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La Trobe Business School

Month: December 2015

Can Economics Improve People’s Wellbeing?

jan Libich La Trobe Business

jan Libich La Trobe BusinessLBS economist Jan Libich has a mission. He has been determined to show that economics, often referred to as the dismal science, can be very useful in helping us improve our lives. His newly published book ‘Real-World Economic Policy: Insights from Leading Australian Economists’ is a culmination of his effort so far. It bridges the gap between academic economists, policymakers, students and the general public by exploring how influential economists – including four former central bank Governors/Board members, an ACCC Commissioner, and a current member of the federal parliament and Shadow Minister – use economic research to develop and evaluate policy.

When asked what constitutes this gap between economists and the general public, Jan Libich’s passion for economics shows: “Economics is often portrayed as divorced from the real world; it is criticized for being about boring curve-shifting, equations and heartless definitions. The book attempts to show that such image is not accurate, that economics can help people and policymakers to make better decisions and thus improve their prosperity.”

Real-World Economic Policy: Insights from Leading Australian Economists is based on a series of one-hour video-interviews the author recorded from 2011–2014 , aiming to help the reader identify welfare-improving policies in areas including healthcare, education, retirement financing, monetary and fiscal policies, banking regulation and climate change. Libich explains: “We all make hundreds of decisions every day. Economics attempts to understand how we make them, and whether we can perhaps improve on our decision making to achieve our goals (whatever they may be: economics does not prescribe that money is all we should care about). The same is true at the country level, whereby the quality of public policies can have a major impact on people’s wellbeing.”

In Jan Libich’s eyes, research in economics has been getting more mathematical over time to enable a more rigorous and objective examination of the economy: “It is about discipline, it is easier to see a flaw in logic when one has to clearly state all the assumptions rather than just use verbal arguments. Together with improvements in computing power this enabled exploration of more complicated models and environments.”

However, these developments have also created a gap between what academic research can teach us and what policymakers in government and the general public can understand. “To me, this implies that academic economists need to pay more attention to communicating their findings and recommendations in an understandable and convincing fashion. And to be honest, we have not done that as well as we should have,” Libich says. “My book is a humble attempt in this direction.”

More information on ‘Real-World Economic Policy: Insights from Leading Australian Economists’ can be obtained here.

ISBN: 9780170364386, Published by Cengage Learning Australia, Pub Date: November 2015, © 2016

Buly Cardak’s research reveals connections between student dropout rate and financial hardship

Buly Cardak La Trobe Business School

La Trobe Business School academic Buly Cardak recently came under the spotlight with his research on dropout rates among university students, with his research receiving significant media coverage. Specialising in the economics of education, he has been researching factors influencing students’ studies since early 2006. In his recent study, Associate Professor Cardak and his collaborator Joe Vecci studied the connection between the financial hardship of university students and the likelihood that these students would graduate or dropout at some later stage in their studies.

The data show that one in three students from financially disadvantaged backgrounds drop out from university studies. Further to this, students from financially disadvantaged backgrounds are up to 15% more likely to dropout than students from financially secure backgrounds. It is believed these effects operate through costs of living, e.g. paying for food, books, or transport, rather the tuition fees which can be deferred through HECS.

Associate Professor Cardak notes that these results are important because not only do they show that students experiencing financial hardship are more likely to drop out, but it was found that after three years of study, the likelihood of dropping out among financially disadvantaged students increases rather than falls as it does for other students. Disadvantaged students that don’t finish their degree in the standard allotted time are likely to be cut off from government income support. Facing this financial challenge, many students have no choice but to drop out. Not only is this detrimental to disadvantaged students, but it is also costly to society. After financially supporting students for several years, to have them drop out of university altogether, presents the economy with a costly loss of potentially skilled graduates.

Another important finding was how the Youth Allowance benefited students. It was found that students who are independent Youth Allowance recipients were less likely to drop out. However, results pointed to these students taking a longer time to graduate. It is suspected that this is related to students who have taken time off from study in order to work full time and earn sufficient income to demonstrate their financial independence and qualify for independent Youth Allowance. It seems that taking this time off from study has a longer term detrimental effect with students in this situation actually taking longer to graduate.

Associate Professor Buly Cardak and Joe Vecci, who have been conducting this study together, are hoping to conduct further analysis over the coming years on this issue, and to consider ways to improve the circumstances for financially disadvantaged students.

To read the full article in which this research has been published, see: Cardak, B.A. and J. Vecci, “Graduates, Dropouts and Slow Finishers: The Effects of Socioeconomic Status on University Educational Outcomes”, Oxford Bulletin Of Economics and Statistics.

