Professor Larry Dwyer

The Qantas dispute may be far from settled, but by giving away thousands of free tickets, the airline will kick-start a mini boom in the tourism sector.

Australian holidaymakers may need reminding of the allure of the attractions that are right under their noses. And with domestic travellers representing three quarters of Australia’s tourism market, it’s an area that resorts need to capitalise on.

Qantas’ offer of 100,000 free air tickets to customers stranded by last week’s decision to ground the airline for 24 hours appears to offer a chance for domestic tourism to capitalise on those who will travel much further than they normally would for the two years of the offer, which gives away a free return flight to anywhere in Australia from December 14th.

In Australia there is a lot of goodwill towards Qantas and a lot of affection for the brand: we think of it as ‘our’ airline. So at the start of the dispute I think the public was more on side with Qantas and its need to restructure than it was with the unions, however, I think Qantas has lost a direct proportion of that goodwill in terms of what it’s done, the timing of it and so on. Now, this is a chance for them to buy some of that goodwill back, and get passengers back on a Qantas plane, which many of them may not have considered.

In Australia six out of ten tourism operators are reporting forward sales to be worse or much worse than they were, according to a recent Mastercard survey. I would certainly expect that those resorts are looking forward to plenty of bookings from those who plan to use their free tickets to go to as remote a destination in Australia as possible: Sydney residents for example are already looking at Broome as a way to use their tickets – and these resorts have been hit hard by the downturn. Equally those on the west coast may now be looking at staying in the party resorts in Cairns.

However we must remember that not only were customers severely disadvantaged in terms of their travel plans but because tourism is a global network the impact was felt all over Australia and as a result of that there was widespread impact on the Australian economy. The Qantas initiative will also go some way to gaining support from industry stakeholders around Australia who felt badly let down by the Qantas lockout.

However the boost to holiday tourism and Qantas may only be temporary. It appears that Qantas was simply not geared up to meet the crisis head-on and, of course, that further eroded customer confidence in Qantas management. What Qantas has done by the lockout is to force many customers to trial Virgin Australia. Now, of course, a good percentage of those will now continue on with Virgin. The big area where there’s going to be competition between Qantas and Virgin in the future is in the area of business and government travellers. They pay a premium, they’ve been disadvantaged, and it’s an area that Qantas can’t ill afford to lose.

Larry Dwyer is a Professor in the School of Marketing at the Australian School of Business.

Peter Shergold | CSI Blog

Daniel Altman was in Australia recently as a guest of the Sydney Writer’s Festival.  He’s Director of Thought Leadership at Dalberg Global Development Advisors (a far more exciting career description than General Manager!).  I was fortunate to attend a provocative breakfast session he presented based around his book, Outrageous Fortunes:  The Twelve Surprising Themes That Will Shape The Global Economy.

I was also able to interview him for last week’s Social Business program about a paper he and his colleague, Jonathan Berman, have recently published.  Their argument is that schemes such as corporate social responsibility, creating shared value or triple bottom line reporting are unnecessary.  At best they are inefficient workarounds.  Business should get back to focussing on profit which will, over time, deliver social benefits more effectively.

It’s not surprising that this viewpoint is generating waves of angst in the blogosphere.  The financial journalist, Felix Salmon, in a recent response called the thesis “profoundly silly” and Altman “a complete laughing stock”.  Other commentators, although employing less extravagant language, tend to agree.

So let’s be clear about what Altman is not saying.  He is not returning to the position, associated with the great economist Milton Friedman, that by creating employment and producing goods and services in a competitive market, employers fully met their moral obligations and that no more should be required of them.

Altman, by contrast, believes in the value of the beneficial outcomes often associated with CSR.  His position, at its heart, is this:  if corporations focus only on profit they will generate social benefits more efficiently and sustainably than through the embrace of separate programs.

In other words, management – if it is economically rational – will recognise the monetary value that corporate reputation, employee loyalty, job satisfaction and positive government relations have on the single bottom line.  Such factors enhance shareholder value.  There is no need to embrace (and report upon) well-meaning but often ill-considered corporate citizenship initiatives.   A focus exclusively on profit will naturally inculcate behaviours that are socially and environmentally responsible.

In a nutshell, Altman believes that doing good really is good for business.  To develop distinctive programs is inefficient.  Indeed, by hiding the contribution of economic contribution of social responsibility to profit, CSR interventions may be more likely to be cut back or discarded at times of economic downturn.

