Treasury Secretary Dr Martin Parkinson is right to argue for a new wave of reform to boost productivity. Hopefully he also recognises that one of the best things governments can do to boost productivity is to cut wasteful spending and to lower taxes, which will transfer resources to more productive uses in the private sector. Given that Treasury couldn’t stop the home insulation program, Green Loans and the National Broadband Network, Treasury clearly needs to perform much better in its traditional bean counting role.

At the same conference at which Dr Parkinson spoke, the head of the Productivity Commission Gary Banks noted that regarding potential budget savings:

…no doubt there is more low-hanging fruit waiting to be picked. For example, the case for Australia spending $36 billion or so on another dozen homemade submarines, when imported alternatives could be purchased for a fraction of the cost (and risk) has never been adequately explained publicly — notwithstanding the generally acknowledged failure of the Collins Class precedent. The whole area of defence procurement seems ripe for a thorough independent review.

One of the great failings of the Australian public service is that a lot of the service’s most talented micro-economists are locked away in the independent Productivity Commission, rather than being in the Treasury, where their analytical skills are greatly needed if Treasury is to successfully prosecute the case for productivity-enhancing spending cuts.