#3 December 2000 - Melbourne Institute News

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ISSN 1442-9519

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Issue 3 December 2000

‘HILDA’ Survey and Welfare Reform Conference

In September the Federal Minister for Family and Community Services, Senator Jocelyn Newman, announced that a Melbourne Institute-led consortium had been commissioned to conduct one of the most comprehensive long-term studies into Australian households ever undertaken in this country, the Household, Income and Labour Dynamics in Australia (HILDA) survey.

Most leading industrial nations conduct such household-based longitudinal surveys, which provide a wide variety of information. Until now Australia has been a notable exception. The allocation of funding to this project by the Federal Government is thus to be welcomed.

The primary objective of the HILDA is to support research questions surrounding the following three broad and interrelated areas.

First, income dynamics—focusing on low to middle income households and their responses to policy changes aimed at improving financial incentives, and interactions between changes in family status and poverty.

Second, labour market dynamics—focusing on low to middle income households (including the role of part-time and casual jobs in escaping poverty), female participation and work-toretirement transitions.

Finally, family dynamics—focusing on separation/divorce and social/economic status, and

on any links between income support and family formation/breakdown. (continued on page 4) Photo: Michael Silver

Melbourne Institute Embarks on ‘HILDA’ Survey

Melbourne Institute Hosts Welfare Reform Conference On 9–10 November the Melbourne Institute in conjunction with the Department of Family and Community Services hosted a two-day conference on Welfare Reform at the University of Melbourne. The aims of this conference were: • to facilitate participants’ understanding of the reforms proposed by the report of the Reference Group on Welfare Reform; • to provide a US, UK and OECD perspective on welfare reform and elicit implied lessons for Australia; and • to provide interested parties with a forum to discuss and debate both the findings and recommendations of the recently released report of the Reference Group on Welfare Reform, and the issues surrounding welfare reform more generally.

Speakers at the conference included members of the Reference Group on Welfare Reform, international experts on welfare reform, and a number of prominent Australian academics and representatives of business and the community sector.

Forthcoming Events (provisional dates) •

Melbourne Institute Business Economics Forum (Melbourne) on 29 March 2001

•

Melbourne Institute Business Economics Forum (Sydney) on 5 April 2001

•

Melbourne Institute Public Economics Forum (Canberra) on 4 April 2001 See page 7

Melbourne Institute of Applied Economic and Social Research The University of Melbourne, Victoria 3010 Australia Phone: +61 3 8344 5330 Fax: +61 3 8344 5630 Email: melb.inst@iaesr.unimelb.edu.au WWW: http://www.melbourneinstitute.com  2000 The University of Melbourne, Melbourne Institute of Applied Economic nd Soci l Rese rch

Senator Jocelyn Newman, Minister for Family and Community Services, addressing the Welfare Reform Conference. The Shadow Minister and the Leader of the Democrats also addressed the conference.

On the first day Mr Patrick McClure, Chairman of the Reference Group on Welfare Reform and CEO of Mission Australia, presented an overview of the Final Report of the Reference Group.

Professor Peter Saunders (University of New South Wales) and Associate Professor Alison McClelland (La Trobe University) provided discussants’ comments. (continued on page 4)

★★ Inside Stories ★★ •

New staff. See page 3

•

Melbourne Institute economic forecasts on track. See page 5

•

R&D and Intellectual Property Scoreboard released. See page 6

•

Report on November Forums on innovation and R&D policy. See page 7

Hard Heads, Soft Hearts: Director’s Letter Introduction I would like to take this opportunity to comment on some of the exciting developments in the Melbourne Institute since the last newsletter. I will also make some remarks about some important policy decisions that the Commonwealth Government will be making soon.

Centre for Business Cycle Analysis Acclaimed This year the Melbourne Institute’s Centre for Business Cycle Analysis was reviewed by a panel chaired by the University’s Professor John Freebairn, who was joined by two external reviewers, Professor Alan Layton (QUT) and Mr Tony Cole (William M. Mercer). More details are provided on page 3, but it was a very pleasing report in which it was stated that ‘the Centre has been an impressive performer in recent years and especially since 1998’. It made a particular point of commending the Centre on its economic forecasting performance.

