Dale Boccabella

As currently couched, the self-education deduction capping measure is not targeted at the claimed mischief and it therefore overwhelmingly looks like a revenue raising measure. To dispel this, the government needs to target the measure.

As part of the government’s National Plan for School Improvement (NPSI), a $2,000 per year cap will be placed on deductions for self-education expenditure related to production of a taxpayer’s income. It is planned to start in 2014-15 and is expected to save the government around $520 million over the forward estimates (3-4 years).

Two justifications were given. First, this measure will generate savings towards the cost of the NPSI. Secondly, some taxpayers are spending too much on their self-education and/or their expenses involve “luxury” self-education. The Treasurer suggested that without a cap, some taxpayers are able to enjoy a significant “private benefit” at the expense of taxpayers.

Denying these deductions to raise revenues for an expenditure program is using the tax system for a “foreign purpose”. And, this point holds even if the topic of tax deductions bears some relationship with the expenditure program. In this case, this is debatable.

The Treasurer has some basis for arguing that the capping can be justified by the “private benefit” aspect. There are many tax cases involving claims for overseas and interstate travel where the taxpayer attaches leisure to attendance at a relevant conference. The tax tribunals have been rather generous when it comes to apportioning expenditure on air travel between the deductible conference attendance and the non-deductible leisure pursuit. This capping measure may put a ceiling on “suspect claims” but it will not address the private element of expenditure where it is below the $2,000 cap because it is not targeted at “private items” of self-education expenditure.

The cap more broadly can be seen as an equity measure as it puts a ceiling on a category of otherwise deductible expenses and therefore can reduce the detrimental “upside down” effect (i.e. taxpayers on higher tax rates get bigger tax break from a given deduction amount) that comes with all deductions. But, many people incurring non-private benefit and expensive self-education are in the earlier stages of their careers and are on lower tax rates. For them, the capping appears inequitable.

Although bluntly targeted, this measure will in part deny deductions for taxpayers with high “luxury” income-related expenditure. The short and legitimate question is, why is the capping only relevant to self-education expenses? Why isn’t it considered where other “luxury” deductible spending occurs? After all, isn’t there a large private benefit to a taxpayer undertaking business or first class air travel or five star accommodation for their work, outside the self-education context?

The extra problem is that the measure also operates to deny deductions for taxpayers with high “non-luxury” income related expenditures of self-education; again, the targeting of the private benefit appears to be missing. This tends to undermine the denial of the private benefit rationale and brings the government admitted revenue-raising rationale to the fore.

The deductibility of self-education expenses is one of the most troublesome areas under the general deduction provision and an area where the error rate is very high amongst taxpayers and their advisers. At times, this uncertainty encourages unscrupulous taxpayers and tax agents to make iffy claims knowing full well they may not be called to account. This announcement doesn’t address complexity because the focus is on capping. However, the government could use the opportunity to set out some bright lines on the circumstances where self-education is deductible. After all, it will have to do this to identify expenditure subject to the cap.

Perversely, the introduction of the cap may actually convince some taxpayers to claim an amount of self-education deductions just under the cap as deduction caps can send the “wrong message” (i.e. it is viewed as giving a deduction). Such practices need robust compliance follow up from the ATO.

Finally, many will argue that denying/capping deductions for income related self-education expenses is sending the wrong message and that some may be discouraged from engaging in education. Time will tell, but the argument puts considerable faith in the power of a tax deduction.

Dale Boccabella is an Associate Professor of Taxation Law at the Australian School of Business.

Geoff Weir

There is no doubt China wants the renminbi (RMB) to become a major global currency. While there is no public timeframe, one thing is clear: the ongoing move towards internationalisation of the RMB will have a huge influence on global volumes, currency denomination and location of financial flows and financial market activity over the coming decades.

China will within the next decade be both the world’s largest economy and the single most important driver of global trade.  The move towards internationalisation of the RMB will require ongoing relaxation of capital controls on China’s inward and outward investments, and full currency convertibility.

These factors will see a massive increase in investment and trade-related flows into and out of China, and in the associated provision of RMB denominated financial products and services in trade financing and investment.

There will be winners and losers. For instance, local and offshore investors have used Australian dollar and Australian dollar denominated assets as proxies for exposure to the Asian growth story. As the RMB becomes fully convertible and capital controls are gradually eased, these “proxy” trades will decline.

So how is Australia positioned to ensure it benefits from these enormous changes?

