Drivers of Trust in Public Institutions in Australia

Public trust plays a dual role in democratic governance, serving as both an essential input and a crucial indicator. As an important source of legitimacy, trust underpins public governance, allowing officials to make complex policy decisions and address global challenges. It lowers transaction costs, can boost political engagement, and eases policy compliance (Putnam, 1993[1]; Algan and Cahuc, 2013[2]; Fukuyama, 1995[3]). At the same time, trust serves as a useful gauge, reflecting how people view and interact with government institutions. It is worth noting, however, that high trust levels are not a prerequisite for democratic systems (Brezzi et al., 2021[4]). Rather, democracies thrive through "sceptical trust" and open dialogue, which fuel ongoing improvement and responsiveness to citizens' changing expectations (OECD, 2024[5]).

Australia has demonstrated its commitment to trust-enhancing reforms and to advancing democratic principles through various means. In November 2022, Australia signed the Luxembourg Declaration on Building Trust and Reinforcing Democracy, alongside 41 other countries and the European Union. This action, taken at the OECD Public Governance Committee's Ministerial Meeting, underscores Australia's proactive stance in fostering democratic resilience and public trust in a rapidly evolving global landscape. Recognising the critical role of public trust, Australia has invested in comprehensive initiatives to measure trust and make the results available to policymakers and the public. At the national level, these include the Survey of Trust in Australian public services (previously the ’Citizen Experience Survey’), carried out multiple times per year since 2019; and the 2023 Trust and Satisfaction in Australian democracy survey. Moreover, the importance of trust to broader well-being was recognised in “Measuring What Matters,” Australia’s National well-being framework. The framework includes a dimension ‘Trust in institutions’, which includes trust in others, in key institutions, in Australian Public Services and in the national government as indicators. At the international level, Australia has participated in the inaugural and 2023 waves of the OECD Survey on Drivers of Trust in Public Institutions (OECD Trust Survey). To further this commitment, Australia has commissioned this study as an in-depth analysis of trust drivers, reflecting the nation's dedication to understanding and enhancing public trust in its institutions.

This study primarily draws on data collected during October-November 2023 through the OECD Trust Survey, conducted in 30 OECD countries including Australia; and to a lesser extent on the 2021 OECD Trust Survey, carried out in 22 OECD countries in late 2021. It offers new comparative insights into levels of trust in public institutions, citizens' perceptions and assessments of public institutions, focusing on government competence (responsiveness and reliability) and government values (integrity, openness, and fairness) (Brezzi et al., 2021[4]). Trust levels and perceptions of public institutions along these dimensions jointly make up the OECD Framework on Drivers of Trust in Public Institutions (see Table 2.2 in Chapter 2), and the report chapters are structured according to the main public governance categories of the framework. These survey findings are complemented by qualitative data from over fifty interviews with key stakeholders from public institutions, academics, and civil society, conducted primarily in July 2024. This comprehensive approach provides a holistic view of areas where the government can take action to enhance public trust and improve citizens' lives.

The report is structured in four chapters, each exploring distinct aspects of trust in public institutions:

• Chapter 1: Presents an overview of country-specific features that may influence the relationship between public governance and public trust in Australia.

• Chapter 2: Examines trust levels across various public institutions and population groups and identifies the drivers of trust in different Australian institutions.

• Chapter 3: Focuses on competence as a core public governance driver of trust, discussing public perceptions against the background of Australia's relevant policies and initiatives.

• Chapter 4: Concentrates on values as another crucial driver of trust, similarly, analysing survey results in the context of Australia's existing policies.

Chapters 3 and 4 also incorporate comparisons to other countries' experiences and policies, identifying Australia's public governance strengths, specific challenges, and opportunities for improvement. Together, these chapters provide a comprehensive basis for reflection on how to strengthen trust and reinforce democratic governance in Australia.

This first chapter seeks to provide a snapshot of important socioeconomic, political, and institutional factors that help contextualise the survey findings presented later in the report. Notably, longitudinal data suggests public trust in the Australian government has remained relatively stable and mid-range over time. The country benefits from robust democratic institutions and strong public support for democratic governance, with positive attitudes towards diversity contributing to social cohesion. However, challenges such as economic disparities, the spectre of polarisation, and the ongoing impact of colonial legacies pose potential risks.

Long-term structural patterns and more recent crisis events have influenced both the performance of public institutions and public perceptions. The Australian public sector has undergone, and continues to undergo, significant changes in the 2010s. More recently, the COVID-19 pandemic served as a litmus test for Australia's federal system, showcasing both its crisis management strengths and the complexities of cross-government co-ordination.

Trust in government in Australia has remained relatively stable over time, regularly placing the country in the mid-range among OECD countries. Australian democratic institutions and values are known for their innovative and adaptive approaches, which make them strong when assessed overall and when compared to other countries. The country’s rich multicultural heritage and positive attitudes towards diversity further contribute to democratic resilience. However, challenges persist. Economic disparities and polarisation have emerged as potential threats to interpersonal trust and the social fabric. Additionally, the historical legacies of colonialism continue to shape the lives of Indigenous peoples and their relationship with public institutions, presenting ongoing challenges to achieving true equality and reconciliation in Australian society.

