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ANALYSIS: As the government strives to fast-track a green transition and manufacturing revival, it’s crucial to avoid ceding control to private enterprise. By Alison Pennington.
Risks in the race to deregulate
When Atlassian co-founder Scott Farquhar addressed the National Press Club last month, he presented the “technotopia” of a renewables-powered global data industry as Australia’s biggest economic opportunity.
Never mind the huff about advanced manufacturing powered by renewables, with its benefits for jobs and the national economy. Farquhar sees silent “digital embassies” becoming the new data meccas for other countries and foreign companies to operate on Australian soil – under their own laws. Copyright, tax and labour laws could all be bypassed for giants such as Amazon, IBM and Google.
Farquhar says government needs partnerships with big tech that move “at the speed of technology, not at the speed of bureaucracy”, with faster approvals of renewables projects and data centres. Artificial intelligence should be implemented across all public-facing government services and workplaces, too.
As our economy struggles to solve big problems such as climate adaptation and affordable housing, it’s tempting to imagine a tidy overlay of the giant tech companies’ capabilities and the interests of the wider community. But it’s dangerous.
Billionaires in T-shirts are a relatively new thing, but their rent-seeking practices are not.
Take “digital embassies”. Carving out geographies for selected corporations and foreign countries to undertake their activities outside normal laws has been pursued at pace since the 1990s through special economic zones (SEZs).
Globally, there are about 5400 SEZs, with countries mostly in the global south promised jobs and industrial development by “partnering” with large corporations and foreign countries. The result? Too often, profits have been siphoned out, with host countries losing their capacity to fully capture gains. SEZs across South-East Asia and India have traded exemptions from labour and tax laws to gain foreign investment, leading to hyper-exploitation of workers and lost public revenues.
Underpinning Farquhar’s vision is the view that businesses need special treatment to invest in the societies in which they operate: subsidies, tax breaks and carve-outs from labour laws are standard fare. But ceding sovereignty altogether is another matter.
Trading in sovereignty would be an unacceptably high price to pay for an energy transition we are positioned to lead the world in. It takes “greenwashing” to a new illiberal level.
Is a shift from foreign-owned mining to foreign-owned data mining with even less control the best we can do?
The Albanese government’s array of economic plans suggests that it thinks we can do better, with big-ticket projects under way, including Future Made in Australia, net zero, the National Reconstruction Fund, Buy Australian Plan and policies to build 1.2 million homes in five years.
After one term in government, however, there’s not much to show – in buildings, new green enterprises, affordable homes or cheap renewable power for households.
The United States offers a cautionary tale. Slow progress, that is, in former president Joe Biden’s apparent failure to “walk the talk” on big job-promoting industry policies helping to pave the way for Trump. And a lack of visible progress threatens to backfire here.
So how can government get better at getting things done quicker?
A new political model for solving bottlenecks seeks to answer this question. It’s outlined in Abundance: How We Build a Better Future, a book by US journalists Ezra Klein and Derek Thompson, who argue that to build the stuff we desperately need faster, regulatory obstructions on both public and private sectors must be lifted, freeing up all actors to invest and drive outcomes in the public interest.
The book has gained traction in Canberra – Treasurer Jim Chalmers calls it “a ripper” – and the challenge of deregulation is a foundation of this week’s Economic Reform Roundtable.
The risk is that the theory misdiagnoses the problem. Low private investment is often less about regulation and more about market concentration, shareholder-first business models and decades of governments stepping back from actively shaping the economy.
There is, however, a useful kernel in the Abundance agenda, especially for Australia.
As government’s role in directing the economy began narrowing from the 1980s, a thicket of rules and conditions sprang up to determine how the public service should operate.
While the “small government” brigade were railing loudly against red tape, a silent campaign was being waged inside public institutions and departments to create more of it – to tie up government.
Ill-fitting, short-term metrics such as productivity, efficiency dividends and lowest-cost contracting were grafted onto policymaking and budgets. The long-term effects on revenue, employment and other multipliers fell by the wayside.
Public servants were reorientated to dead-end work, and policy experts were replaced by armies of siloed contract managers ticking boxes against matrices instead of working to the big picture of national interest.
Wide-scoped policy work was outsourced to private consultancies, the value of which hit $20.8 billion under the Morrison government, with the current government clawing back $5.3 billion over its first term. Outsourcing has flipped blueprints for complex government systems into valuable commodities to be guarded, dissolving the efficiencies of centralised, coordinated design and delivery within the public sector.
The IT systems behind government services and agencies were handed to private companies, setting up multibillion-dollar gravy trains beset by long delays – the National Disability Insurance Agency’s scandal-ridden contracts with global IT giant Salesforce for back-end technologies is one example – and turned minor policy tweaks into years-long, lucrative deals.
The way physical infrastructure projects were designed and delivered has also radically changed. Private constructors and consultants took over all project phases, undermining the efficiency and accountability of infrastructure delivery, something acknowledged by the Senate in 2012.
The result is a public policy machine tripping over itself, scared to take risks, lead and collaborate across divides. State capacity has been neutered.
Meanwhile, submissions to the government’s round table are flowing in from unions, business and other groups across the realms of AI, productivity, tax reform and more. Progress on any of these ideas will be stymied, however, unless severe procedural obstructions inside the government are confronted.
We need a strong, progressive case for a “mission-focused” recalibration of the rules and processes guiding government activity.
Clear directives are needed from elected leaders on who leads in a democracy. This means discarding the ideology that government is a block on markets, or that its only role is remedying private-sector failure.
We need an unflinching assertion of the critical role of the public sector in an economy. It shouldn’t play second fiddle to corporate interests. Governments plan, fund and deliver. And they do this for their citizens, not “customers” or “clients”.
A clearer demarcation of responsibilities is paramount. The public sector delivers the core business of living standards, including healthcare, education, skills and jobs. It should set long-term policy horizons in future-focused industries and lead with investment – to “crowd in” the private sector.
This means abandoning the fictional role of markets in services that are almost entirely publicly funded, and engaging in more direct provision – because today’s privatised government services are tomorrow’s royal commissions.
When essential services fail their citizens, governments should not entrust the clean-up to private consultancies – a risk-shifting practice calcified in the federal government, with the redesign of the crisis-ridden early childhood education and care sector awarded to Deloitte just this week. A system corrupted by the unaccountable motive of profit isn’t repaired within that same logic.
Achieving abundance for Australia also means abandoning “partnerships” with large corporations that tell us to move as fast as their own business opportunities.
Australians believe in a strong role for government to deliver essential services, good living standards and sustainable industries. These expectations are our strength.
We want an abundance of the things we need, but if we don’t confront the structural reasons behind modern policy inertia, we won’t create a better future.
The treasurer has had some success in initiating big, honest conversations about our economy, leading changes to the regressive stage three tax cuts that enshrined the principles of progressive income tax. He can do it again this term, taking a leaf out of his new favourite book.
It’s becoming increasingly clear that the private housing system is incapable of building at the scale and price we need. If Abundance argues we must seek outcomes rather than just spending the money, then why can’t government get reacquainted with the housing planning, financing and construction that it used to do?
Big Tech’s technotopias distract us from the basics. Australia can position itself as a hosting ground for foreign-run data enclaves, or we can relearn how to do simple things such as build homes – similar to the achievements of postwar reconstruction, where up to one third of the homes built over 25 years were built by the government.
We have an opening in Australia to avoid the afflictions plaguing countries such as the US and the United Kingdom, but the window is narrow.
This is not just a question of speed, it’s also a question of direction, and who gets to determine it.
This article was first published in the print edition of The Saturday Paper on August 16, 2025 as "Economic speed traps".
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