To date the process of building up RMB liquidity offshore has focused on encouraging RMB trade invoicing. While only a small proportion of Australia’s trade with China is currently invoiced in RMB, a recent Bank Customer Survey of Australian companies trading with China showed that it is likely to increase, potentially resulting in a build-up of RMB liquidity and RMB-denominated financial products and services in Australia.

Looking beyond trade invoicing, there are good reasons why Australia has the potential to become an important part of the offshore RMB network. For starters, Australia is ideally positioned, being the first major financial market to open after the US closes, before Singapore, Tokyo and Shanghai, and remaining open for much of the Chinese trading day.

Australia has a world class payments settlement system and a predictable, efficient and well-regarded legal framework and regulatory regime, with strong prudential oversight.

Australia already has critical mass and liquidity in funds management, and equities, derivatives and foreign exchange markets.  This is allied with a robust banking system and efficient distribution platforms, providing both liquidity and confidence.

While the extent to which in practice Australia develops as an offshore RMB hub is very much in the hands of the Chinese authorities, Australia has reasons for optimism. Firstly, in 2012 China and Australia entered into a bilateral currency swap agreement. The swap facility is the fourth largest after Hong Kong, Singapore and South Korea.  Last week it was announced the AUD has just become the third major currency outside of USD and JPY to have direct trading against CNY. And perhaps most importantly, the recently announced strategic partnership between China and Australia will provide an annual forum at which policy issues can be discussed.

So there are encouraging reasons for thinking that China may be willing to encourage and support Australia’s development as a location for the expansion of the network of offshore RMB hubs.

Nonetheless, more work needs to be done on understanding the key issues, drivers and impediments for developing RMB business in Australia. They will be the subject of a joint research project to be conducted by the Centre for International Finance and Regulation (CIFR) and the Shanghai University of Finance and Economics. This important project was announced last Friday by the Treasurer at the RMB Trade and Investment Dialogue in Sydney. It will incorporate a survey of both Chinese and Australian companies regarding constraints to RMB invoicing; the implications of RMB internationalisation for regional and global financial markets; and the market conditions and policy framework that may need to be in place to encourage development of an offshore RMB market in Australia.

Australia benefits enormously through its trade links with China. We now need to ensure that we have both the market conditions and the policy framework in place to also benefit from the massive changes that are just beginning in global financial markets as China eases its capital controls and moves towards a more market determined exchange rate.

Geoff Weir is a consultant for the Centre for International Finance and Regulation. A version of this article was previously published in The Australian Financial Review.

Professor Chris Styles

Former British Prime Minister Margaret Thatcher has died at the age of 87.  Famously the daughter of a grocer she was in the top job for 11 years.  She was also a highly divisive figure who was to some the saviour of the British economy, but to others responsible for decimating industries and communities.  Irrespective of which side of the fence you sit, it’s hard not to recognise her as a strong and highly effective leader.

What kind of leader was she?  In modern parlance she might be described as a values-based leader.  Whether you ascribe to her values or not, her model of leadership was about articulating her core values, and making decisions consistent with them, even in the face of strong opposition.

How do today’s leaders stack up to the Margaret Thatcher model?  Sheena Lyengar, a Professor at Columbia Business School, told an audience of over 1000 senior business school academics gathered in Chicago this week that we are facing a ‘leadership crisis’ that applies to business as much as politics.  Whether we are indeed in a crisis is debatable, but there are legitimate concerns over short termism, popularism (whether its politicians reacting to the voter polls or CEOs pleasing market analysts), and revolving door leaders. To better understand Thatcher’s approach to leadership, consider her three biggest achievements. First, with Ronald Regan, she was credited with ending the Cold War.   Their approach was to negotiate from a position of strength, which controversially included deploying nuclear missiles across Western Europe (including in Britain).  While Mikhail Gorbachev was a man she said she could ‘do business with’, she had a deep distrust of communism and saw its end as a moral imperative.

Second, she fought and won a war in the Falkland Islands that no one seriously thought she would enter into. Although a group of Islands where sheep outnumbered people, she said that it was a matter of principle that she not sit by and see British citizens invaded by ruling military junta in Argentina.

Finally, she transformed the British economy.   When Margaret Thatcher came to power in 1979 inflation was rife and the economy in poor shape.  She tackled inflation head on, cut spending and took on unions to move the economy towards the more flexible, market driven system that essentially operates today.  She was hated by many for the hardship her measures caused, but was resolute in reshaping an economy that in her mind would reward the efforts of local grocers like her father.

