The balance between equity and efficiency in Australian public policy

1. Australia has performed quite well over the last two decades in terms of real GDP per head; the GDP gains have not been fully reflected in other economic welfare measures (section 1). 2. Most economic reforms have important distributional effects, and these are often prolonged and enduring. Since distributional effects are an important dimension of economic welfare, they should be an integral part of the evaluation of policy reform (section 2). 3. How can this be done? Some policy guidelines are proposed in the paper. There are practical and conceptual problems in applying these guidelines e.g. some value judgments are inevitable. However, these problems are not decisive (section 3). 4. Two current policy issues (labour market reform and indigenous land rights) illustrate why it is important for economists to take distributional effects into account (section 4).