Various surveys have consistently placed Australia in the mid-range for trust in government among OECD countries, with a slight uptick in recent years. For instance, while New Zealand has consistently outperformed Australia in trust levels since 2010, the United States generally showed lower trust levels. Canada and Ireland experienced more volatile trust levels, occasionally surpassing Australia in recent years (GallupAnalytics, 2022[6]) (see Figure ‎1.1). In 2021, Australia ranked 13th out of 20 countries participating in the OECD Trust Survey, with 38% of people having high to moderately high trust in the federal government, just below the OECD average of 41% (OECD, 2022[7]). In 2023, Australia climbed to 9th out of 30 countries, with 46% of people expressing high to moderately high trust in government—surpassing the OECD average of 39% (see Chapter 2).

Although trust levels in the government remained relatively stable compared to other OECD countries, they nevertheless peaked in the mid-2000s, followed by a general decline, levelling out around 2020 (Figure ‎1.2). This is seen consistently across different surveys, including Gallup and the World Values Survey (GallupAnalytics, 2022[6]; Haerpfer et al., 2022[8]). Data from the Australian Election Study, a survey series timed to coincide with the Australian federal elections, show that until 2013, trust in government followed a more cyclical pattern, peaking with changes in government. The two changes of power in 1996 and 2007 coincided with notable increases in public trust (Dassonneville and McAllister, 2021[9]; Bean, 2001[10]). Australia's unique electoral system—combining compulsory voting and frequent elections—likely contributed to this distinctive pattern (Werner, 2016[11]). However, in 2013, a shift from Labor to Liberal leadership did not boost trust as expected; instead, it continued to decline. The recent rise in trust observed across various measures might signal a return to the cyclical pattern linked to party changes in government, coinciding with Labor's 2022 victory.

With strong democratic institutions, widespread public support for democratic governance, and a rich multicultural heritage, Australia has consistently ranked among the most established democracies globally. The nation's commitment to multiculturalism, evidenced by its diverse population and positive public sentiment towards immigration, has contributed to its unique and cohesive societal landscape. However, economic disparities and polarisation have emerged as growing threats.

Australia demonstrates strong democratic credentials based on several key indicators and unique features of its political system. In the Varieties of Democracy (V-Dem) Liberal Democracy Index, Australia consistently ranks highly, placing 14th in the global rankings in the latest results (Nord et al., 2024[12]). This index, which combines 71 indicators of liberal and electoral aspects of democracy, has seen Australia rank as high as 7th in recent years (Lührmann et al., 2018[13]). Similarly, in Freedom House's global freedom index, which measures access to political rights and civil liberties, Australia has maintained a high score of 95 out of 100 since 2022 (Freedom House, 2024[14]).

Furthermore, public sentiment strongly supports democracy in Australia. The Trust and Satisfaction in Australian Democracy study found that 59% of people in Australia are (very) satisfied with how democracy works in the country; and an overwhelming majority (95%) think that it is (very) important to live in a democratically governed country (Commonwealth of Australia, APSC, 2024[15]) (Box ‎1.1). This notable support underscores the robust democratic culture in Australia, complementing its strong institutional framework.

Australia is a historically diverse and multicultural country, with a wide variety of cultures, languages, and faiths shaping its societal landscape. This diversity is deeply rooted in the nation's history, beginning with the Aboriginal and Torres Strait Islander peoples—recognised as the First People of the continent—who represent over 250 language groups (Commonwealth of Australia, 2024[21]). Australia's multicultural character was further enhanced by post-World War II immigration programmes, which have welcomed 7.5 million migrants, including 950 000 refugees, since 1945 (Australian Government - Department of Home Affairs, 2024[22]). In the 1970s, amid growing economic uncertainty, Australians challenged the existing political order and called on the government to provide a fuller sense of social citizenship and democracy. The Whitlam Labor Government (1972-75) and subsequent administrations responded by creating new frameworks and institutions that enabled citizens to participate more fully in society, protest, and hold power accountable. Key changes to the Racial Discrimination Act (1975) and amendments to the Australian Citizenship Act (1973)—which granted non-British migrants the same citizenship rights as British migrants—marked a shift towards a more inclusive framing of the nation (Pietsch et al., 2023[23]).

The 2021 Census reveals that more than half of Australian residents (51.5%) were either born overseas or have at least one parent born overseas, and over 5.5 million Australians speak a language other than English at home (Australian Bureau of Statistics, 2022[24]). Importantly, this multicultural makeup is viewed positively by the population, with the Scanlon Foundation Research Institute's 2024 report on Social Cohesion indicating that 71% of Australians believe that accepting immigrants from many different countries strengthens the nation, and support for multiculturalism has risen to 85% in 2024 from 77% in 2018 (Scanlon Foundation Research Institute, 2024[25]). Australia's multicultural identity is therefore not only a historical fact but also a source of pride and satisfaction for contemporary Australian society.