For those interested in the Centre’s latest economic forecasts, their outlook remains positive, albeit with some slowing in growth expected in 2001. More details can be found in the fourth quarter issue of the Mercer – Melbourne Institute Quarterly Bulletin of Economic Trends.

HILDA and the Value of Longitudinal Data We are delighted to have secured the contract from the Department of Family and Community Services to design and manage the new survey of Household, Income and Labour Dynamics in Australia (HILDA) in association with the Australian Council for Educational Research and the Australian Institute of Family Studies.

At our recent conference on Welfare Reform we were also delighted to hear from the Minister for Family and Community Services and from the Shadow Minister about how important they both considered the HILDA initiative to be.

Most leading industrial nations now conduct household-based longitudinal surveys which provide a wide variety of information about households and their individual members. Australia, however, is a notable exception. Australian policy-makers and researchers thus do not have access to a data set that is both representative of the Australian population and provides information on the dynamic nature of events and how they interact in influencing the changing be-

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haviour and fortunes of Australian households, families and individuals.

To quote a leading international expert on social policy, Dr Nicholas Barr of the LSE, ‘the case for gathering longitudinal data despite its costs is that it allows analysis of major policy problems, which are intractable without it’. Barr provided the following examples of the sorts of policy-related research questions which longitudinal data can assist in analysing: Is poverty transient or is it a long-term issue for many people?

How do we help people get back into work?

What are the incentive effects of income transfers? What factors determine choices about postcompulsory education and investment in human capital?

The Importance of Research and Evaluation in Welfare Reform HILDA promises to be a key source of data that will help policy makers in future years to evaluate some of the welfare reforms implemented following the report of the Reference Group on Welfare Reform, of which I was a member. It was certainly one of our main thrusts that, in the process of reforming welfare, research and evaluation was a very important ingredient.

How relevant HILDA turns out to be in such a process will depend partly on the sample size especially of low-income families. This issue is under discussion at present. It would be wrong, however, to see HILDA as purely a policy evaluation tool. It has much broader aims than that.

Further, evaluation of welfare reform will require a battery of research techniques, including policy ‘experiments’ or ‘pilots’, as well as behavioural micro-simulation modelling of the kind that we are beginning at the Melbourne Institute with the MITTS model (the Melbourne Institute Tax and Transfer Simulator).

cantly more in support services and incentives for people who are heavily reliant on income support to engage more successfully in the labour market, I found Rod Maddock’s argument, at these forums, that the government should also invest more in R&D quite persuasive. If his argument is right, such investment would help Australia’s medium to long-run productivity and growth performance.

While it is hard to be certain about the exact size of the benefits that flow from public support of R&D, there is a strong case for reversing the apparent reduction in public support for R&D of recent years, in the light of evidence about the social rate of return to R&D. Then, of course, there is the case for increasing public investment in education! It is just as well that the economy has been performing strongly, which is contributing to higher government revenue than projected. Given this, there is a credible case for increasing investment in R&D and education to help sustain strong economic growth in the medium to long term. There is also a strong case for investing in welfare reform to help ensure that the benefits of growth are more equally dispersed (and that the effective labour supply is expanded, which will also help to sustain growth). Of course if all these things work they will be mutually reinforcing!

The challenge for government is to respond effectively to these arguments, while at the same time satisfying financial markets that it is pursuing a prudent budgetary policy. At least if the Melbourne Institute’s growth forecasts are as accurate over the next two years as they have been for the last four, the challenge will be easier to meet than if some of the more gloomy pundits turn out to be right.

1 December 2000 Innovation and R&D While the Commonwealth Government has been considering its response to the McClure Report, it has also been considering what to do on innovation policy. After our two-day conference on Welfare Reform in November, our Business Economics Forum in Melbourne and our Public Economics Forum in Canberra focused on R&D and innovation policy. We released the 2000 R&D and Intellectual Property Scoreboard at the forums (see pages 6 and 7).

Having become convinced that there is a very strong case for government investing signifi-

Professor Peter Dawkins Ronald Henderson Professor and Director

News on Staff and Other Developments Positive Review of Business Cycle Centre Earlier this year a review committee was established to undertake an independent review of the performance and future plans of the Melbourne Institute’s Centre for Business Cycle Analysis.

The Review Committee comprised Professor John Freebairn (Faculty of Economics at the University of Melbourne), Professor Alan Layton (Queensland University of Technology), and Mr Tony Cole (William M Mercer).

