The Inside Word
Will Australians really be 40 per cent poorer by 2063?
Last month I commented on the importance of lifting productivity up the priority list for governments and industry across Australia – if we are to retain and improve our living standards.
Treasurer Jim Chalmers has reported that Australians will be 40 per cent poorer by 2063 if the federal government is unable to turnaround lacklustre rates of productivity growth. Forty years is a long time and 40 per cent is a big number. But the last 30 years was also a long time – during which productivity accounted for more than 80 per cent of national income growth (also a big number). We got something right over the last 3 decades – let’s hope that continues.
Part of the heavy lifting will fall on the shoulder of Industry Minister Ed Husic, pulling the policy and funding levers to encourage development and expansion of our industrial sectors including manufacturing.
Minister Husic notes “Australia has the highest dependency on manufactured imports and the lowest level of manufacturing self-sufficiency of any OECD country. In less than 30 years Australia has fallen 38 places in Harvard’s Economic Complexity Index. We now reside a lowly 93rd out of 133 countries more than 50 places below the country we most like to compare ourselves with, Canada.”
Mobilising these policy and funding levers, Minister Husic recently announced the National Reconstruction Fund Board charged with investment decisions under the $15 billion National Reconstruction Fund. The Board has exciting and important work ahead of them, but while enlivening our manufacturing sector is important, it alone will not deliver the sustained productivity boost needed to preserve our comparative living standards into the future.
Labour productivity remains stubbornly below historical levels. Wages growth is important, but recent industrial relations reforms and wage rise decisions – unhinged from the productivity considerations – will not improve the labour productivity outlook.
The recently released intergenerational report confirms the risk and laziness of our tax system with personal income tax accounting for an ever-increasing share of the pie. Independent and Teal MPs, buoyed by comments by Bernie Fraser, Ken Henry, and others, are calling for sweeping tax reform – with an increase in the GST rate at its core. Tax reform could be a major productivity driver, but the major parties won’t want to touch that unless they detect a sizeable shift in public sentiment.
The Treasurer points out however, that many of the productivity levers are shared responsibilities between States, Territories and the Commonwealth – such as education and skills, occupational licensing, digital and technology diffusion, public procurement and expenditure on infrastructure, health etc, fostering entrepreneurship, and least cost transitions towards carbon reduction. Each State and Territory has productivity improvement ambitions and plan, but these will hardly excite the voting public come election time.
National leadership, from the Prime Minister down is needed. Anthony Albanese has galvanised his parliamentary team behind the Voice campaign. Perhaps we need the same concerted approach to explain the importance of and focus on improving our national productivity.