11 May 2017

Im often asked why I went into politics, what got me interested in politics at an early age.

Its not a particularly easy question to answer. My family wasnt overly political and my parents werent members of a political party.

And yet, as a 15 year old I sought out the local branch of the Australian Labor Party and took myself off to a meeting one Sunday afternoon.

It wasnt a highly developed or detailed political philosophy or economic narrative which led this particular 15 year old to spend many Sunday afternoons and Monday evenings in draughty halls debating motions and learning the Labor ropes.

It was a sense of justice, or rather a sniff of injustice.

I went to what was then the biggest public high school in New South Wales, St Johns Park High.

There were 1600 hundred of us at that school, with origins from pretty much every part of the planet.

I knew there were many fiercely intelligent and hardworking students among us. But somehow I knew the odds were stacked against us.

That as dedicated and talented as our teachers were, our school was under-resourced and many of my friends, who were super smart, would miss out on places in tertiary education because of their parents lack of wealth.

And it seemed to me that the Labor Party was the only party that was likely to anything about this, and similar injustices.

But it was when I went to University that I really started seriously thinking about equality of opportunity in Australia.

On my first day at the University of Sydney, in my Economics One tutorial, we went around and introduced ourselves.

Long story short, I was the only one in the room who was from Western Sydney. The only one from a comprehensive public high school.

Now of course, some of those fellow students became my friends and weve kept in touch over the years.

And, of course there were other Western Sydney public school kids who were scattered through the course and the university.

But it was clearer to me then than ever before that twenty years after Gough Whitlams attempts to open up universities for all, we still had a long way to go.

Equality of opportunity is an important part of who we are as nation, or at least who we think we are as nation.

The concept that every Australian has equal opportunities: to grow and prosper, to capture the fruits of their ability and potential.

We tell ourselves that in Australia, motivated, hardworking and talented people can get ahead in life, can grow to their full potential, regardless of their social background or the wealth of their parents.

We tell ourselves that for Australian children, the starting line is even.

There is an Australian dream, one which migrants chase and the Australian born cherish: we are the land of the fair go.

Equality of Opportunity, Australia Fair. Opportunity gets a lot of lip service in the rhetoric of politicians.

All political parties claim to believe that all Australians, regardless of their background or their parents wealth, can grow to their full potential.

But is this actually the case?

Of course, there is no doubt that this is true for many individuals.

We can all site success stories of well-known and successful people who started life on the wrong side of the tracks and have done well, in some cases spectacularly so.

Indeed, many of us, the first in our families to go to university have done things our parents could only have dared to dream.

But we cant let the well-earned achievements of some mask a cold, hard assessment of the situation in the broad.

We need to calmly and soberly assess whether we as a nation and society do arrange for the starting line to be even.

Im not going to give a dry academic lecture which goes through all the data and the various studies.

But it is worth sharing with you the conclusions of the latest study.

In their 2015 study, Sylvia Mendolia and Peter Siminski conclude that Australia is not particularly mobile in an international context.

It is less mobile than the Scandinavian countries as well as Germany, Canada and New Zealand, but is more mobile than France, Italy the US and the UK.

The land of the fair go is, in fact, a mediocre performer at best.

Tonight, I want to make the case for opportunity.

But I also want to do more than that.

I want to make the case that governments caring about opportunity and actively promoting equality of opportunity is now more important than ever before.

I want to make the case that of Australias two viable governing parties only one has a policy approach which actually defends opportunity.

And finally I want to make a couple of practical suggestions as to how equality of opportunity can be kept front of mind for governments.

But firstly, I need to address why equality of opportunity, the ability of all Australians to grow to their full potential is important.

To be honest, when drafting this speech I asked myself whether this was actually even necessary, whether the case for Governments to intervene to ensure that all Australians have the opportunity to grow to their full potential was so self-evident and strong that it could be left unsaid.

But given the state of the political debate and the questioning we saw during the election campaign of the virtues of making our school education funding system fairer and more equal, for example, or having to argue about the importance of people being able to go to the doctor regardless of their financial situation, its clear to me that actually yes, I do need mount the case for improved opportunity as an important policy goal for our government and our society.

Let me briefly give three reasons.

Firstly, it is harder to think of anything more fundamental to the fairness of a society than the principle that every citizen is deserving of the same rights.

Now I am not talking here about the traditional, limited normative rights of the right to free speech, freedom of religion etc but the right for people to grow, to prosper to their full potential, to use their abilities for their own good and their nations good. Its fundamental to our notion of fairness that this is the case.