I think that Altman’s provocation does us a service.  Too often CSR or corporate citizenship has been treated as a public relations exercise, separate from the strategic core of a business.  It is better to devote attention to the business of the business.

Yet I remain unpersuaded by his central thesis, for two reasons.  The first, which goes to the essence of the Altman/Berman arguments, is time horizon.  As Altman argues convincingly, it takes a long-term perspective to fully appreciate and value the goodwill that derives from corporate responsibility and accountability.

The reality, as was made manifest in the causes of the global financial crisis, is that whilst management leadership and directors should be driven by long-term corporate sustainability, there is a strong tendency for remuneration and dividend structures to reflect short-term profitability.   Positive and normative economics are being confused.  In the immediate future managers and shareholders can often be better off: in the long-term we are all dead.

The advantage of a company articulating a program which emphasises both social and financial returns is that it can act as a valuable counterbalance to narrow thinking driven by immediate considerations.  It can help frame risk appetite for the long-term.

As an economist I believe it is probable that companies will tend to maximise their benefits to society when they concentrate their resources on achieving sustained profitability.  As an economic historian, however, I discern from the recent past that such time horizons are unlikely to motivate business behaviours naturally.  Right now, in my view, there is advantage for companies in articulating and promoting shared or blended value.  It is a way of ensuring that they look to a more distant future.   Think of CSR or shared value as a way of reporting on profitability (and corporate survivability) over the next generation.

And the second reason why I part company with Daniel Altman?  That will be the subject of my next blog.  In the meantime, I urge you to read “The Single Bottom Line” for yourself.

Peter Shergold is the Macquarie Group Foundation Professor at the Centre for Social Impact (CSI) at UNSW.  This blog post first appeared on the CSI Blog.

Michael Aitken

There is no evidence that so called ‘circuit breakers’ can prevent a flash crash in the market, and they may even make things worse.

Under major reforms to be unveiled to the stock market, brokers will be required to install software that acts as a ‘kill switch’ if there is a threat to the market from computer trading systems, and prevent a ‘flash crash’, such as the one that wiped $US1 trillion off Wall Street in minutes last year.
There is considerable evidence that the circuit breakers reduce trading quality, and indeed they put you in the line of fire.

Alas, all regulators follow the same pattern in the face of a threat of a flash crash. Quite simply, a circuit breaker or a ‘kill switch’ simply makes all the markets close at the same time. What happens then is that all the cash dries up – we saw this when the New York exchange halted trading – and waits for the markets to reopen; it’s just a question of postponing what will naturally happen.

High speed automatic trading is now very popular, with one in five share transactions in Australia traded by computers using algorithms to calculate if a deal will make a profit. With so many computers trading, they are now competing to trade faster than other computers, and beat them to a better deal.

I feel regulators haven’t grasped the implications of halting trading if there is a crash, and just make a knee-jerk announcement that looks good, but achieves little.

Security regulators make decisions based on their perceived authority, not on the available evidence. What we need is evidence from markets that stay open. Alas most exchanges around the world, including in Australia, will follow the lead of the SEC who try to halt all the markets. It is very hard to get evidence in the first instance of what happens for leading markets when they do stay open if prices are falling sharply.

With a proliferation of high-speed trading expected with the launch of the alternative stock market Chi-X in Australia at the end of the month, I am dismayed to see regulators trying to control high-speed trading in this way.

There is no evidence that circuit breakers are good for trading, around the world or in Australia.

Professor Michael Aitken is the Chair of Capital Market Technologies at the Australian School of Business

Wolfgang Buehler

The European summit in Brussels will shortly be on us, and there are hopes that a solution to the crisis could finally be reached.

If the euro is to stay alive there has to be a change. However a positive outcome from change could be a shakeup of some European institutions which needed to change anyway.

The German Chancellor Angela Merkel says that European leaders will demonstrate strong support for a stable euro at the upcoming EU summit, but solving Europe’s debt crisis and the problems in Greece will take some considerable time.

The situation is particularly tough for Greece. If you look at the Greek economy it is not looking at all healthy. The estimate for economic growth this year is minus 5.3%. Now that’s not surprising, as the IMF, the European Central Bank (ECB), and the European Commission has imposed tough conditions on Greece. As a result private demand will go down, followed by a decrease in GDP. Only part of the blame for this recession can be placed with the Greek government; however the tough austerity measures are causing major economic problems and a huge impact for the Greek people.