All three of these achievements are defined by a strong set of core values that were translated into strategies and action.  For example, her commitment to free and flexible markets led to strategies that reduced union power and privatised state industries which ultimately led to actions such as the miners’ dispute.  And once she went down a path, she did not waiver a position made famous by her remarks, “the lady is not for turning”.   Many of her decisions led to short term pain, including job losses, and indeed 255 British servicemen and three Falkland Islanders, as well as 649 Argentineans, lost their lives as a result of the Falklands conflict. She saw leadership as actions reflecting principles rather than basing decisions on popular sentiment.  She also displayed what many now see as a critical leadership quality, resilience.

When selecting leaders, whether on election day or for senior positions in business, we would do well to focus on a person’s core values and beliefs, and assess their record of delivering against them, particularly when the going gets tough.   If values are well articulate and we buy into them, then decisions and actions are better understood, respected and followed, even if not always liked.  Values-based leadership has much going for it and Margaret Thatcher was a great exponent.

Professor Chris Styles is Deputy Dean and Director Australian Graduate School of Management (AGSM).

Peter Swan

On Thursday the Gillard Government launched Phase 2 of their High Speed Rail study that was produced as part of a political agreement with the Greens.

The very optimistically projected cost is $114 billion for 1,800 kms of rail to link Melbourne to Brisbane via Canberra and Sydney. Approximately 8% of the route requires exceedingly expensive tunneling, giving huge scope for costs to blow out.

The projected (internal) financial return is 0.8% compared with a minimum of 15% to be considered for a commercial project. Hence it could never be financially viable and is likely to require on-going subsidies even if the Government provided the entire capital cost.

Can the project be justified in cost-benefit terms? Certainly, the Report claims that there is a positive benefit/cost ratio at low discount rates with the benefits roughly equal to the costs with a 7% discount rate.

These benefits consist of consumer and producer surplus. It is my belief that these benefits are likely to be vanishingly small in practice with the costs far outweighing the benefits.

These benefits are assumed to arise largely from time savings due to better access and egress compared with airports such as Tullamarine. A high-speed rail connection between Tullamarine and the City could be built for less than $114 billion with considerable time and convenience savings. There might even be some spare change.

Such assumed time savings also presumably drive the 55% of passengers who are assumed to switch from air to rail and the 19% induced passenger increase.

It is hard to imagine that the 23% of passengers that are assumed to switch from cars will gain sizeable subsidiary benefits to motivate a switch. In fact, many who currently drive will face car-rental and other out-of-pocket costs that are likely to be sizeable.

In my view, these passenger estimates are likely to be even more upward-biased than the pie-in-the-sky estimates that led many toll-road providers to the bankruptcy in both Sydney and Brisbane. Projected toll-road/tunnel usage exceeded the reality, typically by 100% or more.

At least one would think that private providers taking and equity stake would be cautious in accepting ludicrous estimates of traffic projections. Governments looking for juicy election bribes have no such hip-pocket concerns. All of these failed projections tended to give excessive weight to traveler time-saver benefits.

The first question to ask is what is a high-speed rail network? It is largely duplication of air passenger routes provided for ‘free’ by nature. Unlike air-routes high-speed rail is exceedingly capital intensive with an exceedingly long gestation period.

The Report projects that cash-flow will be positive for the first time around 2060, about 45 years after commencement. Once of the few routes that is commercially viable is in major Japanese city pairings with population density about 1,000 times higher than major pairings in Australia.

Even Japanese bullet trains received a bailout in 1987 and Taiwan’s line needed rescuing only two years after commencement. In China the high-speed network is highly problematic with severe speed limitations imposed on some lines. One line was even reduced to 45 kms an hour. Even in much denser Europe, only a few city pairs are financially viable.

There is no indication that any success will be achieved in North America. The Californian line that commenced in 2008 had spent $630 million within three years without constructing even one kilometer of track.

Thus the benefits of high-speed rail are largely illusory, especially in Australia with its exceptionally low population density and existing network of relatively efficient airports. Removal of curfews could greatly improve airport efficiency, especially in Sydney. Unfortunately, the costs are not illusory and are likely to be massively understated in the Report.

There have been quite few very-fast train schemes in Australia, mostly centering on the Sydney-Canberra-Melbourne corridor.

The first one was proposed by the then head of the CSIRO who carried the appropriate handle of ‘Wilde’. Hence the ‘Wilde scheme’, of which the latest incarnation from the Gillard Government is yet another example of an exceedingly white elephant.

It is also well timed as a tempting election bribe where it joins the Gonski Report into school funding, the National Disability Scheme and numerous other unfunded projects.

Professor Peter Swan is the Professor of Finance at the Australian School of Business.

