. And I led it, back in 1991. That report was done. And it was commissioned by Paul Keating, who was treasurer at the time, ahead of the Rio Summit, which was the first international summit on climate change. And the government of the day wanted to have some information to inform its negotiating position at that summit. So it was a case of, you know, a study informing a government approach to a really important issue. So we started off really well, but I think we lost our way a little bit, subsequently.

David Walker: Some regular reports can over time, simply lose some of their reason for existing. Such was the case with Australia’s series of “intergenerational reports”. They were originally thought up in the 1990s. Their stated aim at the time was to tell Australia’s citizens about the long-term pressures facing the national government’s budget.

Gary Banks: I think the first intergenerational report was excellent, partly because the politics, perhaps, were a bit less constraining at that time. And I think thereafter, either the politics were more constraining, or the politicians involved, you know, wanted to use it as a vehicle in a more overtly political way. I think it has become less useful. I mean, it's still good to hear that information out there. But, for example, the most recent intergenerational report has assumptions about productivity growth that just don't really stack up. And you can see why they're in there, you know, it, it makes things look a little bit more optimistic than perhaps more realistic assumptions would do.

David Walker: Still other reports suffer a different problem: their authors fail to hear the public’s various views on the issues involved.

Gary Banks: I mean, there are public reports and public reports. And those that are made public, but don't have a strong public input along the way – in other words, don't have a process that engages the public – are quite different, and in my view much less effective than the other sort.

David Walker: Now that we’ve looked at the failures, let's look at the successes. For Gary Banks, one standout is the 1993 Hilmer Competition Review, chaired by former Australian McKinsey & Co chief Professor Fred Hilmer. Banks sees that Hilmer report as one of Australia’s most productive public reports of recent decades. And that’s in part because it made competition an easier idea to sell to both parliament and to the public.

Gary Banks: Yes, I think it is a standout. And ... the Productivity Commission did a review of national competition policy when we looked at some of the reasons for that. And it sort of ticked all the boxes in terms of what you'd think of as an ideal process.

• It had clear terms of reference about looking at impediments to competition – and there were lots of them in the Australian economy.
• It didn't rule anything out.
• It engaged the states as well as the Commonwealth, because many of those issues with infrastructure etc were state-based.
• It had a task force that was very suited to the task, and a good team of people writing and doing the research.
• Then they followed a process that was very engaging with the public in terms of, you know, issues papers and discussion papers and a draft report.
• And Hilmer himself is quite an engaging fellow, and he performed quite well on television in terms of explaining why all of this needed to be done.

And then, of course, when you look at the outcome from that, because it was such a successful process and it build a lot of credibility, the government was able to implement a lot of its recommendations. And it's had quite a significant effect on GDP and on material prosperity in Australia, I think, in areas where we can't go back. There have been ongoing, definitive changes in the way things are done in Australia.

I think the notion that government services should also be in a competitive context, as well as other things, I think was quite important – and infrastructure services in particular. So while there are complaints about different forms of infrastructure, I think the old approach in just about any area you can think of government of almost a government monopoly was very high cost, very unresponsive to consumer demand, and so on. So I think that was that was an important step. But just the notion that the competition was important, and that regulations needed to, in a sense, pass a competition test, rather than just be, you know, promulgated on the basis of the presumed benefits – so looking at both the cost and the benefits – I think was a way of thinking that was broadly accepted as a result of that inquiry. That's not to say that governments have always followed it. But that was quite important, I think.

David Walker: Now before we end this podcast, we need to focus on an idea that is a constant presence in Gary Banks’ writings in this area. It’s the concept of public engagement, which he sees as crucial to the success of public reports. He has argued for processes that have public input right through, including feedback on a discussion paper and a draft report. And he has also argued that face-to-face meetings will elicit information that you can't get in any other way.

