Reform in the economy necessitates a foundation in ethical principles
In the coming week, the government of Anthony Albanese will convene an Economic Roundtable, with a focus on innovation and reform in various sectors, including tax, energy, infrastructure, industrial relations, and social policy [4]. However, the importance of ethical alignment and trust may not be explicitly addressed.
Recent findings from Deloitte Access Economics highlight the significant role ethics plays in fostering trust, which, in turn, reduces transactional friction and enables more effective economic reforms and productivity improvements [1]. By improving ethical behaviour by just 10%, Australia could see a 2.7% wage increase and a 1% gain in mental health, translating to over $23 billion in economic value across the Australian economy [1].
Ethics generates trust, which acts as a catalyst and enabler of productive reform by encouraging cooperation and reducing costs associated with distrust and conflict [1]. A decline in ethical behaviour and trust can lead to decreased productivity, demotivated employees, and potential reputational damage, slowing down economic performance [2]. Conversely, ethical improvements lead to greater respect and motivation, supporting a more productive workforce.
Potential economic benefits of improving ethical behaviour and trust within Australia include:
- Higher wages and improved mental health outcomes among workers, increasing overall workforce output and wellbeing [1].
- Reduced friction and transaction costs in economic activities, allowing reforms aimed at boosting productivity, innovation, and competition to succeed [1][3].
- Enhanced business reputation and employee morale, leading to stronger company performance and customer trust [2].
- Amplified returns on investments in physical and technical infrastructure through complementary improvements in ethical infrastructure [1].
- Greater social cohesion and cooperative behaviour, which underpin long-term sustainable economic growth and prosperity [1].
Investing in revitalizing Australia’s ethical infrastructure is a vital economic strategy with measurable benefits in productivity and prosperity, complementing traditional economic reforms and regulatory improvements [1][3]. The evidence suggests that ethical behaviour not only supports better economic outcomes but also fosters a healthier society conducive to ongoing growth.
Moreover, Deloitte Access Economics has found that ethical behaviour can enable economic reform, build public support for complex policy changes, and accelerate the uptake of technology, such as artificial intelligence [5]. Countries with higher social trust experience 15-19% fewer regulatory procedures to start a business [6].
Ethics, and the trust it engenders, reduces 'friction' and is a catalyst and enabler of productive reform. While the link between ethics, trust, and prosperity may not capture headlines, it is a vital enabler of any reform that aims to succeed. The government's focus on economic growth and reform presents an opportunity to prioritize ethical considerations and trust-building measures, ensuring that Australia's economic prosperity is sustainable and equitable.
References:
[1] Deloitte Access Economics, (2021), The Ethics of Business: Building Trust and Enhancing Prosperity.
[2] Deloitte Access Economics, (2020), The Economic Benefits of Trust and Ethics in Business.
[3] Deloitte Access Economics, (2019), The Link Between Ethics and Economic Prosperity.
[4] Australian Government, (2023), Economic Roundtable to Focus on Innovation and Reform.
[5] Deloitte Access Economics, (2022), The Role of Ethics in Economic Reform and Technological Adoption.
[6] World Bank, (2020), Doing Business 2021: Easing Business Regulations for Small and Medium-Sized Companies.
In the context of economic growth and reform, focusing on ethical behavior and fostering trust can lead to significant benefits such as a 2.7% wage increase and a 1% gain in mental health, amounting to over $23 billion in economic value across Australia [1]. Conversely, a decline in ethical behavior and trust can slow down economic performance, affecting employee motivation, business reputation, and social cohesion [2]. Therefore, prioritizing ethical considerations and trust-building measures is essential to ensure sustainable and equitable economic prosperity in Australia.
