Shifting the Dial, which Scott Morrison says could help the economy recover from Covid-19, had to revise some numbers down last year

This article is more than 4 months old

This article is more than 4 months old

A Productivity Commission report touted by Scott Morrison as providing important policy options to help the Australian economy recover from the coronavirus crisis was so riddled with errors and unsupported assertions that the commission was forced to issue a six-page correction.

In its correction to the Shifting the Dial report, which was initially released in 2017 while Morrison was treasurer, the commission revised some numbers downwards by an order of magnitude and abandoned claims that regulatory changes could deliver tens of billions of dollars of gains to the economy.

The report recommended sweeping changes to everything from healthcare to taxation, including banning “low value” surgeries, watering down copyright laws and replacing stamp duties with a land tax.

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Morrison referred to the report by name at least twice last week, on Thursday saying it contained “important policy options” that the government would look at to see “how they can be utilised to have an effective and sustainable and strong recovery on the other side of the coronavirus”, and on Friday telling Sky News he wanted to “put all this stuff on the table again and let’s look at the things that we think can best work”.

The commission, which acts as an in-house thinktank to the federal government, is required to conduct an inquiry into productivity in Australia every five years, but the Shifting the Dial report was far more comprehensive than the body’s normal review of microeconomic reform.

In a speech in December 2016, the then commission chairman Peter Harris said Morrison was heavily involved in the design of the review, and before commissioning it “wanted to discuss in detail the design of the brief that was given to us”.

A Productivity Commission spokeswoman said the report was changed in July last year after concerns about some of the numbers in it were raised within the organisation.

Most of the abandoned claims were in appendix B of the report, which dealt with regulatory reforms.

However, error also infected supporting papers and parts of the main body of the report that relied on the work in appendix B.

Clangers in the report included a claim that loosening restrictions on importing used cars could boost the economy by $13.5bn a year and that changes to industry assistance, government procurement and intellectual property policies could create gains of $5bn a year.

Both numbers were deleted in the corrected report. Instead, the commission said the effect of changing car import rules was “hard to estimate given unreliable data on used car sales and the prospective impact on car prices”, and did not quantify the effect of the grab-bag of proposed policy changes.

It is believed the used car and intellectual property numbers were changed because, on review, Productivity Commission officials felt they were unrealistic.

Loosening occupational licensing rules was originally said to be a $15bn a year gain, but was changed to being “worth billions”.

The original report implied that making Australian intellectual property laws less restrictive, by replacing the “fair dealing” regime that covers copying with a “fair use” one similar to that in force in the United States, could boost annual gross domestic product by $1.9bn.

This was revised down by an order of magnitude, to $190m.

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It is believed concerns were first raised about some of the numbers in the report by public servants from outside the commission.

This prompted senior commission staff to conduct a review of the entire report, which discovered and corrected the errors and unsafe assumptions.

Within the commission, it is accepted that the errors were serious, but it stands by the recommendations of the report as a whole.

A spokeswoman said the changes “address concerns about the degree to which numerical estimates are sufficiently reliable for some specific reforms, and in other instances correct early estimates”.

“The changes do not affect any qualitative judgments made in appendix B or elsewhere in the report, or the overall view about the collective magnitude of traditional microeconomic reform,” she said.