Martin C. Jones

In a survey last year of 22,812 people across 22 countries (including Australia), the polling organisation GlobeScan found that environmental concerns had fallen worldwide since 2009, and fewer than one in two people (49%) now viewed climate change as a “very serious” problem. GlobeScan’s chairman, Doug Miller, commented: “Scientists report that evidence of environmental damage is stronger than ever – but our data shows that economic crisis and a lack of political leadership mean that the public are starting to tune out.”

Miller’s comments could have been tailor-made for Australia. The famous “hockey stick graph” of rising temperatures has been confirmed, and atmospheric greenhouse gas concentrations spiked dangerously upward in 2012. The Australian Climate Change Commission found that climate change is already adversely affecting Australians with record-breaking heat, severe bushfires, extreme rainfall, and damaging floods – byproducts of the “Angry Summer”.

Yet with the centrepiece of Australia’s climate policy not even a year old, most Australians are sick of it, or sick of hearing about it – fewer than 13% trust what politicians say about major public issues like climate change. And in the shadow of the Clean Energy Future package (CEF), state and federal governments are quietly letting other climate policies slip.

This “abdication of climate policy”, as Tristan Edis calls it, wouldn’t be so bad if Australia’s climate policy were perfect. But it isn’t; no policy is. The carbon price, while worth having, is a broad, blunt tool that covers two-thirds of Australia’s greenhouse gas emissions. The rest of the CEF fills in some gaps, but there is ample room for further complementary climate policy at a state and federal level.

I wrote last year on this topic, giving reasons why state (or other federal) climate policies could still be worthwhile under the CEF. This would mean innovative approaches such as:

• addressing areas that don’t respond well or rapidly to price changes
• shifting habits, socially-shaped preferences, or intrinsic motivation
• investing in worthwhile programs the private sector is unlikely to fund
• addressing goals other than least-cost abatement, such as improving energy efficiency in disadvantaged households
• making Australia’s climate policy robust; that is, giving it the ability to maintain a minimum level of performance under a range of possible future conditions.

My colleague, Paul Twomey, wrote in a similar vein the year before.

Academics aren’t alone in regarding (some) additional policies positively. Five years ago the federal government received a strategic review of its climate change programs, assessing them for efficiency, effectiveness, appropriateness, and complementarity with the Carbon Pollution Reduction Scheme (CPRS, the forerunner to the current Clean Energy Future package).

Named after its author, the 249-page Wilkins Review formalised criteria that governments could use to assess which climate policies complement a federal carbon price. Reasons for needing complementary policies included market failure, inefficiency, covering sectors that emissions trading can’t, helping people make informed decisions to change their behaviour, social equity, or where the underlying problems of climate change differ across regions. Some of those may sound familiar.

And it’s not as though states have never complemented federal policy, in climate or in other areas. One of the great benefits of federalism is that states can compete with each other to provide better policies, the best of which then (ideally) percolate to the national level. NSW had an emissions trading scheme in 2003, one of the first in the world. Queensland started transitioning to a lower-carbon economy in 2005 with its 13% Gas Scheme. Victoria’s Industry Greenhouse Program to regulate industrial emissions and energy efficiency was another world-leading climate policy.

Indeed, under the constitution, states – and councils – have a duty to act in many areas. They hold powers the federal government doesn’t – education, the environment, or town planning. These are clearly areas where state and local governments should be complementing federal climate policy, as they have not only the power but the best knowledge of the field. They are, quite literally, at the coal-face and on the front line of disaster management.

The need for climate action remains. The scope for complementary policy remains. The duty of governments to act remains. But in many areas, they are going backward. Energy efficiency activities are being scaled back. Construction of renewable energy plants is being cruelled. And electricity price freezes or subsidies are on the cards – as far from a complementary measure to a carbon price as is possible. How you can you make a polluting product more expensive if it’s subject to a price freeze?

These actions make Australia dangerously vulnerable to the fate of its carbon pricing scheme, and there’s no certainty it will last the next term of government. If the CEF is scrapped, or fails, what do we have to replace it? The Coalition’s Direct Action package has a far narrower scope than the current carbon price, and relies on soil carbon measures unproven at the suggested scale and cost. State governments aren’t competing to beat each other or the federal government on climate policy, as they once did.

As the risks of a dangerous climate increase, Australian governments are risking measures needed to ward it off and respond adequately. If GlobeScan polled me, I’d say that’s a very serious problem.

Martin C. Jones is an environmental economist from the Australian School of Business.