The move by the ECB to buy Government bonds of troubled countries in the secondary market, to fight the government debt crises, has inflationary consequences if the liquidity is not taken out of the financial system once the crisis has eased. In any event it looks as if inflation is inevitable as the result of the ECB strategy to defend the euro exchange rates with major countries.

It is crucial to avoid a disorderly default by Greece with a contagion effect that might spill over to the US and Australia.

Even Australia will probably be impacted by the problems in the eurozone. For example if exports to Europe as a whole go down by half that would decrease Australian exports by about 5% because Europe takes about 10% of Australian exports. Plus, we would then have what is called a ‘second order’ effect, whereby China would also see an impact because it exports a huge amount of goods to Europe. Consequently the demand for minerals to Australia would also drop. We’re not out of the woods yet.

Wolfgang Buehler is a Professor of Banking and Finance at the Australian School of Business.

Peter Shergold

The American media, somewhat belatedly, is now asking the question:  how big can the ‘Occupying Wall Street’ campaign become?  What began as a relatively small group of protestors in New York’s Lower Manhattan a month ago has now spread to around 150 cities in the US.  As unionists, environmentalists and students join the so-called ‘leaderless movement’, the broad-based anti-corporatist sentiment that has fuelled the agitation seems to be growing.  Numbers are swelling.  Media interest is increasing.  Politicians are positioning.

Amped Status, which claims responsibility for the birth of the ‘99% Movement’ which prompted the “ground-up grassroots decentralised movement”, sees the protest’s origins in the growing inequalities of wealth and power perpetuated by the “neo-liberal economic domination” of corporate America.

I’m not persuaded that all of the protestors, let alone their many sympathisers, would recognise such an ideological presentation of their beliefs.  Nor is it clear that the increasing range of grievances being brought to the protests can sustain collective cohesion amongst the disparate groups involved in “direct and transparent participatory democracy”.  The future of the protests is uncertain.  The increased organisation of spontaneity may either undermine the movement’s appeal or else – less likely I think – mould it into a more enduring form of political protest.

What is certain is that the concerns that underlie the street occupations are real.  The diversity of opinions, and the lack of political sophistication with which they are often expressed, should not lull observers into the complacent belief that the protest is just the latest day out for the usual ‘anti-globalisation’ suspects.

Something serious is going on.  It was the Harvard Business Review, no less, that earlier this year published an article premised on the prescient view that the “capitalist system is under siege”.  The article, by Michael Porter and Mark Kramer on “Creating Shared Value”, pointed to the fact that companies are “widely perceived to be prospering at the expense of the broader community”, that the legitimacy of corporate activity is falling and that trust in business is now much diminished.

A couple of years ago, at the height of the GFC, I reflected on what impact the severe economic downturn might have on corporate social responsibility (CSR).  I argued that the fundamental causes of the financial crisis – the unconstrained pursuit of high-risk short-term profits – represented the antithesis of the ethical values of corporate citizenship which community and environmental programs were intended to exhibit.

My concern in 2009 was (and remains) that CSR and corporate sustainability are too often located at the periphery of business strategy.  They are embraced as a matter of good corporate relations which can bring the economic benefits of reputational integrity.  Unlike those sleeping on Wall Street, I am persuaded that the community and environmental initiatives of companies really are of significant social benefit.  Their influence is weakened, however, to the extent that they are pursued and reported upon as if they are a peripheral ‘bolt-on’ to core business activities.

This structural weakness helps feed the angry cynicism of the Occupy Wall Street movement.  Corporate responsibility and sustainability are portrayed by protest leaders as little more than a low-cost sop to ‘the 99%’:  a ‘launch, lunch and logo’ designed to present brand identity in a favourable light and a self-serving ploy to ‘greenwash’ products for unwary consumers.  It seems to the protestors that business leaders lack any genuine concern or empathy for society at large.  At best CSR is perceived as a strategy to win political support on Capitol Hill.

The challenge for those of us who believe in market economics is how to restore business legitimacy.   The ‘licence to operate’ needs to be rearticulated.  Business must be able to exhibit its societal value, not to trade-off against the social and environmental costs of economic success but as integral to the supply-chain by which goods and services are produced.  ‘Giving back’ is no longer sufficient.  Charity won’t save capitalism.

This is the provocative thesis that lies at the heart of the arguments propounded by Porter and Kramer.  Companies, they propound, need to demonstrate that, through their policies and practices, they simultaneously advance both economic and societal value.  They need to recognise that they create ‘shared value’ through their business.