 

“Near Enough is Good Enough”

Mark Morris La Trobe Business School Professor of Practice
By Mark Morris

It’s not often that I intuitively align the laborious machinations of industry policy deliberations in Canberra with the wise intonations of the Rolling Stones but that is exactly how I responded after I digested the Federal Government’s National Innovation and Science Agenda report issued on Monday 7 December 2015.

As Mick and Keith once sagely wrote ‘You can’t always get what you want but if you try sometime you find you get what you need.’ This pretty much sums up the overall impact of the myriad of changes announced which collectively makes Australia a far more attractive place in which to invest in innovative businesses. This is the case even if the report falls short of the cutting edge vision of economies like the United Kingdom.

On the plus side it is clear that the Federal Government has commendably adopted a multi-disciplinary approach to improving research and development (R&D) and related commercialisation. It has done this by proposing measures that enhance access to venture capital, drive closer collaboration between universities and industry, improve educational outcomes in science, technology, engineering and maths, ensure digital by default delivery of government services and capitalises on the growth of big data and the need to leverage it for the benefit of the economy through advanced data analytics.

As such the Federal Government is seeking to apply a more holistic view on innovation policy along the lines championed by the Cutler Review of the National Innovation System way back in 2008. This was before the Global Financial Crisis derailed the process to the point where we did not need a Minister for Science as if that distracted us from the fixation of repairing the Budget Deficit.

Crucially the tax settings of the new innovation regime are also a considerable improvement over the status quo. Tax incentives are not only available for companies undertaking R&D but also for investors who provide the venture capital to fund the commercialisation of any resulting R&D.

Accordingly, the Federal Government has finally recognised that tax breaks need to be provided over the life cycle of a business to encourage entrepreneurs to conduct and invest in risky projects which may ultimately not be viable especially in the new rapidly dynamic and volatile digital economy.

As a case study to the Report highlights the retention of the existing refundable R&D tax offset allows start-up companies to leverage tax credits to help finance eligible research and development. This is so, even if it appears that the offset will be retrospectively cut from 45% to 43.5% from 1 July 2015).

This has been augmented by new tax breaks which allow individual investors a 20% non-refundable tax offset for investments in certain start-ups, and a capital gains tax exemption where investments held in such companies are held for more than three years but less than 10 years. In addition, partners in early stage venture capital limited partnerships (ESVCLP) will get a 10% non-refundable tax offset on capital invested in the partnership which can now raise funds of up to $200 million in early stage development of eligible activities.

Taken collectively there is therefore much to be praised in the new package.

So where does it fall down?

Firstly, the Report flags that there will be yet another review of the efficacy of the R&D incentive by the newly created Innovation and Science Australia Board. This concession has been around in various forms since 1985 and has had almost as many reboots or variants as the James Bond franchise. The last thing that an innovative entrepreneur wants to see is uncertainty as to whether it will still be around to help finance their initial R&D so let’s hope it is enhanced and not diminished.

Secondly, the take up in ESVCLP has tended to be relatively low as high wealth investors with surplus cash want some control over their venture capital investment. This is not the case with this investment vehicle where your investment is generally capped to a maximum 30% interest. I do not see that radically changing because of the prospect of a 10% non-refundable tax offset. And the proposed rules on other investors are typically over-restrictive.

Thirdly, and perhaps most importantly, the Report does not address our internationally uncompetitive corporate tax rates of 28.5% and 30%. Additionally, the demarcation between those tax rate regimes can itself be a practical nightmare to navigate.

How does this compare to the United Kingdom’s 18% corporate tax rate to apply from 1 July 2020, and particularly to royalties and capital gains arising from intellectual property subject to their patent box regime which will likely be subject to further concessional tax treatment?

I would suggest not that well even if it is not an apple to apple comparison.

It’s true that businesses don’t do things solely because of a tax break but a whopping differential in tax rates could be a deciding factor in a mobile digital world as to where you want to invest your capital in innovative products and processes.

However, even if the proposed changes fall short of addressing all facets of our international competitiveness they do signal that our Federal Government is finally serious about instilling an innovation mentality and culture in our businesses, universities and the broader community.

Which leads us back to Mick and Keith.

Maybe the announced changes are not what we ideally want in becoming an international trendsetter on innovation but maybe it’s what we need to allow us to nationally lift our head and embrace being part of the new innovative digital economy.

And given where we have been perhaps that is enough at this point.

 

Public Administration in a globalised world: La Trobe Business School’s Zahirul Hoque takes leading role at 2015 Greater China Australia Dialogue

La Trobe Business School Zahirul Hoque

Zahirul Hoque (far right) at the 2015 Greater China Australia Dialogue Conference.