Notably, Australia shows no evidence of erosion in generalised social trust/interpersonal trust, further underlining the country's strong social cohesion. Recent OECD Trust Surveys demonstrate a slight improvement in interpersonal trust levels, with Australia rising from 63% in 2021 (below the OECD average of 67%) to 65% in 2023 (above the OECD average of 62%) (see Figure ‎1.3). World Values Survey data suggest an upward trajectory over a broader time frame: after dropping to 39% in 1995, interpersonal trust rebounded to 46% in 2005 and has since stabilised between 48% and 51% (Haerpfer et al., 2022[8]). Moreover, trust towards people of other nationalities and religions remains high, with over 70% of Australians expressing trust in people of other nationalities, while trust in people of another religion has shown recent improvement. An IPSOS survey further supports these findings, ranking Australia as one of only six countries out of 27 that are net positive in measures of social cohesion1 with a score of 12% (IPSOS, 2020[26]).

Australia faces challenges to its social fabric as economic disparities and financial uncertainties remain prevalent. Income inequality in Australia has grown over the past two decades, with the most significant rise occurring prior to the global financial crisis. While wage inequality has risen, primarily due to rapid earnings growth among top earners, this has been partially offset by increased labour force participation and longer working hours at the lower end of the income spectrum (Sila and Dugain, 2019[27]). The Gini coefficient for equivalised disposable household income increased from 0.289 in 2019–20 to 0.322 in 2021–22, indicating widening income inequality (Australian Bureau of Statistics[28]). Available evidence suggests a majority of Australians feel the current income distribution is unfair and that this appears to be affecting their views on democracy (Biddle and Gray, 2024[29]). In parallel, social dynamics are under pressure, as evidenced by the Scanlon Foundation's Mapping Social Cohesion report, which revealed a sharp decline in people who have a great sense of belonging in Australia from 63% in 2020 to 47% in 2024 (Scanlon Foundation Research Institute, 2024[25]). Economic fairness concerns were understood to play a partial role in this decline, particularly the diminishing belief that "hard work brings a better life" (Scanlon Foundation Research Institute, 2023[30]).

For many households, one significant source of financial stress is the availability and cost of housing. Compared to other OECD countries, the housing supply in Australia is relatively low, contributing to shortages in properties available to buy or rent (Commonwealth of Australia, 2024[31]). Rising home prices, along with rising interest rates relevant for mortgage holders, have increased the share of households overburdened by the cost of housing. Tenancy laws and regulations exist at the state or territory level, but overall, rent controls tend to be relatively limited (OECD, 2022[32]), potentially contributing to a sense of instability among renters. However, 77% of Australia’s working-age population (15-64) held paid jobs in 2023, significantly outperforming the OECD average of 70%, which suggests Australians have better access to employment opportunities compared to many other developed nations, alleviating a potential source of financial stress (OECD, 2024[33]).

While Australia has so far managed to avoid extreme polarisation seen in some other OECD countries, there are indications that efforts to prevent further social fragmentation should remain a priority for the nation's democratic health. A cross-country study on polarisation, defined by the authors as the extent to which citizens feel more negatively toward other political parties than toward their own, found that Australia was among six OECD countries where polarisation actually decreased since the 1980s (Adams et al., 2020[34]). Furthermore, the 2023 Edelman Trust Barometer classified Australia as only 'moderately polarised', setting it apart from countries that are either 'severely polarised' or at risk of becoming so (Edelman Trust Barometer, 2023[35]). Polarisation here is conceptualised as the perceived degree of division in society and perceived inability to overcome it. At a more granular level 35% of Australians believe their country is very or extremely divided—a low score compared to other surveyed countries. However, there are early warning signs that warrant attention: among those who perceive this division, 74% are pessimistic about the country's ability to overcome it. While this entrenchment affects only a comparatively small segment of the population, it signals the importance of a preventive approach. This is especially important as changing technology and digital landscapes are driving new information environments, with patterns that may undermine information integrity with consequences on polarisation, social cohesion and trust more broadly (see Chapter 4). In light of these national trends and the broader global context of increasing polarisation, the Strengthening Democracy's Taskforce report identified polarisation as one of the eight challenges to Australia's democracy2 (Australian Government - Department of Home Affairs, 2024[36]).