Professor Chris Styles

Michael Clarke was recently named the most influential Sportsperson in Australia by The Australian Newspaper. He won the 2012 Alan Border medal (voted for by peers, the media and umpires), and scored more runs in test cricket than anyone else in the game last year.  He even got an apology from the Sydney Morning Herald a few months back for their misjudging of him as a player and a captain.

But in the last few days he and the Australian coach, Mickey Arthur, have been heavily criticised by the public, past players and sections of the media for stepping down four players from the test in Mohali for not doing their homework. The rationale given by them was that this incident was the last straw in a string of breaches of team discipline and came on top of two large, embarrassing losses in India.  They are well paid professionals and the management team felt it was time to draw a line in the sand.

Remember when being a cricket captain just involved  setting a good field and deciding whether to bat first if you won the toss? Welcome to leadership in the 21st century.

Whether we like it or not, sport, and sports teams, look more like businesses than ever before. Probably because that’s what many have become.  Cricket is a good example.  With multi-million dollar bids for television rights, players earning exorbitant match fees and sponsors critically assessing ROI (return on investment), cricket is a sizeable business indeed. The question then becomes about how Clarke should lead the Australian cricket team in such an environment.

Taking a corporate model, Captain Clarke is equivalent to the CEO and Mickey Arthur could be viewed as Chairman of the Board.  They decide who is in and out of the team, the organisational structure, strategy and tactics.  Earlier this week, four members of the organisation didn’t comply with a request from senior management to provide their thoughts on a turnaround strategy, and they were put on ‘special projects’. One declined the offer and has taken indefinite leave.

A consultant brought in to help evaluate performance might look at a lot of things, particularly now that they can access huge amounts of data generated by various performance programs including detailed video analysis.  But the consultants might also ask one very basic question: how did it come to this?  It’s not about who did how much homework, being late for a bus, or wearing the wrong uniform.  It’s likely to be more fundamental.  The problem is really about the culture of the organisation, and any change in performance requires a change in culture.

Leaders talk a lot about culture but culture is often hard to put your finger on.  We see the outcomes of culture – behaviours, performance, staff turnover and retention – but culture itself is harder to define. Management consultants McKinsey & Co (who may have already got the call from Clarke), are attributed with a broad definition of organisation culture which is “how we do things around here”.  If we believe the reports from India, the way things were done by the Australian team appear to be pretty lax.  There would also seem to be a distinct lack of accountability on and off the field.

In simple terms, changing culture requires an organisation to decide where it wants to be and what culture would support getting there, and then collectively deciding change is needed.

Clarke has stated very publicly where he wants the team to be – to return Australia to its position as the #1 test team in the world.  He has also obviously decided that currently, ‘how things are done around here’ isn’t going to support the achievement of that goal.  So he, and the coach, have decided to get tough. Llike those in the corporate world, perhaps Clarke’s big leadership test will be his ability to bring everyone in the team along with him.

Professor Chris Styles is Deputy Dean and Director Australian Graduate School of Management (AGSM).

Professor Renée Adams

It’s accepted across the globe that women are under-represented in business leadership positions and that something should be done about it. To date, the focus has been on increasing the number of women invited to sit as non-executive directors on boards. The aspirational figure is 40% female representation, with some countries legislating quotas and others just setting targets.

While championing diversity in this way may have merit, it’s like treating a symptom rather than the disease. Quotas and targets seem too narrow a policy tool to address the underlying factors associated with the lack of women reaching the top.

My recent research, in association with Tom Kirchmaier from the University of Manchester, has found a strong correlation between the rates of full-time female labour-force participation and the number of women in boardrooms. That is, countries with more women working full-time have more women on boards.

It stands to reason that in order to gain the experience necessary to be a director, you have to have a career. Not all women, particularly those with children, are able to sustain one. Legislators need to look at developing policies that promote full-time employment by women to generate a pipeline of talent that can eventually perform leading corporate roles.

When most people talk about representation on boards, they are looking at the largest listed companies – the top 100, or maybe the top 200. Our research studied a more comprehensive sample comprising 9,888 listed companies in 22 countries: Australia, Austria, Belgium, Bermuda, Canada, Denmark, Finland, France, Germany, Greece, India, Ireland, Italy, Luxembourg, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the UK and the US.

We obtained the data from business intelligence service BoardEx for a 10-year period from 2001 to 2010. To ensure our sample was representative, we restricted ourselves to country-years for which BoardEx covered at least 70% of the total market capitalisation of listed companies in that country and year.