In presenting their findings to the Melbourne Institute the Review Committee applauded the Centre’s impressive performance in recent years. In particular, the Review Committee praised the Centre’s macroeconomic forecasts: The Centre was one of the very few economic forecasters to forecast the robust performance of the Australian economy during the period of the Asian economic meltdown and subsequently. In part this was an outcome of the development and use of recently developed econometric techniques in conjunction with the use of previous tools of leading and coincident indicators.

The Review Committee also applauded the Centre’s state-of-the-art business cycle analysis and strong commercial focus. ‘The Centre is clearly at the forefront of Australian analysis’, the Committee stated in their report.

New Business Cycle Centre Staff • Lei Lei Song joined the Melbourne Institute in December and will be working with the Centre for Business Cycle Analysis. Lei Lei’s main research interest is in applied macroeconomics and applied econometrics. Lei Lei has almost completed a PhD in economics at the University of Melbourne and most recently worked in the Economics Department of the University of Melbourne on a re-

search project on long-term forecasting of the Chinese economy, and as a tutor.

• Duy Tran joined the Melbourne Institute in December and will also be working in the Centre for Business Cycle Analysis. Duy’s main interests are both theoretical and applied econometrics. Duy recently completed a bachelor of agricultural economics degree at the University of New England and from July until November worked as an associate lecturer in Economics at the University of Queensland.

Ms Nicole Watson HILDA Survey Manager

Visiting Professor Professor Derek Bosworth, from the University of Manchester Institute of Science and Technology (UMIST), visited the Melbourne Institute in the week commencing 20 November. Professor Bosworth is a participant in the Melbourne Institute’s Enterprise Performance Research Program. During his visit he discussed future possible collaboration with the Melbourne Institute on research into the economics of innovation and intellectual property.

Professor Bosworth presented a seminar at the University of Melbourne on Intellectual Property, Innovation and Company Performance.

He was also a discussant at the Melbourne Institute Business Economics Forum in Melbourne on 21 November.

formation technology from the University of Western Australia. Prior to joining the Melbourne Institute she worked at the Australian Bureau of Statistics in Canberra and the Department of Human Services in Melbourne.

• Joanna Sikora joined the Melbourne Institute in August, working on the International Social Science Survey, Australia project. She is primarily involved with putting together an international database on income inequality, the International Economic Survey Unit-Record Database (IESUD). Joanna was previously employed with the Australian Bureau of Statistics and has recently submitted her PhD on public attitudes to government ownership in several countries.

Other New Staff The Melbourne Institute is pleased to announce a number of other new staff appointments.

• Nicole Watson was appointed as the Survey Manager for the HILDA project and joined the Melbourne Institute in October. Nicole has an honours degree in statistics and in-

Ms Joanna Sikora Research Officer

Business Cycle team from left: Anne Leahy, Penny Smith, Duy Tran, Don Harding, Matt Hammill and Peter Summers

• Dr Guyonne Kalb will join the Melbourne Institute in January 2001 and will be involved primarily in research related to the economics of social policy. Guyonne has a PhD in econometrics and was most recently employed at Monash University in modelling household labour supply and welfare participation.

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Labour, Social and Fiscal Studies Melbourne Institute Embarks on ‘HILDA’ Survey (continued from p. 1) The Government has set aside $7 million over four years for the HILDA survey. The project will involve surveying around 8000 households and the project leader is Mark Wooden of the Melbourne Institute.

HILDA is presently at the planning stage. During the first half of calendar year 2001 pilot testing will be undertaken in order to establish and refine the methodology to be used and to test the questionnaire to ensure its effectiveness. The first surveys will be undertaken over a four to six month period during the 2001–02 fiscal year, with the preliminary results from these surveys to be presented to the Commonwealth Government at the end of that fiscal year. The surveys will then be repeated in the following two years.

The two other leading research organisations involved in the project are the Australian Council for Educational Research (ACER) and the Australian Institute of Family Studies (AIFS). All three members of the consortium have extensive experience in survey design and implementation and bring together a unique blend of relevant skills and experience to design, develop, and manage the HILDA survey.