On 14, 15 and 16 November 2015, leading Australian academics were invited to attend the 2015 Greater China Australia Dialogue Conference, to share their knowledge with Chinese and Taiwanese scholars and practitioners working in public sector administration.

Why from Australia?

The public administration sector is changing rapidly in a globalised world. Creating structures in the public administration sector to ensure government programs and organisations use their funds efficiently and effectively has been shown to be crucial as a means to nurture good practices within a community. In Australia, the government has developed a highly efficient model that in time has also cultivated government agencies to start generating their own funds. By introducing performance audits along with performance management practices, not unlike companies in the private sector, Australian government agencies are no longer required to fall back fully on government finances.

In rapidly expanding economies such as China or Taiwan, these auditing and management structures are largely still being established. Government agencies are still heavily reliant on government money, often without being assessed thoroughly enough. By initiating the Greater China Australia Dialogue Conference, China and Taiwan want to sharpen ties with eminent Australian academics so as to exchange knowledge on the public sector, thereby equipping Chinese and Taiwanese scholars with the tools they need to engage with public sector reform.

Professor Zahirul Hoque

Professor Zahirul Hoque, who is La Trobe Business School’s Head of Department of Accounting, as well as the Executive Director of the La Trobe University Centre for Public Sector Governance, Accountability and Performance (CPSGAP), has more than twenty years’ experience in the Public Sector. During a workshop themed ‘Value for Money’, he presented two papers on performance auditing, performance management and parliamentary oversight.

In his presentations Professor Hoque highlighted how the use of performance auditing and performance management can create a strong sense of accountability at all levels of a public sector organisation. By introducing this auditing process that independently evaluates the effectiveness and efficiency of government undertakings, parliaments can not only see how much government initiatives are costing them, but also how those initiatives benefit the country’s economy and, in turn, the community.

The positive effect of performative auditing is notable around the world, with performance auditing increasingly become international best practice. As Professor Hoque concluded in his paper, there is a lesson in this for other nations. But the road is long: developing and implementing new practices takes significant work and effort over many years. Having guidance from experts in such a situation is invaluable. For China and Taiwan, sharing knowledge with scholars like LBS’s Professor Zahirul Hoque is an important step in this process.

La Trobe Business School Zahirul Hoque

La Trobe Business School Zahirul Hoque

Emma Sherry plays key role in developing more inclusive sport in South Australia

Emma Sherry

Last month, Dr Emma Sherry from the Centre for Sport and Social Impact was invited by the South Australian Office of Sport and Recreation to provide strategic advice and a keynote presentation on the topic of sport and inclusion.

During the day with the ORS team, Emma delivered an internal professional development session to ORS staff regarding the research context in Australia and the Pacific on developing more inclusive and diverse sport organisations. The key message of this session was to provide insights that the team can apply to increasing opportunities for the South Australian community to participate in sport at all levels and a wide variety of roles.

Following the ORS staff workshop, Emma delivered a keynote and interactive session with a group of 30 CEOs and senior managers from South Australian state sporting organisations. This session was supported by the CEO of Inclusive Sport SA, and together with the ORS executive this session was provided as a joint initiative and to build on the momentum of Inclusive Sport SA’s Building an Inclusive Culture Forum and three Empowering Sport to Reflect Community Round Tables held earlier in the year.

Emma’s keynote and workshop discussed:

  • insight into current research and results that could influence SSO decision making
  • opportunity to examine how SSOs engage in diversity and inclusion, strategically and operationally (and what is the difference between the two)
  • sports to be aware of the benefits to them of embracing all aspects of their sport and all potential participants and pathways
  • sport understanding of the value and role of good news stories and the potential to get buy in from other partners
  • understanding that inclusion is core business and a strategic imperative and
  • to encourage collaboration and thought leadership between sport organisations.Key learnings from this workshop will be used by the South Australian SSOs to prepare for a new South Australian government funding initiative Sport and Recreation Development and Inclusion Program which will deliver over $3 million to sport organisations for projects up to 3 years in duration. Emma and the team at the Centre for Sport and Social Impact are liaising with ORS to collaborate in monitoring and evaluation for this funding program to assess the impact of this policy on the diversity and inclusion practices of state sport organisations.

Key learnings from this workshop will be used by the South Australian SSOs to prepare for a new South Australian government funding initiative Sport and Recreation Development and Inclusion Program which will deliver over $3 million to sport organisations for projects up to 3 years in duration. Emma and the team at the Centre for Sport and Social Impact are liaising with ORS to collaborate in monitoring and evaluation for this funding program to assess the impact of this policy on the diversity and inclusion practices of state sport organisations.

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