Aside from the correlation between full-time work and representation on boards, our data revealed that female boardroom participation was actually lower than the usual surveys suggest. For example, the 2011 Davies Report for the UK found that “in 2010, women made up only 12.5% of the members of the corporate boards of FTSE 100 companies. This was up from 9.4% in 2004.” Our wider sample showed that the proportion of unique female directors on the boards of listed firms in the UK in 2004 was only 5.1% and in 2010 it was 6.5%.

To reach a board position, women need to stay in the workforce. But our evidence suggests that full-time employment may not in itself be sufficient. The level of government services to families also appears important. More services, such as childcare, make it easier for women to remain working and to pursue ambitious career paths.

A key adverse factor that is less easily addressed is the attitudes to women imposed by cultural barriers. It’s not surprising that there are less women on boards in the more traditional societies, where staying at home being a housewife is deemed to be equally as fulfilling as going to work.

It is possible that present diversity policies which target boards directly may help overcome cultural barriers in the long run, though they may also reinforce gender stereotypes. There are three main types of these policies: quotas, governance codes and disclosure requirements. It’s not necessarily clear that their effect is going to be unambiguously positive. Affirmative action can produce negative results when the unqualified or unprepared are placed in roles just to make up the numbers.

The magnitudes of female director participation are still low, but they do show a clear upward trend over time. To foster this progression, policy-makers should try to remove the impediments to full-time labour-force participation rather than simply trying to put more women on boards.

Renée Adams is the Commonwealth Bank Chair in Finance at the Australian School of Business.

Rafal Chomik

Since its proposal at a 1910 conference, International Women’s Day, which we celebrated last week, has served as a reminder of the role of women in society and the struggle for equality.

The most commonly debated element of this struggle relates to balancing child care and work. Policy makers have responded with various measures.

In Australia and elsewhere even cuts to parental benefits are justified on the basis that they are aimed to help parents, particularly single mothers, into work. The recent introduction of paid parental leave for fathers and partners is intended to help parents become more equal in balancing work and family. And in courting women’s votes for the upcoming federal election the Coalition has pledged to take the issue further by proposing to extend paid maternity leave.

But another area of unpaid work in which women overwhelmingly participate involves care for people with disabilities and the elderly. Australian Bureau of Statistics data on unpaid care shows that women comprise 68 per cent of primary carers overall, 92 per cent of primary carers of children with a disability, 70 per cent of primary carers of parents, and 52 per cent of primary carers for partners. It translates to 1.5 million Australian women acting as either primary or secondary carers.

The benefit of this unpaid work is considerable. One set of recent estimates puts the value of unpaid care by both women and men at $650 billion – equivalent to 50.6 per cent of GDP.

But carers often bear the cost of their unpaid responsibilities. Informal care is associated with lower levels of formal employment, higher risks of poverty, and a higher probability of mental health problems.

Unpaid primary carers are half as likely to be participating in the labour force as non-primary carers. And when they are employed, they are twice as likely to be in part-time work and 30 per cent more likely to hold a temporary job. These impacts increase with hours of care provided.

Of course, the care involved may be incompatible with a full-time job or there may be a level of ‘self-selection’ into the role of unpaid care-giver by those who had lower market opportunities in the first place. But analysis shows that even controlling for such socio-demographic variation, informal carers are less likely to be in paid employment.

Lower employment rates, fewer formal working hours, and fewer household members with earnings can mean that unpaid carers have a higher probability of experiencing poverty. Women carers appear to be particularly vulnerable to such a risk. Moreover, less work and lower earnings during their working life translates to lower savings and incomes in retirement.

The psychological distress and isolation of caring and the lack of support are possible reasons why unpaid carers in Australia are shown to have a 40% higher rate of mental health problems than non-carers. Again, even controlling for socio-demographic characteristics shows that informal caring is associated with more mental health problems and that the impact is more detrimental for women. Being the recipient of a carers’ allowance does not seem to alter the negative impact on mental health in Australia.

With an ageing population the demand for informal care is only going to increase. Indeed, the Productivity Commission sees such care as an integral part of the Australian aged care system. At the same time, the Commission points to the likely reduction in availability of informal care due to demographic and motivational factors. Yet, most informal care is low intensity, with 55% of informal carers providing 0-9 hours of care. Such figures suggests that with the right level of support there is scope for some carers to increase their hours of care with limited impact on work and mental health outcomes. So how do we design support systems for informal carers that avoid the negative impacts?

The Australian government has started putting various measures in place. It developed a National Carer Strategy as a framework to address the economic, educational, and health needs of informal carers.