Melbourne Institute Hosts Welfare Reform Conference (continued from p. 1) This was followed by a number of speakers presenting an international overview of welfare policy developments. These were Mr Peter Scherer, from the Organisation for Economic Cooperation and Development (OECD), presenting a broad international perspective; Mr

David Butler, from Manpower Demonstration Corporation in New York, presenting the US experience; Mr Alan Duncan, from the University of Nottingham, presenting the British experience; and Mr Tim Maloney, from the University of Auckland, presenting the New Zealand experience.

The second day of the conference commenced with a presentation by the Melbourne Institute’s Director, Professor Peter Dawkins, which looked at the options for reforming the income support system in Australia, with a particular focus on increasing work incentives and achieving a simpler and more integrated system.

Peter Dawkins was followed by Professor Anna Yeatman (Macquarie University), who discussed the issues surrounding mutual obligation, and Professor Mark Lyons (University of Technology in Sydney), who discussed service delivery issues and social partnerships.

Senator Jocelyn Newman MP, Minister for Family and Community Services, addressed the conference as did Mr Wayne Swan MP, Shadow Minister for Family and Community Services and Senator Meg Lees, Leader of the Democrats. It was clear that there is widespread political support for welfare reform involving measures of various kinds, many of which were canvassed in the McClure report, albeit with some different emphases.

Other discussants to respond and stimulate debate on the critical issues being addressed at the two-day conference included Professor Bob Gregory (ANU), Mr David Kalisch (Department of Family and Community Services), Professor Bob Goodin (ANU), Professor Judith Sloan (Productivity Commission), Dr Bruce Bradbury (University of New South Wales), Ms Elizabeth

Morgan (Morgan, Disney and Associates), Mr Ian Spicer (National Disability Advisory Council), Father Nic Frances (Brotherhood of St. Laurence), Mr David Thompson (Jobs Australia), Dr Rod Maddock (Business Council of Australia), and Mr Michael Raper (ACOSS).

With in excess of 350 attendees at the two-day conference, largely from business, government and non-profit organisations, the high level of interest in the issue of welfare reform in Australia is very evident. The quality of the discussion involving people from many different backgrounds and perspectives was a feature of the conference.

By the time this newsletter is released the Federal Government is expected to have released its response to the Report, outlining how it plans to proceed with welfare reform.

Literature Review on Unemployment The Melbourne Institute recently published a compendium of five working papers which represent a literature review on unemployment in Australia. These papers are the result of work being undertaken as part of a collaborative research program entitled ‘Unemployment in Australia: Economic Analysis and Policy Modelling’.

The project is being supported by the Australian Research Council and other collaborative partners which include the Department of Family and Community Services; the Department of Employment, Workplace Relations and Small Business; and the Productivity Commission.

The working paper titles are listed below.

• Labour Market Models of Unemployment in Australia by Jeff Borland and Ian McDonald • Disaggregated Models of Unemployment in Australia by Jeff Borland • Cross-Country Studies of Unemployment in Australia by Jeff Borland and Ian McDonald • The Labour Market in Macroeconomic Models of the Australian Economy by Jim Thomson • Labour Market Analysis with VAR Models

by Peter Summers

From left: Mr Peter Scherer (OECD), Mr David Butler (Manpower Demonstration Corporation, New York), Mr David Kalisch (Department of Family and Community Services) and Professor Bob Goodin (ANU) at the Welfare Reform Conference

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The papers are available individually, or as a compendium with an executive summary by Professor John Freebairn of the Department of Economics at the University of Melbourne. (See last page for further details.)

Business Cycles and Forecasting Reading on the Economy The economic environment continues to be a challenging one for those in the business of explaining the present and forecasting the future.

This is particularly so when the past is subject to continual, and sometimes major, revision. At the Melbourne Institute we have met this challenge with a forecasting model built by Peter Summers.

As Don Harding showed in issue 2.00 of the Mercer – Melbourne Institute Quarterly Bulletin of Economic Trends the forecast errors made using this model have been of the same size as the revisions in the ABS data that are being forecast.

The March and June quarter National Accounts elicited considerable press comment about the failure of economic forecasters to get anywhere near the mark. The year-end growth rates were 4.4 per cent in March and 4.8 per cent in June. Forecasters were a long way under the March quarter growth number and then over-predicted the June number. In the event, the Melbourne Institute’s forecasts of 4.3 per cent and 5.4 per cent growth in the four quarters to March and June respectively were not far from the mark.

