Politics — 05 May 2017

bigstockphoto_Australian_Money_Background_2479434In his speech to the Australian Business Economists forum last week, Scott Morrison distin­guished between good and bad debt. Good debt, he argued, was used to finance spending that boosted productive capacity; bad debt financed recurrent expenditure such as health and welfare.

The examples provided of investments that could be funded by “good debt” have largely referred to physical infrastructure projects, or capital investment. These projects can stimulate jobs and deliver resources, which in the long term support economic activity and build the wealth of our nation.

What appears to have been overlooked, however, are the significant gains to be had from investing in perhaps our most important economic asset — the productive capacity of the Australian people.

The benefits of doing so are possibly best illustrated in relation to mental health.

On OECD estimates, the economic cost of mental ill-health in Australia is about 4 per cent of gross domestic product, or upwards of $60 billion a year. These costs include substantial productivity losses, welfare payments, acute hospital services and crisis supports — spending that the National Mental Health Commission considers vital but also indicating failure within our mental health system.

The economic gains from mental health reform, and investment in prevention and early intervention, dwarf the gains from many other reforms on the economic agenda. While projects such as roads, rails and telecommunications are much needed and can deliver long-term economic gains, so too would investment in people and communities deliver substantial economic returns.

Indeed, investment in our people has never been more important. Increasingly, our economy is moving towards industries that rely on health and human services, advanced skills and knowledge, management, innovation and relationships. These aspects of human capital will be critical to increasing our future national prosperity and productivity.

In the dichotomy of good and bad debt (and implicitly good and bad costs), it is important to acknowledge the critical role of our social and economic safety net. As other commentators have pointed out, health, welfare and education spending in some circumstances can be characterised as productivity enhancing.

With the right investments, demand for safety net services can be reduced, and help to better manage the rate of expenditure growth in these areas. This is good for the budget and good for people.

What the dichotomy also overlooks is that “good debt” can be used to help reduce some of these recurrent and so-called “bad costs”. The opportunities for this are perhaps most clear in relation to mental health and wellbeing.

Improved mental health would see better participation in the workforce and higher on-the-job productivity, supporting stronger economic growth. There would be more efficient allocation of res­ources, meaning lower costs in the longer term in areas such as welfare, justice, and housing and homelessness services. The most important gain of all, of course, is a better quality of life for people who experience mental illness, and their families, carers and other support people.

As with all significant projects, investing in mental health and wellbeing needs to be guided by sound analyses of effectiveness, and the economic costs and benefits. While some of this evidence exists in an Australian context, and much of what we know is based internationally, it would not be too much of a stretch to identify the “best buys” in mental health.

Of course, the implementation of any such investment needs to be systematically tracked and rigorously evaluated to ensure not only delivery of the promised activities, but also to monitor improvements in health, social and economic outcomes for people, and value for money for governments and (ultimately) citizens and taxpayers.

The Treasurer’s distinction between good and bad debt and the focus on productivity-enhancing investments doubt will no feed into the government’s broader narrative in next week’s budget.

While for now this may be characterised by some as budgetary massage and political posturing, the principle of investing for longer-term economic gains is sound — and one for which the National Mental Health Commission has been advocating for years.

It may be too ambitious to hope the shifting conversation about debt could pave the way for the application of this principle in all areas of budget spending.

However, at minimum, it should drive serious and genuine consideration of both the physical and human capital investments that are needed as an economy and a national community.

By investing in the mental health and broader wellbeing of our people we have the opportunity to reduce so-called “bad costs” and — more significantly — support the conditions that enable people to thrive and be productive, engaged and contributing members of the community as workers, as friends, as parents, carers and volunteers.

As Malcolm Turnbull has stated previously, such investment is critical to supporting the productivity, prosperity and overall mental wealth of our nation.

Allan Fels is chairman of the National Mental Health Commission.

This piece by Allan Fels was first seen on ‘The Australian’ 5 May 2017.

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