As Australia grapples with contemporary challenges, it is crucial to recognise that these issues are intertwined with the country's complex historical legacy, particularly concerning its Indigenous peoples. Historical legacies of colonialism continue to shape the lives of Indigenous peoples in Australia, and their relationship with public institutions. Aboriginal and Torres Strait Islander peoples maintained diverse cultures and languages in Australia for 65 000 years, fostering connections within the continent and with neighbouring regions in Asia and the Pacific (Commonwealth of Australia, 2024[21]). The establishment of a British penal colony in 1788, rooted in the concept of terra nullius, brought on the spread of epidemic disease and systemic campaigns of dispossession and violence against Indigenous peoples (OECD, 2020[37]). The precolonial population of mainland Australia is estimated to have been between 350 000 and one million people; but by 1901, the Indigenous population had likely declined to under 100 000 (Hugo, 2001[38]). The last colonial frontier massacres of Indigenous peoples3 took place in the 1930s, in the Northern Territory (Ryan et al., 2017-2022[39]).

For a period spanning nearly two centuries, Aboriginal and Torres Strait Islander peoples were systematically excluded from participating in political and policy-making processes that directly impacted their lives. During this time, they were largely under the control of state and religious bodies, subject to policies that initially aimed at "protection" and later shifted towards "assimilation" into mainstream Australian society. From the early 1800s, the creation of reserves and Christian missions, coupled with the appointment of "Protectors" and Protection Boards, progressively disrupted the ability of Indigenous Australians to support themselves and gave colonial authorities undue control over Indigenous lives (Australian Human Rights Commission, 1997[40]). Australia's first constitution, established in 1901, excluded them from the constitutional process and effectively left their welfare in the hands of the state (Australian Human Rights Commission[41]). This pattern of marginalisation and state interference in Indigenous lives eventually extended to the forced removal of Indigenous children from their families, known as the "Stolen Generations," which continued until the 1960s (Australian Human Rights Commission, 1997[40]). To this day, Aboriginal and Torres Strait Islander children remain overrepresented in the child protection system. Despite a target to reduce Aboriginal and Torres Strait Islander children in out-of-home care by 45% by 2031, the proportion has actually increased between 2019 and 2023 (Australian Government - Productivity Commission, 2023[42]).

The governance of “Indigenous affairs” in Australia has undergone significant changes since the mid-20th century, marked by Indigenous resistance to discriminatory policies and the gradual acquisition of political and land ownership rights (Box ‎1.2). A pivotal moment came with the 1967 constitutional amendment, which empowered the Commonwealth to legislate for Aboriginal people, creating a shared responsibility with the States. Despite this shift, States maintain primary control over land management, education, healthcare, and law enforcement (OECD, 2020[37]). In this federal context, the capacity for effective Indigenous self-governance is heavily influenced by the complex interplay of legislative frameworks, intergovernmental responsibilities, and administrative practices. Notably, the current governance structure presents several challenges to achieving meaningful self-governance for Indigenous communities, especially those straddling administrative borders. These challenges include the frequently siloed top-down delivery of programmes through sectoral ministries, poor co-ordination of services at the local level, short-term and fragmented funding arrangements, and frequent policy and governance changes (McDonald and Raderschall, 2019[43]) (see Chapter 3 for further discussion). Drawing on Indigenous Australian historical practices—which include sophisticated consultative frameworks, thorough deliberative practices, and a degree of comfort with uncertainty and conflicting narratives—could offer valuable insights (Australian Government - Department of Home Affairs, 2024[36]).

With regards to governance arrangements and policy outcomes, the Closing the Gap framework is the current overarching and comprehensive strategy launched by the Australian government in 2008 to address disparities between Aboriginal and Torres Strait Islander peoples and non-Indigenous Australians (Closing the Gap, 2024[49]). In 2018, the Council of Australian Governments established the Joint Council on Closing the Gap, marking a significant step towards shared decision-making and collaboration. This led to a new National Agreement on Closing the Gap in July 2020, which brought together various levels of government, the Australian Local Government Association, and the Coalition of Aboriginal and Torres Strait Islander Peak Organisations. The 2020 Agreement is unique in its inclusion of a non-government signatory, the Coalition of Aboriginal and Torres Strait Islander Peak Organisations, and its calling for fundamental changes in how governments work with Aboriginal and Torres Strait Islander peoples (Productivity Commission, 2024[50]). The framework is structured around four priority reforms and outlines nineteen national socio-economic targets across seventeen areas, with progress monitored through various mechanisms to ensure transparency and accountability. Critics have nevertheless pointed out that the Closing the Gap framework tends to emphasise deficits rather than strengths and fails to adequately explore ways to leverage Indigenous assets and potential for growth (OECD, 2020[37]).

Despite these initiatives, the cumulative and intergenerational effects of colonisation are felt to this day. Although significant progress has been made since the 1960s, there remain substantial disparities between Indigenous and non-Indigenous Australians across various well-being indicators, associated with stark differences in life expectancy (see Chapters 3 and 4). Lastly, racial prejudice remains a significant issue, with 60% of Indigenous peoples reporting at least one experience of racial prejudice in the past 6 months in 2022, up from 52% in 2020 and 43% in 2018, compared to 25% of non-Indigenous people (Australian Reconciliation Barometer, 2022[51]).