As expected, given the uncertainty surrounding the impact of the introduction of the new tax system on 1 July, monetary policy has been on hold since the Reserve Bank last raised rates in early August.

Those who at the end of 1999 sought an accurate guide to macroeconomic performance during the implementation of the GST would have been well served by adopting Peter Summers’ forecasts and simulations of alternative scenarios in the 4.99 issue of the Mercer – Melbourne Institute Quarterly Bulletin of Economic Trends. Most notably, the Melbourne Institute predicted the reduction in the unemployment rate as well as the underlying inflation rate, which remained in the RBA target range in September 2000.

The economy should continue to perform strongly in the coming quarters, although growth is expected to start slowing in the first half of 2001. The Westpac – Melbourne Institute Indexes of Economic Activity for October support this view. While the leading index points to a slowing in growth below trend in the next six months, after making adjustments to take account of the distorting effects of the tax changes (on the building sector in particular) the leading index indicates only a modest slowdown in

growth. The coincident index also suggests that growth remained strong in the September quarter.

Arguably, however, the risks to this scenario have increased in recent months. In particular, and as discussed in the above mentioned report, the risks on the inflation front would have appeared to have increased, with the Australian dollar reaching new lows against the US dollar, oil prices remaining high and an escalation of tensions in the Middle East. The last two factors also threaten to lower world growth.

Monitoring the GST The new tax system has now been in operation for four months and the last of the Melbourne Institute’s series entitled Monitoring the GST was released at the start of October. The initial report in this series, which was produced in late May, and its five updates provide valuable information about consumer attitudes to the July 1 tax package prior to its implementation and during the early months of its operation. Monthly surveys of 1200 households provided the basis for these reports.

In the pre-GST period there was significant uncertainty about the effect of the GST on people’s personal situations and on the situation of the nation as a whole. People also generally overestimated the effect of the GST on price inflation and underestimated the amount of compensation they would receive in the form of tax cuts and increased benefits. This uncertainty was reflected in weaker than expected consumer spending in the first five months of the year.

In June, however, spending rebounded ahead of the introduction of the GST. Meanwhile, in July the Melbourne Institute’s index of consumer sentiment also rebounded in the wake of the smooth transition to the new tax system, reflecting a reduction in the level of anxiety about the new system.

However, uncertainty about the effects of the tax changes remained significant in September, when the last of the Monitoring the GST surveys was undertaken. In the September survey some 82.7 per cent of respondents reported some understanding of the tax changes, up just 5.2 percentage points from 77.6 per cent of respondents in the April 2000 survey. Looked at another way, in September most people reported that they did not fully understand the changes: only 28.4 per cent reported a full understanding of the impact of the changes on their personal situation; and only 17.2 per cent re-

ported a full understanding of the national implications.

The surveys provide a guide to the possible impact of the tax changes on household saving.

In the April survey 73 per cent of respondents reported that they would spend all of the increase in after-tax income and benefits resulting from the tax changes. However, by the September survey 43 per cent of respondents said that they would save all the tax cuts. This development reflects consumers’ initial underestimation of the increase in after-tax income and benefits that would occur under the new system. This implies that the overall tax package may have a less expansionary effect on the economy than previously expected.

In September 42 per cent of respondents reported price increases of 10 per cent since June; this overestimation along with responses to other inflation-related questions indicates that a large part of the population remained confused about the impact of the GST on inflation.

With widespread volatility in retail sales and building activity data in recent months associated with the tax changes, employment data have been the best indicator of the strength of the Australian economy during the transition period of the tax package, as expected.

Business Economics Forums The June 15 Melbourne Institute Business Economics Forum provided a useful opportunity to discuss the likely impact of the GST on the economy. Peter Summers presented the latest forecasts for the economy and Don Harding discussed the Melbourne Institute’s surveybased work in this regard and the usefulness of these findings to the Melbourne Institute’s forecasting during the implementation of the new tax system. Bill Evans from Westpac and Paul Braddick from the ANZ were the respondents.

At the October 13 Business Economics Forum in Melbourne the special topic for the meeting was industrial relations reform. The Minister for Employment, Workplace Relations and Small Business, The Hon. Peter Reith MP, was the leading speaker. Mark Wooden of the Melbourne Institute provided an assessment of the extent of reform and the prospect for further reform.