Secondly, the importance of inclusiveness and the perception of inclusiveness.

Around the world we are seeing the distress signals being emitted by a middle class that no longer feels that the society or economy is working for them.

I addressed some of this phenomenon in my speeches earlier this year The Case for Openness and The Case for the Middle Class.

If people look around like I did when I was at school and see people of good intelligence not getting an opportunity at realising their potential, its a sure fire way of damaging inclusiveness and trust in the system.

And one thing I know is this: one thing that hard working members of the Middle Class care about more than themselves getting ahead, is their kids getting ahead.

The only thing that is certain to rile them anger more than the deck being loaded against them is the deck being loaded against their kids.

The notion that no matter no hard they work or their children work, their children will be no better off than they are.

If we going to re-assure hard working Australians that our open economy is working for them, that our system is designed for their benefit, than we will need to show them not just that they are front of mind for policy makers, but that their childrens opportunities are too.

And thirdly, equality of opportunity is in our economic best interests. Improving opportunity is not a zero-sum gain. We are all better off if our society is more mobile.

Equality of opportunity is also another way of saying meritocracy. Is Australia going to be a meritocracy or an aristocracy?

This is about what is in the national interest.

I believe passionately in equality of opportunity as a matter of social justice, of fairness.

But even if I didnt, Id believe in it as sensible economic policy, as being vital to our future to ensure that all our talents as a nation are being harnessed.

Inclusive growth is not just about ensuring that all Australians are included in receiving the dividends of economic growth.

Its also about ensuring that all Australians can participate and contribute to our economic growth.

Fred Argy put it well when he said:

Unequal starting opportunities represent a fundamental form of market failure because it means that society does not make the best use of all its citizens. A lot of human capital is wasted and over the long term the economy under-performs.

Its simply good economics, ensuring that our growth potential is maximised by, in turn, maximising the capacity for each individual to contribute.

The OECD agrees, having pointed to the link between improved social mobility and economic growth.

With our population getting older and more people entering retirement it means a declining labour force and a smaller pool of skills for businesses to draw on to grow and compete.

It is now more important than ever to ensure that whoever can participate in the economy does participate.

So the economic case is pretty clear.

But improved opportunity as an important Government objective is a particularly important challenge now.

Why is it that governments should be even more focussed than they needed to be in the past?

With technology changing the nature our economy and putting an even greater premium on skills and education, it is more important for us a nation now that we are providing every individual with the opportunity to get the skills they need and it is more important for each individual.

As Nouriel Roubini put it:

software innovation, together with 3D printing technologies, will open the door to those who are educated enough to participate; for everyone else, however, it may feel as though the revolution is happening elsewhere.

I have also previously quoted Brynjolfson and McAfee who put it even more sharply when they said in their very important book The Second Machine Age:

Technological progress is going to leave behind some people as it races ahead. Theres never been a better time to be a worker with special skills or the right education, because these people can use technology to create and capture value.

However theres never been a worse time to be a worker with ordinary skills and abilities to offer, because computers, robots and other digital technologies are acquiring these skills and abilities at an extraordinary rate

The other reason that caring about equality of opportunity is even more important than in previous years is because income inequality is already rising around the world.

It is fashionable in some quarters to concede that equality of opportunity is important but to argue that income equality is not.

To argue that it is appropriate for governments to help people to get to the starting line but not care about what happens in the race.

But this is a false dichotomy and misses the vital link between the two.

Put simply, the more unequal a society, the harder it will be for people to be mobile within it.

Or conversely, the less opportunity there is for people to reach their potential can make an unequal society even more unequal as those at the bottom of the socio-economic class cant even get to the starting line.

My colleague the now Shadow Assistant Treasurer Dr Andrew Leigh looked at this with Dan Andrews (the academic, not the Premier) in 2009 and found that in the ten countries they studied, social mobility and equality of opportunity went down as income inequality went up.

This makes sense. The bigger the gap someone has to overcome, the harder it will be to close it.

It also makes sense when you consider the amount of time, energy and resources which go into a parent investing in education.

Whether it is investing via money in buying books and educational resources or investing via time in reading books and nurturing their kids, the squeeze on the middle class through growing income inequality makes it harder for working people to make the types of decisions that give their children a better chance at accessing the opportunities our country provides.