While flexible work for women with children has been on the agenda for a while, only recently has care responsibility across the life-course been recognised. Last month, the Prime Minister announced that the Fair Work Act will be amended to extend the right to request flexible working to carers – it was already available for those caring for children.

As ever, there is more that can be done. In January, the Sex Discrimination Commissioner, Elizabeth Broderick, released a report calling for a series of possible reforms to support unpaid carers including legislative mechanisms, flexible work arrangements, carer support payments, leave arrangements, services for carers, workplace initiatives and mechanisms within the retirement income and savings system.

Investing in unpaid carers would mean not only relieving pressure from the formal aged care system and improving the quality of care for recipients, it would also go some way to redress this particular area of gender inequality.

Rafal Chomik is a Senior Research Fellow at the Arc Centre of Excellence in Population Ageing Research at UNSW.

Rosemary Howard

We have all had at least one bad experience with dialing through to an Australian firm’s call centre. A long wait. Finally an operator. Answering lots of questions the firm already has in their database. Getting disconnected as they transfer you to another division, and then having to start all over again.

We often assume that these experiences are with outsourced, offshored call centres in India or the Philippines. But this is not always the case.

Sometimes offshored call centres can provide superior customer service (and at lower costs) to Australian call centres, and provide better data analytics.

When we think about the offshoring of Australian financial institution jobs, what questions should we ask?

The first I suggest is why is an organisation thinking of doing it. If the answer is as simple as cost due to Australia’s high wage structure and high dollar, then one probably needs to ask more.

As revenues are harder to come by, there is no question that Australian financial institutions (like all Australian firms) need to manage costs more carefully.

However, the outsourcing or offshoring of call centre and IT jobs should be a more strategic decision.

All firms – including Australian financial institutions – need to consider their long term strategy and therefore how they operate in that context. They need to reflect on the key trends of our time, namely globalisation and digitisation.

In the constrained post-GFC world, Australian financial institutions cannot grow sufficiently to meet investor expectations without the support of offshore markets, particularly in the Asia Pacific region. This insight is reflected in the Government’s recent Asian Century white paper.

As companies consider the optimal destinations for the demand side of their business, they need to also think about where to best locate supply side functions.

This raises the question: what supply side functions are best located in Australia, and what are the sources of our national competitive advantage?

With the finance sector, the GFC has demonstrated we have some real competitive strengths. These include the strength of our banks, our financial regulatory system, our universities and our superannuation system. Given this, what jobs are best located here versus offshore?

There is no question that on face value at least, lower paid roles such as call centre and IT processing can be delivered more cheaply offshore. India and the Philippines come to mind and even our nearest neighbour, New Zealand, guarantees at least a 25-30% cost savings based on wages and overheads.

But then some strategic questions need to be asked. Can these roles be performed to a high standard offshore? Will customer satisfaction data be readily available to drive innovation? Are there hidden costs or risks from having functions offshore? What is happening to wage relativities given wages are rising faster in China and India?

Australian organisations often send offshore the functions that may not be working for them. But you cannot offshore what you cannot manage well yourself.

Organisations also need to consider that by offshoring, they may throttle their employment pipeline of younger workers. Up to half of call centre employees in Australian financial organisations are university-qualified and may likely be suited to progressing to higher level positions in the firm.

If offshoring is strategically right (not just short-term cost cutting), and the whys have been thought through, then it can work. In fact some specialist offshore firms who focus on call centre management or IT processing can offer superior services to some available in Australia or delivered in house.

Outsourcing particularly offshore requires a high level of partnering between the Australian firm and the outsourcer, and this requires the right supplier.

Proactive communication is needed with all stakeholders so as not to tarnish the brand, reputation and image of the Australian firm with customers and employees alike, and affected employees need to be given every chance to be supported and move to a different role.

But there is no question outsourcing often fails and is followed by a period of insourcing and onshoring – we are seeing this happening at present with many US and UK firms.

Many would argue that more regulation is required to stop jobs going offshore.

Australia now ranks 96th in the World Competitive Index in terms of regulatory barriers to business performance, down from a ranking in the 60’s. We also rate more poorly than we should for strategic, people and sales management.

Australia’s focus needs to be on developing high value-adding jobs. That’s why we should only regulate where necessary but educate and develop wherever possible. I am a strong advocate for the ongoing development of those in leadership positions to enable optimal strategic and people management decisions to be made.

To optimise our firms’ performance, business and government need to work collaboratively together. We need to work harder at improving in the areas of management practice, active stakeholder communication, long-term strategy, sales, marketing, innovation and creativity.