Meanwhile Ross Garnaut from the ANU provided a broader perspective on the issue of industrial relations reform.

Both meetings were strongly attended. The November 21 Business Economics Forum is discussed on page 7.

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Enterprise Performance R&D and Intellectual Property Scoreboard 2000

Management and Industrial Relations Practices in Australian Workplaces

The R&D and Intellectual Property Scoreboard 2000 was launched on 21 and 28 November at the Melbourne and Canberra Business Economics Forum and Public Economics Forum respectively (see last page for R&D and Intellectual details). It is in its Property Scoreboard third year of production and provides the most comprehensive assessment to date of the innovative activities of large Australian enterprises. It is produced by the Melbourne Institute in association with IP Australia and IBIS Business Information.

The Scoreboard collates information on four different measures of innovation: expenditure on R&D, and the number of applications for patents, trademarks and designs.

The data on large Australian firms included in the Scoreboard are taken from the IBIS database. In 1998 the database included financial information, including R&D expenditure, for 2240 firms. Patent, trademark and design application data come from IP Australia.

The R&D and Intellectual Property Scoreboard 2000 provides rankings (by absolute amount and intensity) of the top 50 firms for each of the innovation measures. In 1998–99, the latest year for which data are available, overall expenditure by business on R&D fell for the third year in a row. However, for six of the top ten firms R&D spending rose in 1998–99.

This publication also includes an innovation index to identify Australia’s most innovative firms. This index incorporates a firm’s R&D expenditure, patent, trademark and design applications into a single measure. Firm size is controlled for by taking account of a firm’s assets. This more comprehensive measure of innovation produces a very different top-ten list to that produced by looking at R&D expenditure.

Poor industrial relations performance can be costly to firms. In particular, employee resignations, employee absence, industrial action and substandard relations between management and employees can all have a detrimental effect on the performance of a firm. Joanne Loundes has used the 1995 Australian Workplace and Industrial Relations Survey (AWIRS) to examine how particular human resource management techniques and industrial relations settings can influence the industrial relations outcomes of Australian workplaces. Her analysis indicates that unions have played an important role in affecting workplace performance outcomes. It also suggests that while particular human resource management techniques can also influence workplace performance, there is not a single bundle of human resource management policies that will apply across workplaces to affect all measures of performance in the same way. The results of her analysis are reported in a working paper entitled Management and Industrial Relations Practices and Outcomes in Australian Workplaces. (See last page for details.)

Enterprise Performance Research Continues Further Melbourne Institute research examining the performance of Australian enterprises is outlined below. This research is part of a greater body of research funded by a three-year Australia Research Council (ARC) SPIRT grant.

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Research Fellow Ms Joanne Loundes working on the Management and Industrial Relations Practices Project

Diversification and Firm Performance The issue of the optimal level of firm diversification has been of interest to management analysts for some time. It has been argued in both Australia and the United States that in the 1960s and 1970s many firms failed to ‘stick to their knitting’ and that those that did focus on key competencies achieved a higher performance. In assessing such propositions many case study

analyses have reviewed a relatively small number of firms. Mark Rogers has analysed the association between diversification and firm performance in a sample of up to 1449 Australian firms over the period 1994 to 1997. Firm performance is measured by profitability and, for publicly listed firms, market value. Results from the full sample do in fact show that more focused firms have higher profitability. This result controls for firm-specific effects and other determinants of performance. However, this association is not found in sub-sample regressions that use a dynamic panel model, or when market value is used as a performance measure. The detailed findings of this study are yet to be published.

Training for the Skilled Trades This project aims to document and analyse factors affecting the attraction, retention and career progression of people through the metals, construction, vehicle and electrical trades in Australia during the past 10 to 15 years. Specifically it considers the extent to which training-linked career paths have developed in Australia over this period.

Obstacles and barriers inhibiting the formation of appropriate skills were widely discussed and debated in Australia during the late 1980s.

Common issues included the heavy reliance on apprenticeship for many areas of skill formation, the inaccessibility of apprenticeship to many workers, the lack of modular training courses, lack of recognition of prior learning and the narrow definition of skill clusters. Elizabeth Webster, with assistance from several Melbourne Institute staff, is currently assessing how far these barriers have been removed.