Of course companies must return economic value or their financial viability is at risk.  Yet they also need to focus on the societal value they can create through the investors they attract, the suppliers from whom they buy, the employees who work for them and the consumers to whom they sell.  Sustaining a financial return to shareholders requires businesses to take account of their impact on multiple stakeholders.

Crucially, companies need to build into their strategic planning an explicit awareness that long-term economic returns can be accrued through the pursuit of societal value.  Improving value in one area gives rise to opportunity in the other.  The future of capitalism, according to Porter and Kramer, lies in corporations creating a “virtuous cycle of shared value”.

Business needs to get serious about establishing trust in business itself.  Corporate philanthropy alone won’t win the hearts and minds of the public.  Companies need to show, right along the value chain, how societal needs are being embodied in their products, benefits being achieved and harms mitigated.  They need to recognise that they pursue societal impacts because, in a competitive market, they are integral to sustaining long-term project profitability.  Creating shared value is a matter of corporate self-interest.

None of this is likely to persuade those engaged in the Wall Street sit-ins to go home and embrace capitalism.  Their anger will take longer to assuage.   Nor will the virtues of shared value convince those business and political leaders who continue to argue, channelling Milton Friedman, that the only responsibility of business in a capitalist society is to make a profit on their investment of private capital.

The battle for hearts and minds needs to be fought.  An increasing number of hard-nosed multinational companies – such a Google, IBM, Intel, Johnson and Johnson, Unilever and Wal-Mart – have begun to embark on important shared value initiatives.  Indeed in a recent edition of Social Business, I interviewed Peter Kelly, Director of Corporate and External Relations at Nestlé  on the way in which the company was embracing the new approach.  From the support they offer to their agricultural producers in the developing world to the care with which they market their products, Nestlé has become a market leader.

What about Australia?  Do we have companies that are starting to present their business in terms of the shared economic and societal value they are creating?  The answer, I’m pleased to say, is in the affirmative.  Over the next few weeks I’ll blog about a few of our own ‘shared value’ companies.

Peter Shergold is the Macquarie Group Foundation Professor at the Centre for Social Impact (CSI) at UNSW.  This blog post first appeared on the CSI Blog.

Michael Sherris

Australia needs new infrastructure. We need to fund it. And there are substantial assets in superannuation funds. Why don’t we combine the two?

Former Treasury secretary Ken Henry says that Australia’s infrastructure projects should be reformed in a way that will make them more attractive to superannuation funds that fear taking on too much risk.

There are vast assets in superannuation funds that can do a lot of good for Australia. These are a potential source of funding to finance the infrastructure that Australia badly needs.

These superannuation funds will increasingly be seeking assets that will allow them to provide retirement income streams to their members either directly or through retail products such as indexed life annuities.

Among the potential reforms suggested by Ken Henry is one that would see the Federal Government assume greater risk, with less pressure on the private sector, to reassure funds and their investors that infrastructure projects are safe investments, such as the latest proposals for the fast rail network on the east coast of Australia.

Super funds could pay for these proposals now. If these funds are to finance major infrastructure assets they should be seeking long term inflation linked annuity bonds to fill the limited market in indexed linked and long term securities in Australia. This would provide opportunities for the funds to offer income streams to members and have matching long term assets.

I would like to see this taken further. Ken Henry’s Tax Review proposed that the government should issue more long-term inflation linked longevity bonds, to support the development of a longevity insurance market. Now, if we were to be really innovative we may even be able to develop a longevity bond with payments linked to population survival rates to allow the funds to manage mortality risk, which would naturally compensate for the population living longer. This mortality risk is driving the growth of longevity swaps for defined benefit pension funds in the UK and Europe as well as attracting interest in the US.

Australia is one of many countries that has a rapidly ageing population. However there are few products that provide longevity insurance, which is protection against the risk of individuals living too long, running out of cash and then relying on the state. Using these longevity bonds, we could also fund key infrastructure projects in Australia, which are currently suffering from a lack of cash from risk-wary superannuation funds which have seen large losses on projects such as the Clem Jones tunnel in Brisbane.

Michael Sherris is a Professor of Actuarial Studies at the Australian School of Business.

Rosemary Howard

There is a widespread misconception among many Australian managers that operational excellence equates to saving dollars. However, focusing just on the bottom-line is not the way to transform organisations.