Better educated and developed leaders will ensure that the right strategic decisions are made and the right jobs stay onshore.

Rosemary Howard is the former Executive Director and Conjoint Professor of Executive Education at the Australian Graduate School of Management. This opinion piece was previously published on The Conversation under “Impact of offshoring jobs from Australian financial institutions“.

From the Knowledge@Wharton today blog.

Throughout 2012, many analysts were predicting that RIM’s days were numbered. And in one way, that turned out to be true.

Last week, the Canadian firm announced that it would no longer be known as RIM – or Research in Motion – and instead was rechristening itself BlackBerry, after its iconic smartphone. Along with the change, the company introduced a new line of devices based on its latest operating system – BlackBerry 10. Combined, these actions have been widely regarded as a last-ditch effort on the part of the firm to remain a viable player in a market dominated by Apple’s iPhone and devices that run on Google’s Android operating system, such as Samsung’s Galaxy. (In the last quarter of 2012, BlackBerry’s U.S. market share dropped to 1.1%.)

Although many analysts were impressed by the latest BlackBerry devices — one of which incorporates a sleek, touch-screen interface, a “smart camera” and other features — some were disappointed that the firm’s newest offerings wouldn’t be available in the U.S. until March. Already, BlackBerry had delayed the launch of its new operating system for more than a year, and the additional delay sent a negative signal to BlackBerry investors. Following the launch, the company’s stock fell by 12%.

“This looks like a huge uphill battle for BlackBerry,” says Wharton emeritus management professor Lawrence G. Hrebiniak. “If market share equates with power, BlackBerry is close to powerless.” The company offers far fewer apps than its competitors, he notes, and its enterprise user base is continually eroding as companies move to allow employees to rely on their own devices for office email. In addition, “other smartphones are more powerful than the latest BlackBerry offering.”

BlackBerry “needed a bold, ‘swing for the fences’ move, and all we got is a so-so clone of other recent phones,” says Wharton marketing professor Peter S. Fader. “The image of the company revolves around a no-nonsense phone for busy people who don’t have time or patience to type on a virtual keyboard or to monkey around with apps. Many of the people who have clung to a BlackBerry — despite the social pressure to leave it — have done so because of the real keyboard it had traditionally featured, and the many conveniences that come along with it…. The new BlackBerry should have boldly featured a real keyboard and lots of keyboard-based conveniences that iPhones — and their myriad clones — can’t offer.” He adds that although BlackBerry announced it would offer a new phone that incorporates a traditional keyboard, “most people are totally unaware of it. Instead, all the hype is around marginal features that don’t offer any meaningful or long-lasting differentiation.”

“They had an incredible hold on the very large market segment that loved their keyboard,” notes Wharton marketing professor Jerry Wind. “They made huge mistakes by not keeping the keyboard and building around it the necessary software and quality services” to compete with Apple, Samsung and others.

In addition, the company’s decision to reform its brand around its well-known namesake smartphone seems like a step backward to some observers. “The rebranding strikes me as having a certain irony,” says Wharton management professor Daniel A. Levinthal. ”Now that the BlackBerry as a device is becoming associated in people’s minds with a somewhat dated piece of hardware, [BlackBerry is] defining the company’s identity in terms of this particular artifact.

“Adding to the irony,” Levinthal continues, “is that the alternate business strategy for RIM would have been to embrace their secure data network as the core asset and decouple that from a propriety piece of hardware. The ‘M’ in Research in Motion — connoting ‘mobile’ — is arguably more a contemporary statement than ‘BlackBerry.’ They have doubled-down on the propriety hardware in all ways … and, I think, have lost the last opportunity to reinvent themselves as a software/service company. They have an installed user base and can certainly generate some revenue from that, but the longer-run competitive dynamics look bleak.”

According to Hrebiniak, however, there’s still hope for the company. “Mobile carriers like BlackBerry’s operating system,” he points out. ”There’s no guarantee that this applause will generate sales, but it could help.” And if enterprise customers become more security conscious again, they could gravitate back to BlackBerry, he suggests. “But, in my opinion, the biggest hope for BlackBerry revolves around competition. A third or fourth player increases competition and keeps [company] leaders on their toes. This sparks innovation and lower prices. Apple has shown some weakness of late, which could help BlackBerry.

“Finally, people sometimes root for and help the underdog, and BlackBerry certainly fits this category,” he adds. “Super Bowl Sunday has probably affected my thinking, but I think that BlackBerry can make it, despite the very long odds…. The underdog occasionally pulls off the upset.”