Gary Banks: I think for the kind of policy issue or problem where public engagement is important, it's not enough to simply ask people for their views and have them on the website or something like that. It's important to be able to discuss the issues with the public, or the interested public. So that's why I say that face-to-face interaction – going to businesses, going to different regions, talking to different members of society, in a two-way, interactive sort of way – is a really important part of it. And a point that you've raised came up again, and again: in various inquiries and reports that I was involved in, we talked to people sort of off-the-record initially, to get a sense of what they thought was important. And we get wonderful insights, which often were not reflected as well in the formal submission, that was a public document, that came out – often because of reasons you can imagine, you know, a business didn't want to stick its head up too high, and be controversial and so on. So I always felt we got the best of both worlds: we got the insights, which was important in terms of how we directed our research, and we got the formal submission, which sort of clarified some of the broader issues that were important. But we were able to get both. If we just for example, said "this is a public inquiry or public report; anyone who's got any views, send us an email" or whatever, we'd never get that richness coming through. And that richness is important when you have to make a judgement about which way to go in terms of recommendations because it always does come down to judgment. It's never black and white. And so the judgment typically is better if it's been informed by a wide range of meetings and discussions that you've had with a range of people. The inquiry that comes to mind that was most important in that respect was the one we did on the gambling industries, the first one, which was in about 1999. And you might recall at that time, there was a, there was a war between the social welfare community and the gambling industries. And they were at loggerheads. And we had that inquiry. And we were able to bring both sides literally around the table and have discussions – and they were quite well behaved – and we got them to agree, at least, about some of the issues and the problems, which I don't think would ever have happened if it had been a different kind of less public, less interactive inquiry.

David Walker: Banks led several reviews in this way. One was an inquiry into gambling in Australia.

Gary Banks: If we're talking about the gambling inquiry, so here's an interesting thing. I headed that inquiry, with a chap called Robert Fitzgerald, who was the president of ACOSS – he'd been the president of ACOSS, I don't think he was at that time. He approached the issue as "gambling was a bad thing". I approached it more as "well, gambling is something people like to do, so let them do it". So we were kind of at opposite ends, right? We ended up in the middle, where we came to the view that gambling was the sort of area which involved both social costs, but also social benefits, and that the trick in regulation was to reduce the social costs without unduly reducing the benefits to people who aren't harmed by it. And we both agreed on that. And then it was a matter of "Well, what are the particular regulations? How would you frame them?" and so on. And I think that meeting of minds, in my case, anyway, came about through people attending public hearings, and just telling me their story, you know. You can't generalize on the basis of individual stories, but it can help you understand the bigger picture, I think. And so the Commission has the benefit of a research team that can actually pick up an insight that you might have got from an individual related to his addiction to gambling, and think about the wider implications of that and how you could you could generalize a policy response that would help him, but would also help a wider range of people. Now, that's rather different to ... sometimes politicians will speak to somebody in their electorate, who will give them an idea and they'll run with it. Whereas the commission would test that idea through a public draft report. And if we got enough support, and there was no big issues raised against it, it may well find its way into the final report and so on. But it will have been stress tested, which was quite important.

David Walker: Banks argues that reviews often gain from listening to individual members of the public.

Gary Banks: I've still got in my mind a public hearing in Adelaide. And a fellow turned up at the hearings – and it was, it was a public hearing – and he was quite brave to do it, because he told us his story, you know, about how he had become addicted to the gambling. And he said his low point was hocking his children's Christmas presents to get money so he could go and play the pokies. And he was so ashamed of it, you know. And he said: If there only been somebody who could have, you know, he could have gone to and talk to him about his problems and so on. And so he said the sort of things that would have helped him both in terms of counseling, but also in terms of his ability to keep using the ATM when it was, you know, when he was in a gambling, fever and things like that. He mentioned a number of things that would have helped him which when we sort of did the research and thought about them a lot more, we felt, you know, would fly more generally. So I do remember that fellow. I wouldn't recognize him if I saw him now, but his words are still in my head.

Show notes

Guest

Gary Banks, former head of Australia's federal Productivity Commission