Monthly Archives: November 2014

ANZAC spirit fails drug test

It can be surprisingly difficult to get along with your neighbours, even when you frequently play sport together and have a lot more in common, besides.
The unheralded decision of the Australian and New Zealand governments to abandon 11 years of work on a joint regulatory regime for medicines, to be overseen by a single trans-Tasman watchdog, is a reminder of how hard it can be to achieve a level of harmony even between two seemingly similar countries.
Earlier this afternoon, Australian Health Minister Peter Dutton and his New Zealand counterpart Dr Jonathan Coleman jointly announced agreement to “cease efforts” to establish a joint therapeutic products regulator.
Aside from what this means for hopes of cheaper and more readily available medicines in the two countries, and a smaller regulatory burden for business, it is a significant blow – at least symbolically – to aspirations for much greater economic co-operation between the two countries.
When plans for the Australia New Zealand Therapeutic Products Agency were first hatched in 2003, it was amid a swirl of trans-Tasman bonhomie.
The agency was to have been the first fully joint trans-Tasman regulator, and the harbinger of much more to come.
The creation of the ANZTPA was seen as a relatively straightforward task that would embody the ambition of much more intimate trans-Tasman relations expressed in the Closer Economic Relations pact between the two countries, and blaze the trail of increased co-operation.
The unspoken ambition of some has been for the creation of a single ANZAC market.
But if the two countries can’t even agree on something as seemingly relatively straightforward and mundane as the regulation of drugs and medical devices, what hope for other areas of activity?
In their joint announcement, Mr Dutton and Dr Coleman said that the decision to abandon the project was taken “following a comprehensive review of progress and assessment of the costs and benefits to each country of proceeding”.
The collapse of this particular project hardly means the idea of closer Australia-New Zealand economic integration is dead.
But it does yet again call into questions the idea that closer economic ties will inevitably resolve political differences between countries and make national boundaries increasingly invisible.
Even a brief contemplation of the internecine conflicts and testy relationships that bubble beneath the surface between the members states of the European Union or the United States should be evidence enough of the fallacy of that.

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G20’s shaky growth base

For the sake of global prosperity, you have to hope that the pro-growth commitments made by the visiting national leaders at Brisbane’s G20 are of a higher quality that those proposed by the host.
Laudable as the G20 goal is to boost collective growth among member countries by 2.1 per cent by 2018, it comes with a big asterix attached. There are measures whose benefits are difficult to quantify. There are measures that are contingent on the actions of others to come to fruition. There are measures whose prospects are definitely cloudy.
And then there are measures for which any claim of benefit is dubious, at best.
In this category belongs two measures the Australian Government has included in its contribution to the G20 growth goal – the introduction of a $7 co-payment for GP, pathology and diagnostic imaging services, and the deregulation of university fees. (Note of disclosure: I am currently employed by the Australian Medical Association, which is campaigning against the Government’s co-payment proposal).
It is hard to see how it can be argued that either, particularly the co-payment, will enhance growth.
Both are essentially exercises in cost-shifting – removing a liability from the Commonwealth’s books and putting it on to individuals.
In the case of the co-payment, patients face an extra $7 for each visit to their GP, while doctors are set to lose $5 from each Medicare rebate and incur extra practice costs arising from increased red tape and more patient bad debts.
In the case of university fee deregulation, an increased proportion of education costs are dumped onto students as a liability against future earnings – in effect, an increase in the tax on higher education.
Leaving aside arguments about the equity or economic efficiency of these policies, the grounds on which either could be said to contribute to growth appear weak.
It has been demonstrated that cost is a consideration for some when seeking health care, so upfront charges will discourage a proportion from seeing their GP – in fact, this was one of the Government’s explicit aims when announcing the policy.
Furthermore, though some patients might be going to see their doctor for what the Government considers to be frivolous reasons, most have legitimate health concerns.
Some of these might resolve themselves. But deterring people from seeking timely care raises the risk their health will deteriorate further and their problems become more complex, raising the likelihood of more dramatic and costlier care later on. Care in hospitals in multiple more times expensive than in a family doctor’s surgery.
Regarding university fees, it defies all that we know about price signals and human behaviour to suggest that ratcheting up university course fees will have no effect on demand.
Sure, university degrees are a sound investment in enhanced future earning capacity, so the incentive for individuals to incur larger debts for the lifelong advantage a degree confers is strong.
But as the cost of education goes up and wages growth slows, the cost-benefit equation because more finely balanced, and the weight given to other options increases – particularly from the viewpoint of someone with limited financial resources.
The Government argues that students won’t be required to begin repaying their debts until they start earning reasonable money, so any deterrence is overstated.
But even if higher fees don’t discourage many, the debts students will carry through much of their adulthood will have other significant economy-wide effects, including delaying the age at which they might begin a family or buy a house. These are major drivers of consumer spending, and by delaying or diminishing these activities, university fee deregulation will help undermine the strength of a major component of growth.
(The policy is also likely to turbocharge the brain drain, and heavily-indebted graduates increasingly look for better-paid opportunities offshore).
Prime Minister Tony Abbott said the fact that the OECD and the IMF will audit the progress of G20 countries in fulfilling their growth commitments will provide robust reassurance that the growth goal will be met.
But don’t expect the umpires to red card countries not seen to be pulling their weight.
Realpolitik means it is highly unlikely any G20 member will be marked down, especially when there are so many plausible get-out clauses and other excuses that countries can invoke.
Let’s face it, if the Australian Government can get away with calling a GP co-payment a growth measure, it is a pretty low base from which to start.

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