The Australian public sector has undergone significant changes in recent decades, influenced by New Public Management principles notable impacts on the overall capacity, capability, and structure of the Australian Public Service (APS). This pattern has been marked by increased outsourcing and external labour use, as well as growing tensions between political responsiveness and institutional independence. Concurrently, Australia has faced challenges in maintaining robust market competition, with trends showing increased market concentration and potential vulnerabilities to policy capture. The COVID-19 pandemic brought these issues into sharp focus, testing the capabilities of Australia's federal system whilst also demonstrating its strengths in crisis management. The pandemic response led to unprecedented government interventions, increased welfare spending, and a temporary boost in public trust, whilst also highlighting the complexities of co-ordinating across different levels of government in a federal system.

Employment in the public sector4 in Australia has shown considerable fluctuations over recent years. The sector experienced a decline in the 2010s, with public sector’s share of total filled jobs decreasing from approximately 15.5% in September 2010 to 14.6% in September 2019 (ABS, 2019[52]). By the September quarter of 2024, this share had risen to 15.1%, remaining below 2010 levels (ABS, 2024[53]). Within this broader trend, the APS has followed a similar pattern. The APS workforce grew from 159 299 employees in 2008 to peak at 167 343 in 2012, before declining to 150 360 in 2020. By 2024, numbers increased significantly to 185 343 - the highest level in sixteen years. However, when measured as a percentage of total employed persons, the APS workforce still represents a smaller proportion than in the past, falling from 1.53% in 2012 to 1.36% in 2024 (Australian Public Service Commission, 2024[54]).

In addition to structural factors such as technological changes, significant factors reshaping public sector employment numbers have been the rise in outsourcing and external labour use. The Average Staffing Level (ASL) cap, introduced in the 2015–2016 budget to limit full-time equivalent public servant numbers, further drove this trend. A 2023 audit revealed that in 2021–22, 112 government entities employed an external labour workforce of 53 900 full-time equivalent staff at a cost of AUD 20.8 billion. This was in addition to 144 300 directly employed public servants in these entities. Consequently, the actual government workforce was about 37% larger than official public servant numbers suggest (Australian Government, 2023[55]).

In parallel to the increasing reliance on outsourcing, there has been a growing tension between the APS’ responsiveness to the political class and its traditional role as an apolitical institution under the Westminster system (Podger and Kettl, 2024[56]). The APS is designed to serve the democratically elected government while maintaining its independence and efficiency. However, recent events, such as Robodebt debt scheme (see Chapter 4 for full context on the scheme) have highlighted concerns about the APS's ability to maintain this balance. The Royal Commission on Robodebt found that a lack of independence among departmental secretaries and a misunderstanding of the APS's role and values contributed to the scheme's failures. This situation highlights the ongoing challenge of balancing the APS's responsiveness to elected officials with its role in providing independent, expert advice (Royal Commission, 2023[57]).

The decline in APS capacity has not gone unnoticed, with several high-profile independent reviews expressing concerns. Two significant independent reviews of the Australian Public Service—the 2009 Moran Review and the 2019 Thodey Review—identified weaknesses in key areas such as strategic policy advising, human resources management, and digital capacity (Podger et al., 2023[58]). The 2019 Review went further, recommending better data collection on the use of external contractors and measures to enhance the APS's independence. These included stricter merit-based processes for senior appointments and a legislated code of conduct for ministerial staff (Independent Review of the APS, 2019[59]).

The COVID-19 pandemic marked a significant shift in this downsizing in Australia. The first half of 2020 saw an addition of 5 770 jobs, primarily on temporary contracts, with a total of 22 000 extra public servants hired by early September 2020. However, this growth was not intended to be permanent (Colley, Woods and Head, 2022[60]).

The change of government in 2022 presented an opportunity to capitalise on some of the changes made during the pandemic, and address several issues highlighted by the 2019 independent review of the Australian Public Service. The government has invested in APS capacity building, through onboarding of the external workforce and by removing the average staffing level (ASL) caps in 2022, resulting in a significant 6.9% growth in the workforce from 2022 to 2023. To address the over-reliance on external contractors, the Secretaries Board Capability and Workforce Committee is progressing priority actions to rebalance the APS workforce. These include developing an APS Strategic Commissioning Framework and establishing an in-house consulting capability. Lastly, efforts to bolster independence within the APS have been initiated. New whistleblower protections have been introduced and a Review into Public Sector Board Appointment Processes is underway to improve appointment practices. Additionally, the concept of stewardship is being embedded as an APS Value, clarifying the long-term responsibility of public servants to the institution and the public interest (Australian Public Service Commission, 2023[61]).

These structural shifts around public sector capacity can significantly impact service delivery and public perception of the government and public service. The decline in public sector employment, increased outsourcing, tensions between political responsiveness and apolitical roles, and identified capability gaps can lead to reduced service quality, loss of institutional knowledge, and difficulties in addressing complex challenges. These are all tangible outcomes which citizens can perceive. However, recent initiatives to bolster APS capabilities and enhance independence aim to mitigate these issues, potentially improving both service delivery and public confidence in the long term.