Miles Corack was saying this in a slightly more academic fashion when he concluded: increasing divergence in both monetary and non-monetary investments in children during an era of increasing inequality may well lead to a divergence in cognitive attainments and achievements that are the necessary prerequisites for college success.

So inequality matters for a whole host of reasons, not least of which worsening inequality of outcomes makes improved social mobility harder.

Now, as I argued in the Case for the Middle Class, governments do need to be tackling rising income inequality.

But it is also the case that rising income inequality makes governments acting to promote improved equality of opportunity even more important.

Politicians talk about social mobility and equality of opportunity.

But it is far from being front and centre in our national political discourse.

It strikes me that Australian economists, politicians and commentators pour over the latest updated figures on economic growth and productivity for example, but we rarely discuss the latest data on social mobility.

We have heated debates about the inter-generational equity of budget deficits, but rarely talk about the lack of inter-generational equity which comes from having your parents wealth determine your life chances, rather than your talent and work ethic.

Australia has now published four inter-generational reports. They focus on fiscal sustainability. Fair enough. But why stop there?

It doesnt have to be this way.

In the United Kingdom, spurred on by their high rates of social immobility, the UK Commission for Social Mobility and Child Poverty produces data sets which measure progress and produces reports on what is working and what is not when it comes to policies which promote social mobility.

A carbon copy of the UK experience is not the answer for Australia.

In our context, lets use the template of the Inter-generational reports to spur a better way.

In the last term, I announced how a Labor Government would improve the inter-generational report, depoliticising it by commissioning the Parliamentary Budget Office to produce them so that they provide a reliable analysis of the generational equity impacts of fiscal policy over time as opposed to a political pamphlet.

That remains the approach I would take as Treasurer.

And tonight I want to talk about what I would do as Treasurer in the Shorten Labor Government in terms of improving the government focus on social mobility and strengthening the availability of measurable data to judge progress.

In Australia, we have an excellent in-house government think tank The Productivity Commission.

I dont always agree with all its recommendations, but I always take its work seriously, as it is of high quality.

As Treasurer, I would task the Productivity Commission with producing five yearly reports on how we are going as nation in improving equality of opportunity and social mobility.

These would be produced on the same timetable as the Intergenerational reports and would provide a stimulus for a proper national discussion about what is working and what is not when it comes to giving each and every Australian child a fair go at achieving their full potential.

Now of course, measuring equality of opportunity requires long run longitudinal data and the perspective of time. Hence something like an annual update wouldnt work.

But five years is a good timeframe for updates on progress.

The Commission would be asked by me as Treasurer to produce a reliable social mobility measure by drawing on existing academic research which would inform Government and the public on how we are progressing as a nation, as well as to use this data as a basis for assessing the success or otherwise of government efforts to improve equality of opportunity.

The Commission might look at things like intergenerational elasticity or intergenerational correlation, or percentile ranks. Having a sound metric is important.

You cant improve something unless you have the data to measure your progress.

The Commissions work may also draw from and build on the landmark work of Harvard economists Raj Chetty and Nathaniel Hendren who conclude that US social mobility is as much about what neighbourhood people grow up in and as a result social mobility should be tackled on a local level.

In my view, the five yearly Equality of Opportunity Report would become an important part of our national discourse and in time, hopefully, an important document that no future Liberal Government would dare abolish.

Like productivity and economic growth statistics, this report would help enshrine equality of opportunity as a central focus in the national debate about Australias advancement and economic development.

As I make the case for opportunity, its important to remember that opportunity is more far reaching than ensuring people can get access a university education, as important as that is.

Its a much broader concept, ensuring that all individuals can grow to their full potential and make the most of societys advances.

Its about the right for people from disadvantaged suburbs to enjoy access to affordable healthcare, just like other Australians who come from more privileged suburbs.

And the opportunity for people from all walks of life to live in areas which have been well planned, cared for and invested in when it comes to amenity and public space.

And of course that people are not unfairly disadvantaged when it comes to them trying to crack into the housing market.

But having said that, let me make a few remarks about a couple of policy areas which are crucially linked to improving opportunity, namely early childhood education and education funding more broadly.

As Sylvia Mendolia and Peter Siminski argue: There is only a very slender consensus among scholars on which specific policies or programs will effectively promote mobility (although few would argue the closing the gap in the quality of K to 12 education is not a priority.

I would add that hopefully few should argue that improving access to early childhood education should not be a priority.

We often hear about the importance of early childhood education.

We know that what a child learns in its first three years is vital for her performance at school, for her earnings and therefore for her social mobility.