The study also considers the relative attractiveness of working in the skilled trades by comparing how much extra financial and nonfinancial satisfaction people get from undertaking skilled vocational training compared with other schooling or qualification options. Work on the effects of vocational training on work satisfaction is limited and studies which try to quantify the financial rewards are also few in number, especially in Australia.

Finally, the study looks at the perennial question of attrition from the trades. Specifically, whether the provision of additional forms of training affects attrition from the trades.

The findings from this research will be published by the National Council for Vocational Education Research late in 2000.

November Forums on Innovation and R&D Policy

Photo: Irene Dowdy

At the November Business Economics Forum in Melbourne and the Public Economics Forum in Canberra the R&D and Intellectual Property Scoreboard 2000 (see page 6) was launched and a stimulating discussion was held on innovation and R&D policy.

expenditure probably were more rational than tax concessions because of the wide variety of tax liabilities that companies faced. Derek Bosworth argued that rather than a higher tax concession for all R&D, there was a strong case for a tax concession for increments to R&D. Discussants in Canberra were Mr Gary Banks (Chairman of the Productivity Commission) and Dr Mike Nahan (Institute of Public Affairs). The Productivity Commission (and one of its predecessors, the Bureau of Industry Economics) has been the main source of Australian research on R&D policy and Gary Banks gave the Canberra audience the benefit of the accumulated wisdom of this analysis as well as his assessment of the pros and cons of Dr Maddock’s argument and

various policy approaches. Mike Nahan presented some useful international comparisons and commented on the balance between public and private sector R&D. He provided some support for the idea of the tax concession policy, but stressed that regulatory impediments to innovation in the market place were major obstacles that needed to be addressed.

IP Australia was also represented at these forums by Dr Ian Heath (Director General) and Mr Rick Gould (Deputy Director General) at the Canberra and Melbourne forums respectively.

They presented information on trends in patents and trademarks and commented on issues relating to intellectual property policy, another very important aspect of innovation policy.

Dr Rod Maddock (Chief Economist and Assistant Director of the Business Council of Australia) made the case for increasing the tax concession for R&D expenditure back to its former 150 per cent deductibility level. His paper (originally published in BCA Papers) was reprinted in the fourth quarter issue of the Mercer – Melbourne Institute Quarterly Bulletin of Economic Trends.

Discussants at the Melbourne forum were Professor John Freebairn (University of Melbourne) and Professor Derek Bosworth (a leading international expert on the economics of innovation) from UMIST in the UK. John Freebairn argued that direct subsidies linked to R&D

Photo: Irene Dowdy

Dr Rod Maddock (Business Council of Australia) speaking at the Canberra Forum

From left: Professor Peter Dawkins (Melbourne Institute), Dr Mike Nahan (Institute of Public Affairs), Dr Rod Maddock (Business Council of Australia), Dr Michael Keating (ANU and Co-Chair of the Melbourne Institute Public Economics Forum), Mr Gary Banks (Productivity Commission) and Dr Ian Heath (IP Australia)

Forthcoming Events (provisional dates) • Melbourne Institute Business Economics Forum (Melbourne) 7.30am – 9.00am Thursday 29 March 2001, Melbourne The focus of this meeting will be a presentation of the Melbourne Institute’s outlook for the Australian and world economies. Speakers are yet to be finalised.

• Melbourne Institute Business Economics Forum (Sydney) Lunchtime Thursday 5 April 2001, Sydney This inaugural Sydney Forum will include a presentation of the Melbourne Institute’s outlook for the Australian and world economies. Mr Glenn Stevens, Assistant Governor of the Reserve Bank, will be one of the speakers. Mr Bill Evans of Westpac will also be a commentator.

• Melbourne Institute Public Economics Forum (Canberra) 12.00am – 1.45pm Wednesday 4 April 2001, Canberra The special topic to be addressed at this briefing will be higher education policy. Guest speakers and respondents are yet to be finalised.

For information on Melbourne Institute Forums, please contact Karen Roe on (03) 8344 7885.