Competition in a market is crucial for consumer welfare and plays a role in promoting democratic decision-making. As firms grow into market leaders, they gain power and profits, potentially motivating them to influence politicians for their own interests rather than those of the general population (Beneke, 2021[62]). In Australia, however, unique structural challenges exist in maintaining robust competition (OECD, 2023[63]). The country's relatively small population, compared to its vast size, limits the number of potential competitors that can sustainably operate in certain industries. Furthermore, Australia's distance from other large markets can hinder international competitors from entering and competing effectively. These factors heighten the need for targeted public policies to foster competition and prevent market concentration.

Recent studies indicate a weakening of competitive intensity in Australian product markets. Market concentration has significantly increased across various industries since the early 2000s (Productivity Commission, 2023[64]; Parliament of Australia, 2024[65]), with utilities and retail sectors contributing most to this increase over the decade from 2010 to 2020 (Andrews, Dwyer and Triggs, 2023[66]). There are likewise indications of an increase in price to cost margins, or higher markup (Parliament of Australia, 2024[65]). Regarding firm entry and exit, the e61 Institute noted a decline in entry rates from 15% in the early 2000s to 12% pre-pandemic, with a slight uptick since then (Andrews, Dwyer and Triggs, 2023[66]). However, the Productivity Commission reported a modest growth in entry rates between 2013-14 and 2019-20, followed by a significant increase during the COVID-19 pandemic (Productivity Commission, 2023[64]). These trends collectively suggest a changing landscape of competition in Australian markets, with potential implications for economic dynamism and consumer welfare.

Largely in response to these identified trends, the Australian Treasurer announced a two-year Competition Review on August 23, 2023, aimed at modernising the economy and improving competition (Australian Government - Treasury, 2023[67]). The review examines competition laws, policies, and institutions, focusing on reforms to increase productivity, reduce living costs, and raise wages. Instead of a single report, the review team will conduct rolling policy projects, consulting publicly and issuing papers on specific reform topics over the next two years.

One of the focus areas of the Taskforce has been Australia’s merger laws. Australia's competition laws have unique characteristics compared to other OECD countries (OECD, 2023[63]). Historically, while prohibiting anti-competitive mergers, Australia does not require pre-merger notification or regulatory clearance, and the ACCC lacks direct power to block mergers. Additionally, Australia's distinct regulatory standards, such as the Australian Design Rules, can impede foreign competition and product diffusion. The Treasury Laws Amendment (Mergers and Acquisitions Reform) Act 2024 introduced encouraging and significant changes. From January 2026, Australia will implement a mandatory and suspensory administrative system for mergers replacing the current voluntary approach, with businesses having the option to notify the ACCC from July 2025, while expanding the competition test to better assess competitive effects. This reform aims to enhance the ACCC's ability to prevent anti-competitive mergers, particularly in key sectors affecting cost of living, while ensuring faster processing of pro-competitive and benign mergers. The reform aims to support the maintenance of competition in Australia and encourage business dynamism through an efficient and effective risk-based merger system, leading to better outcomes for Australian.

The Taskforce has also been working with states and territories to implement pro-competitive reform efforts across the nation. On November 29th, 2024, Commonwealth, state and territory treasurers signed a landmark agreement to reinvigorate the National Competition Policy (NCP) aiming to stimulate economic growth and reduce prices. The agreement includes updated competition principles and governance structures, establishing a framework for reforms intended to enhance productivity, wages, and government revenue.

Features of competition in Australian markets may have implications for democratic governance and trust in public institutions. Recent evidence shows increasing concentration in various countries, coinciding with emerging pressures on democratic institutions, including challenges to the rule of law, trust in public institutions and the spread of disinformation. The relationship between competition and democracy is complex, with insufficient market competition potentially leading to concentrated economic power exercising undue influence upon political processes. Though lobbying is identified as a key mechanism linking competition to democracy, the transformation of economic power into political influence likely operates through multiple channels and varies by industry sector, with some like media potentially posing greater risks to democratic processes (OECD, 2024[68]). These factors may erode public trust if citizens perceive inadequate market regulation. However, the government's recent initiatives demonstrate awareness and could potentially address confidence deficits through effective reforms.

In addition to long-term structural shifts, crisis events can likewise influence public governance performance and public perceptions. The COVID-19 pandemic led to unprecedented government interventions worldwide. Response effectiveness varied between countries, with successful ones minimising both health and economic impacts. Public trust in institutions played a crucial role in the effectiveness of measures like lockdowns and vaccinations (Zaki et al., 2022[69]). Conversely, effective pandemic management increased public trust in government, though with uneven effects in certain communities.