Analysis of PISA results shows that around the world, a 15 year old who attended pre-school is, on average a year ahead in academic attainment of a child who did not.

One of the great and in my view under-rated achievements of the Rudd and Gillard Governments was universal access to pre-school for four year olds.

23% of four year were enrolled in at least fifteen hours a week of pre-school in 2009. 85% are today.

As Kate Ellis recently said, it is time for a proper examination of the extension of universal access to three year olds.

We spend $40 billion over the forward estimates on early education and child care.

And yet the system is so poorly targeted that we are still falling behind the rest of the world, despite Labors remarkable achievement of four year old universal access.

It is not a lack of information that is holding us back. In fact, we have more information on our successes and failures in early childhood than most countries because of the Australian Early Development Census (AEDC).

The AEDC tells us that one in five children are developmentally vulnerable by the time they reach school, and children from low socio-economic backgrounds utterly dominate this group.

We are not serious about equality of opportunity until we tackle this issue.

Likewise, we know our education system more broadly is perpetuating, not eradicating disadvantage and is therefore not doing what it is required to do to fulfil what I regard as one of the key tasks of an education system: delivering equality of opportunity.

We know the facts.

Children whose parents are of a low income are on average 2.5 years behind students who were lucky enough to be born to high income parents.

In both mathematics and literacy, students in remote areas in Australia on average are performing 2 years behind metropolitan students.

The range between the highest and lowest performing students was wider in remote schools also, accounting for many of the students falling below the national baselines, making the gap gets wider as school goes on.

And the current situation for Indigenous children is a national embarrassment.

For indigenous students, there currently exists a huge two and a half years of schooling between the performance of Indigenous and non-Indigenous students on average in mathematics.

Half of Indigenous students are low performing (51%) by year 10, which is more than twice that of non-Indigenous students (18%) and the international average (23%).

All in all, the size of the education gap determined by socio-economic factors in Australia is greater than the average for OECD countries.

Thats not a record a country that prides itself on being a land of the fair go should be satisfied with.

Would a nation serious about equality of opportunity continue to tolerate a childs post code and their parents bank account having a greater impact on how well you do at school than occurs in other developed countries?

Obviously education funding was a key battleground in this years election.

But perhaps the quantum got more attention than the model. The School Resource Standard model developed by David Gonski and his colleagues on the funding review panel was about determining what level of investment each Australian child needs to reach their full potential.

Of course this was about improving Australias recent poor outcomes when it comes to numeracy and literacy, but it was as much about fairness and equality of opportunity.

And both of these objectives should and will be at the heart of Labors continuing policy offerings.

It is Labors obligation to do this because I argue that Labor is the only party capable of forming government which understands the importance of opportunity.

Im proud to be the most senior member of an economic team which passionately believes in promoting equality of opportunity.

In his book, my friend and colleague the Shadow Minister for Finance Jim Chalmers called in his book for a compact between the generations to improve social mobility. Its a very good way of putting what I have talked about tonight.

And of course I am delighted to have as Shadow Assistant Treasurer one of Australias foremost researchers on inequality, Andrew Leigh.

The Liberals pay it lip service.

When they oppose better and fairer school funding they oppose opportunity.

When they seek out severe cuts to healthcare undermining Medicare as we know it, they oppose opportunity.

When they fail to deliver tax reform to negative gearing and capital gains concessions which would put young aspiring home buyers on a more even playing field with investors, they oppose opportunity.

And when they fiddle with the child care and early education system but do so in a way which doesnt improve access to pre-school for three year olds, they oppose opportunity.

They openly and explicitly opposed opportunity when they cut $88 million from the Higher Education Equity Program, which funded universities to implement programs to enable students from disadvantaged backgrounds into universities.

The Liberals talk a lot about individuals.

But their policies make it harder not easier for individuals to grow to their full potential.

The Liberals talk about opportunity, but actually they believe in rationing opportunity to some those who can afford it, or more to the point whose parents can afford it.

When in fact we believe as a matter of passion that opportunity should be available to all.

A sterile focus on negative freedoms which neglects the positive freedom to grow to the full potential of their abilities sells Australias young people short.

The case for opportunity is strong. The case for government intervention to improve equality of opportunity is strong.

We pride ourselves on being the land of the fair go, but a sober analysis tells us we have a long way to go.

It will fall to a Labor Government to promote better opportunity in Australia. I look forward to playing my role as Treasurer in doing so.