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Melbourne Institute Publications Journals The Australian Economic Review (Australia’s leading economic policy journal; quarterly) Australian Social Monitor (6 issues per year) Mercer – Melbourne Institute Quarterly Bulletin of Economic Trends Macroeconomic and Social Indicators Westpac – Melbourne Institute Indexes of Economic Activity (monthly) Westpac – Melbourne Institute Survey of Consumer Sentiment (monthly) Melbourne Institute Survey of Consumer Inflationary Expectations (Sponsored by the Reserve Bank; monthly) Westpac – Melbourne Institute Survey of Consumer Sentiment: NSW, Vic., Qld, WA (quarterly) Mercantile Mutual – Melbourne Institute Household Saving Report (quarterly) Melbourne Institute Wages Report (quarterly) Poverty Lines: Australia (quarterly) Recent Working Papers Most of our working papers can be downloaded from the Melbourne Institute website. A list of the most recent working papers follows: 11/00 Modelling the Impact of Environmental

Regulations on Bilateral Trade Flows: OECD, 1990–1996 by Mark N. Harris, László Kónya and László Mátyás 12/00 Management and Industrial Relations Practices and Outcomes in Australian Workplaces by Joanne Loundes 13/00 Habit Persistence in Effective Tax Rates: Evidence Using Australian Tax Entities

by Mark N. Harris and Simon Feeny 14/00 The Effects of Wages on Aggregate Employment: A Brief Summary of Empirical Studies by Elizabeth Webster 15/00 Labour Market Models of Unemployment in Australia

by Jeff Borland and Ian McDonald 16/00 Disaggregated Models of Unemployment in Australia by Jeff Borland 17/00 Cross-Country Studies of Unemployment in Australia

by Jeff Borland and Ian McDonald 18/00 The Labour Market in Macroeconomic Models of the Australian Economy

by Jim Thomson 19/00 Labour Market Analysis with VAR Models by Peter Summers 20/00 Foreign Ownership, Foreign Competition and Innovation in Australian Enterprises

by Craig Lofts and Joanne Loundes 21/00 Consumer Sentiment and Australian

Consumer Spending

by Joanne Loundes and Rosanna Scutella 22/00 A Dynamic Panel Analysis of the Profitability of Australian Tax Entities

by Simon Feeny, Mark N. Harris and Joanne Loundes 23/00 The Determinants of Relative Wage Change in Australia

by Elizabeth Webster and Yi-Ping Tseng Books, Monographs, Reports Melbourne Institute Annual Report and Outlook How Big Business Performs: Private Performance and Public Policy (contact Allen & Unwin) R&D and Intellectual Property Scoreboard 2000: Benchmarking Innovation in Australian Enterprises The Contours of Restructuring and Downsizing in Australia Policy Implications of the Ageing of Australia’s Population (contact the Productivity Commission) The Economics of Intangible Investment (contact Edward Elgar) For further information or a copy of the publications brochure please contact Lara Hammond on (03) 8344 5330.

Melbourne Institute Business and Public Economics Forums The Melbourne Institute operates three Forums. The Business Economics Forum (Melbourne) and, from 2001, the Business Economics Forum (Sydney) are held quarterly and focus on the economic outlook and a range of special economic topics. The Public Economics Forum is oriented towards public policy and held each quarter in Canberra.

Different packages of benefits are available to members of the Forums. Three levels of membership are available to Forum members, Gold, Associate and Individual, each contain-

ing a different package of benefits. All memberships include attendance at the quarterly economic briefings and a copy of the Mercer – Melbourne Institute Quarterly Bulletin of Economic Trends. The total package of potential benefits is summarised below.

• invitations to quarterly economic briefings held in Melbourne and Sydney or the quarterly luncheon forums held in Canberra • publications of the Melbourne Institute

• discount registration at public conferences (two per year are planned) • access to consulting by Melbourne Institute researchers • other benefits negotiable For further information on either the Melbourne Institute Business Economics Forums or the Melbourne Institute Public Economics Forum, please contact Karen Roe on (03) 8344 7885.

Enquiries relating to the Melbourne Institute may be directed to Melbourne Institute of Applied Economic and Social Research The University of Melbourne, Victoria 3010 Australia Phone: +61 3 8344 5330 Fax: +61 3 8344 5630 Email: melb.inst@iaesr.unimelb.edu.au For further information on the Melbourne Institute and its products and services, log on to http://www.melbourneinstitute.com

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