Australia's unique geographical position as an isolated island continent provided a significant advantage in managing the COVID-19 pandemic. The country's early decision to close its international borders on March 20, 2020, was a crucial factor in its effective response strategy. While Australia officially adopted a "maximum suppression" approach, its implementation closely resembled a zero-COVID policy. This strategy encompassed stringent border controls, both international and interstate, rigorous quarantine measures, and rapid containment responses to any quarantine breaches (Basseal et al., 2023[70]). These policies continued into 2021, resulting in just 34 612 cumulative cases by August 2021, maintaining Australia's status as one of the countries with the lowest per capita infection rates among advanced democracies (Zaki et al., 2022[69]). Contrary to expectations in a pandemic, Australia was one of 9 OECD countries which saw the mortality rate fall during COVID-19 (Figure ‎1.4).

During times of crisis, particularly those that pose significant threats to a nation's security, public trust in government tends to increase dramatically, regardless of political affiliations or policy preferences. A survey conducted in both New Zealand and Australia in July 2020 found that around 80% of respondents in both countries agreed that the government was generally trustworthy (Goldfinch, Taplin and Gauld, 2021[72]). The study also revealed that approximately three-quarters of the participants believed that the government's management of the pandemic had increased their trust. Further research analysing thirteen survey waves carried out from January 2020 to October 2022 in Australia showed a substantial initial increase in public confidence across both the federal and state level of government. This heightened trust remained stable throughout the first year of the pandemic before waning (Biddle, Gray and McAllister, 2024[73]).

The independent inquiry into Australia’s response to the COVID-19 pandemic found that following an initial boost in the early stages of the pandemic, trust erosion over time was primarily caused by a perceived lack of transparency, fairness, compassion, and proportionality in government responses. To prevent similar issues in future pandemics, key recommendations include making decision-making processes and evidence more transparent, tailoring communications for different audiences, increasing the use of behavioural insights, and establishing stronger privacy protections for digital technologies. The panel emphasised the importance of proactively rebuilding trust with affected communities and implementing robust privacy legislation, particularly given the increased reliance on digital solutions. This includes strict controls on data sharing with law enforcement and ensuring ethical use of personal information.

Australia's management of the COVID-19 pandemic involved a complex interplay between federal and state governments, each with distinct responsibilities. While the Commonwealth government wielded significant power through the Biosecurity Act 2015 and responsibility for macroeconomic and fiscal policy, implementing measures such as border controls and economic support, the states retained primary responsibility for public health measures, including lockdowns and testing facilities (Twomey, 2020[74]). This division of responsibilities necessitated robust joint decision-making mechanisms, particularly given the dual nature of the crisis as both a health and economic challenge (Saunders, 2021[75]). The shared management of the health system, with states running hospitals and the federal government providing substantial funding, further underscored the need for co-ordination. Despite the potential for conflict, Australia's federal structure proved effective in balancing unity and diversity in its pandemic response.

The COVID-19 pandemic required innovative institutional arrangements in Australia to facilitate increased co-ordination and joint decision-making across various levels of government. The most notable of these was the creation of the National Cabinet on March 15, 2020, (Murphy and Arban, 2021[76]). This body, which included the Prime Minister, State Premiers, and Territory Chief Ministers, replaced the slower, more bureaucratic Council of Australian Governments (COAG). The National Cabinet met more frequently, utilised video-conferencing technology, and operated with greater informality and confidentiality (Twomey, 2020[74]). The structure’s success in managing the pandemic response led to its permanent establishment in May 2020, replacing COAG, and was attributed to its practicality, problem-solving focus, bipartisanship, and agility. Likewise, the National Co-ordination Mechanism (NCM) was established to support the National Cabinet’s response to the COVID-19 pandemic, co-ordinating engagement between various levels of government and industry sectors (Royal Commission, 2020[77]). In October 2020, the Australian Government Crisis Management Framework was updated to incorporate the NCM.

The federal nature of Australian public governance allowed for a flexible and tailored response to the COVID-19 crisis. This system enabled different approaches based on varying circumstances and preferences across the country (Twomey, 2020[74]). The public demonstrated an ability to distinguish between levels of government and assign appropriate responsibilities, with a higher level of restriction having a negative association with confidence in state governments and a positive association with confidence in the federal government (Biddle, Gray and McAllister, 2024[73]). Additionally, numerous stakeholders interviewed in the context of this study highlighted that the experience of the pandemic clarified lines of accountability, as state governments had to justify their specific social distancing and quarantine measures to their constituents. It also allowed for sub-national experimentation, as seen in the adoption and spread of effective policies like mandatory mask-wearing (Murphy and Arban, 2021[76]). These benefits highlight the advantages of Australia's federal system in managing the complex challenges posed by the pandemic.

Of course, this differentiated approach enabled by Australia's federal structure was not without challenges or negative consequences. The internal border closures inherent to its “maximum suppression approach,” caused economic disruption and emotional hardship for many citizens—especially in borderland communities. In some areas, particularly those with prolonged restrictions like Victoria, trust in institutions may have eroded (Biddle, Gray and McAllister, 2024[73]), potentially strengthening fringe movements like the Sovereign Citizens. While some variation in state-level health protection measures was likely inevitable, some scholars have urged public officials to better measure and weigh the appropriateness of these differences in the future against their contribution to national confusion and disruption (Basseal et al., 2023[70]).

