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High quality strategic thinking needed to prevent Greek style challenges here

17 Jul 2015

The University of Sydney Business School

By Suresh Cuganesan

As the world continues to ponder the challenges Greece faces it is time that domestically we pay more attention to Australia’s version of the same problem. Yes we do not face the prospect of a big bang default on our debt. But our problem is no less significant, resembling a slowly ticking time bomb that, if left unaddressed, will result in reduced living standards and substandard public services for future generations.

Consider some sobering statistics from this year’s Inter-generational report. By 2054-55 the number of Australians aged 65 is expected to be more than double what it is today, with the ratio of people of traditional working age to people over 65 halving. Although age is no indicator of a person’s ability to contribute to society, statistics such as these nevertheless highlight the fiscal challenges facing Australia as its population ages, not least in areas of health and aged care spending. Growing levels of income inequality will also increase demand for social services and income support while proactive measures such as stimulating new industries and creating world-class innovation systems will require sizeable public expenditure if we are going to achieve meaningful economic transformation. Collectively these paint a somewhat concerning picture for future budgets and the ability of government to contribute to the wellbeing of our nation, especially when you consider recent warnings by the IMF of a low growth ‘new normal’ for developed economies such as Australia.

It really is no wonder then that current debates in Australia resemble in part those going on in Greece – if and how we raise taxes such as GST? How we will curb public spending? How do we grow our economy and stimulate growth? Much of the conversation to date has centred upon the will of politicians to engage in bipartisanship and think beyond short-term voting effects. It is time that we shift this to also focus on the quality of strategic thinking amongst the executive branch of government, comprising those running our government agencies and departments.

We, the public, should ask more questions of whether public resources are being spent in the best way to address the problems we face, whether existing programs are achieving desired outcomes and how government departments and agencies are innovating and collaborating to achieve more with less. Consider the areas of health and social services – the right prevention strategies could reduce subsequent drain in hospitals, the justice system and income support. Consider also investments and assistance programs to industry – while much of this is driven by political ideology we should ask questions about the ‘business case’ and whether these in fact are being delivered.

To date, strategy and performance amongst the executive branch of government has been somewhat opaque. Lots of documents and numbers are produced but the logic behind much of what government does has been difficult to unravel and test. However, in the Commonwealth public sector at least we shall soon be able to assess the quality of strategic thinking. Legislation introduced in 2013 titled the Public Governance, Performance and Accountability Act requires all Commonwealth entities to prepare corporate plans, with associated rules requiring these to be publicly available. To be fair, a number of Commonwealth Departments already do this, however the disclosure of these plans and their content has been highly variable. The first tranche of corporate plans becomes available in August 2016, and requires Commonwealth entities to explain their purpose, outline both the strategies they will undertake and the performance they expect, and discuss the capabilities they will build and leverage in support of strategy. The hope is to wean the public sector away from an annual budget spend mentality and shift it towards medium- to long-term strategic thinking.

Ideally these documents will function much like an investment prospectus; making the case for ongoing investment in the Commonwealth entity and the programs it undertakes, and providing confidence in its managements’ ability to achieve purpose and be effective and efficient in doing so. The risk of course is that the process is seen as an opportunity for window dressing or a box ticking exercise. Thus the challenge is there for our politicians to likewise adopt a strategic mindset in taking up these corporate plans and asking the right questions about strategy, performance and risk as they exercise their parliamentary duty. If we, the community, do so as well then perhaps all branches of government will become more strategic in thinking through how our slowly unfolding Greek tragedy may be best avoided.

First published in The University of Sydney Business School

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