If a business is doing what it did yesterday, but just doing it a bit more cheaply, that isn’t going to deliver any long-term competitive advantage and it won’t make that business more successful.

Real productivity gains are needed but Australia, weighed down by its own good fortune, could struggle to make them.

The mining boom, the very thing that has kept Australia going while other economies in the world have struggled under the weight of the global financial crisis, is taking the focus off productivity levels, and undermining Australia’s ability to perform well in the long term.

A report from independent public policy think-tank the Grattan Institute has pointed out that according to the broadest measures Australia’s productivity performance has turned negative over the last five years. The authors of Australia’s Productivity Challenge, economist Saul Eslake and research fellow Marcus Walsh, issued a stern warning that the country’s economic performance could decline substantially once the commodity boom runs its course.

Australia is not doing the hard yards on a globally competitive basis.

Last year, only 42% of Australian organisations even measured productivity, down from 49% in 2009, according to The Telstra Productivity Indicator 2010.

If organisations are not measuring productivity, how are they managing it?

Leadership remains a key issue, and this is tied to levels of education. However, Australia has a dangerous disdain for business management methodologies such as Six Sigma. Used strategically, these tools can make a valuable contribution to operational excellence.

The education level of Australia’s workforce generally does not compare well with other advanced economies.

We have half the number of people with Masters degrees or PhDs versus the US or the UK and one-third the level of Germany.

Australia ranks 25th out of 33 Organisation for Economic Co-operation and Development (OECD) nations for public expenditure on education as a percentage of GDP.

And when it comes to collaboration between tertiary institutions and business, Australia is a lowly last among the European Union’s 27 nations.

Australia may take pride in being very ‘school of hard knocks’ competent, but if we don’t know what we don’t know, we won’t learn from leading frameworks and best practice.

Australian managers have plenty of positive points that are widely admired and deliver results. We say what we think and don’t hold back. We listen to each other and engage in reasonably open conversations. We form teams naturally, and global academics comment on the phenomenon of boards operating as real teams in Australia, which is comparatively unusual.

Despite this, we are still complacent about addressing productivity.

When the mining boom ends – and it will – we will rely on strong leadership and management skills, as well as technological innovation, to drive the real productivity performance required to sustain our quality of life.

Rosemary Howard is Executive Director and Conjoint Professor of AGSM Executive Programs at the Australian School of Business, UNSW.

Michael Peters

There is perhaps no greater failure of competition policy than access to airports.

The Australian Competition and Consumer Commission’s (ACCC) submission to the Productivity Commission’s inquiry into the economic regulation of airport services states that airports should face tougher rules to discourage excessive parking and other fees.

I can’t help but feel we all pay for this anomaly.

The ACCC has stopped short of suggesting that there should be price caps, however the ACCC has revealed airport charges passed on to passengers make up as much as 20% of the cost of Qantas and Virgin’s cheapest airfares, and even more for budget carriers, and wants to curb the potential for privatised airports to reap excessive profits through market strength.  The ACCC is concerned that some airports may have used their market power to achieve monopoly profits in services provided to airlines and in car parking.

There is little doubt that airports have taken advantage of their market power to the detriment of key industries such as tourism and couriers, as well as everyone who flies for business. The extra costs the airports impose impacts on the entire economy.

The ACCC says the threat of arbitration would encourage fairer commercial negotiations between airports and airlines when determining charges, but it has not pushed for a return of price caps fearing tourism could be harmed.

That’s fair enough, however this form of profiteering is a burden to the economy.

It restricts productivity and distorts the market. In particular the cost to the community is significant. For many years successive governments and the regulator have attempted to do something about our airports – just as they tried to do with Telstra. The answer is the application of sound public policy and to vigorously pursue competition law enforcement to ensure access to key infrastructure.

I want to see a total reform of this area. Rod Sims – the new Chairman of the ACCC – and the ACCC as a whole is in a unique position to finally deal with the elephant in the room that is passengers using the nation’s airports.

Michael Peters is a Lecturer in Business Law and Taxation at the Australian School of Business.

Michael Peters

After 21 years of mandatory superannuation there is almost as much money in Australian superannuation accounts as there is in bank deposits.

If you look at the longer term “sticky money” and take out short term bank deposits, then the $1.2 trillion superannuation industry is way in front. By this time next year, superannuation should be streets ahead, by any measure.

This is why it makes sense for APRA to start treating superannuation accounts in some of the same ways it treats bank deposits held in Approved Deposit Institutions (ADIs), and this is one of the key themes of the governance discussion paper released this week by APRA.