The COVID-19 pandemic significantly increased the need for public social spending across OECD countries. Poverty rates were already rising prior to the pandemic, with poverty levels increased from 13.2% to 14.6% for the general population and from 16.2% to 19% for children between late 2019 and March 2020 (Davidson, Bradbury and Wong, 2023[78]). Given the disruptions caused by the pandemic, poverty could have risen drastically absent government intervention. The public social spending-to-GDP ratio rose from 20% in 2019 to 23% across the OECD on average in 2020, primarily due to increased spending rather than GDP decline (OECD, 2023[79]). This surge was crucial in addressing the economic impacts of the pandemic, particularly in combating rising poverty rates.

The Australian government implemented several economic response measures to support people affected by the COVID-19 pandemic during 2020-2021 and 2021-2022 (Australian Institute of Health and Welfare, 2023[80]). Income support measures included Economic Support Payments, which provided one-off payments to eligible recipients of AUD 750 in March and July 2020 and two additional payments of AUD 250 each in November 2020 and March 2021 to eligible recipients. A Coronavirus Supplement was introduced in March 2020 as an additional payment for people receiving income support payments, initially providing AUD 550 per fortnight to eligible income support recipients, which was later reduced to AUD 250 and then AUD 150 per fortnight before ending in March 2021. The government also made temporary changes to the JobSeeker Payment, expanding eligibility, waiving certain tests, and waiting periods, and making the partner income test more generous. Beyond welfare payments, the government introduced the JobKeeper Payment, a wage subsidy paid to eligible businesses from March 2020 to March 2021 that also acted as an income transfer to households. It is worth noting that while pandemic income support measures ended, there has not been a reduction in the base rates of income support payments, with working age and student payments (for example JobSeeker) seeing permanent increases in the base rate since the pandemic. These measures represented a significant shift towards welfare generosity and relaxation of conditionality, which was particularly notable coming from a conservative government (Ramia and Perrone, 2023[81]).

Prior to the pandemic, welfare spending had grown steadily, following population growth, averaging around AUD 7 300 per person since 2017-18 (Australian Institute of Health and Welfare, 2023[80]). During the 2019-21 period, spending increased by 11% annually, reaching AUD 9 010 per person in 2020-21 due to COVID-19 measures (Figure ‎1.5). In 2021-22, spending decreased by 8.5% but nevertheless remained higher than the pre-pandemic 10-year trend.

Increased welfare spending had a significant positive impact on poverty rates and well-being in Australia. The introduction of the Coronavirus Supplement and the temporary suspension of mutual obligation requirements led to substantial improvements in various aspects of recipients' lives, including better ability to meet basic needs, enhanced long-term financial security, improved physical and emotional well-being, and increased engagement in both paid and unpaid work (Klein et al., 2022[82]). The poverty rate fell dramatically, particularly in the June quarter of 2020, dropping to 12% overall and 13.7% among children (Davidson, Bradbury and Wong, 2023[78]). The impact was especially pronounced for specific groups, such as those relying on JobSeeker Payment, where poverty rates decreased by more than half.

The aftermath of the COVID-19 pandemic has brought to light complex issues surrounding income support payments in Australia. While income support measures during the height of the pandemic were well-received, their subsequent withdrawal has generated a backlash effect in some communities, potentially eroding trust between citizens and the government. Stakeholder interviews conducted as part of this study reveal a growing perception that the measures’ withdrawal reflects a lack of willingness to address financial hardship.

Australia stands out as a nation with robust democratic foundations and public trust levels that have historically consistently aligned with the OECD average. The country's strong democratic institutions enjoy widespread support, with a vast majority of citizens viewing life in a democratically governed nation as desirable and beneficial.

While Australia's multicultural heritage and positive attitudes toward diversity seem to contribute to high levels of interpersonal trust, the nation faces several ongoing challenges. These include managing economic disparities, addressing potential polarisation risks, and addressing the continuing impact of colonial legacies. Housing and economic inequality create significant social pressures, and despite meaningful progress, substantial disparities persist between Indigenous and non-Indigenous Australians across a wide range of indicators. While democracy cannot guarantee specific outcomes, both inequality and the lack of basic conditions for well-being alter people's relationship with public institutions and can undermine democratic participation and processes.

The evolution of Australia's public sector, particularly the recent uptick in public sector capacity following years of decline, and its response to recent crises like the COVID-19 pandemic, demonstrates both the adaptability of its institutions and the complexities of maintaining effective governance in a federal system. However, trends of weakened market competition have made policy decision-making potentially more vulnerable to capture by special interests. Despite these challenges, Australia's commitment to measuring and enhancing public trust, coupled with its strong democratic foundations, positions it well for addressing future governance challenges while maintaining its democratic resilience.

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