In essence, the defining principle of the reforms is that super should be as safe as money in the bank. Superannuation and real estate will soon be Australians’ biggest private investments, so super should not only be as safe as the bank, but safe as houses too.

This is not purely altruistic, of course. Our regulators are terrified at the thought of a financial disaster hitting our superannuation industry. It is a national nest egg which needs an amount of protection, otherwise the impact on the public purse and retirement lifestyles would be catastrophic.

The sagas of Westpoint, Trio Capital, Storm Financial and Opus Prime were well documented but small in scale. If that happened across the industry, though, it would be a tsunami of national disaster.

APRA’s new discussion paper on superannuation governance addresses some of these issues as the regulator prepares to take over the industry from 2013.

Up until now, there’s been very little legislated capital adequacy for superannuation funds, and virtually no liquidity rules and little in the way of regulated transparency. Superannuation has been almost an afterthought for the financial sector.

The concept of operational risk reserves has been completely unknown. Our auditors only look at funds when money goes missing and don’t judge performance in the same way as European regulators “name and shame” poorly performing funds.

The reforms may not go so far as the equivalent of a deposit guarantee on super accounts, but were are heading in that direction. The draft paper is important as it places super at the top of the finance regulatory agenda, so it makes sense that it should be protected by a watertight regulatory regime, and even by a guarantee.

There is little point in Governments changing the rules over the years to make superannuation the nation’s preferred savings vehicle if the regime does not also deliver adequate protection.

There is no doubt that the changes will mean more red tape, more compliance fees, and will further drive the wave of consolidation among the super funds. It will probably also mean less volatility in fund performance. Given the importance of superannuation not just to individuals but the nation as a whole, these are necessary inconveniences.

Less lamented will be the end of the well-known perks enjoyed by fund managers. Most people have no idea of the multi-level fee structures in their superannuation funds. In the 21 years of the mandatory regime, clients have been burned alive.

Accountability for service and performance is APRA’s great challenge, along with minimizing risk. The draft changes show they are up for the challenge.

Michael Peters is a lecturer in Business Law and Taxation at the Australian School of Business at the University of NSW. A version of this opinion piece appeared in the Australian Financial Review on Wednesday 5 October 2011.

Rosemary Howard

Childcare for many families is the second biggest expense after the mortgage. If laptops, cars and mobile phones are all tax-deductable, why isn’t childcare?

In a recent Knowledge@Australian School of Business article, leading business women and academics have flagged childcare as the single biggest and most directly related cost to earning income that should be eligible for a tax rebate.

That’s why it makes economic sense for it to be firmly on the agenda for next week’s Tax Summit in Canberra.  To fulfill the required rise in national productivity and global competiveness, we must address this issue head-on.

The prohibitive cost of childcare affects all families. The lack of financial support in the form of childcare incentives is a serious impediment to women’s participation in the workforce. It is at odds with the nation’s shared objectives when it comes to advancing women into leadership roles, including those at the executive and board level.

Women’s poor representation at the top of the business ladder has been a topic of robust discussion. The latest statistics show that of ASX 200 appointments, woman make up 51 per cent of professionals but only fulfill 2.5 per cent of chair people, 11 per cent of board appointments and 3 percent of chief executive roles.

The 2010 Global Gender Gap Report, a publication of the World Economic Forum, found Australia ranked as No. 1 in terms of educational attainment but No. 44 for labour-force participation of women. This shows that Australia has one of the most highly educated female populations in the world, yet we do not allow women to fully participate in the workforce. The current gender bias means that women are not being employed in roles where they can be most productive.

Substantial childcare incentives could not only help lessen the gender gap, but drive productivity levels. This is supported by the Productivity Commission’s July 2011 research which shows that a 1 per increase in early childhood education and care fees leads to a 0.3 per reduction in the employment rate of mothers with young children and a 0.7 per decline in hours worked.

According to a 2009 Goldman Sachs report, Australia’s Hidden Resource: The Economic Case for Increasing Female Participation, having more women in leadership roles has the potential to boost the level of economic activity in Australia by 20 per cent.

Unless the government is prepared to increase taxpayer subsidies for childcare, the increasing cost of childcare will continue to limit women’s participation in the workforce; ultimately inhibiting their career advancement.

Rosemary Howard is Executive Director and Conjoint Professor of AGSM Executive Programs at Australian School of Business, UNSW.