It’s “crunch time” for the Australian economy.
Young Australians face the prospect of being the first generation to be worse off than their parents and Treasurer Jim Chalmers’ economic roundtable is crucial to ensuring that doesn’t happen.
The generational bargain is in peril and policymakers need to act, Productivity Commission chair Danielle Wood says.
Now in their 30s, millennials are struggling to enter the property market, “as policy choices have contributed to house prices growing much faster than incomes for the best part of three decades”, Ms Wood told the National Press Club on Monday.
That’s largely because successive governments have failed to adopt a “growth mindset” and encourage productivity – reaping more from the effort put into work – she said.
“Productivity growth is the only way to sustainably lift wages and opportunities over time.”
The commission has spelled out a long list of recommendations to kickstart anaemic productivity growth in five separate reports released before the roundtable, which begins in Canberra on Tuesday.
Suggestions include reforming the corporate tax system and financial incentives for workplace training.
If the roundtable fails to revive productivity growth, Australia’s GDP could be six per cent lower than it might otherwise be, a loss of about $6000 per person, HSBC chief economist Paul Bloxham said.
“The stakes are high. It’s crunch time.”
Mr Bloxham identified tax reform, competition and regulation as the three key areas the roundtable ought to address.
Growth in the regulatory burden was symptomatic of a policy culture failing to prioritise growth, Ms Wood said.
Governments have felt a need to “do something” every time an issue emerged, ending up in a system that dampened growth.
An example was the Victorian government’s plan to legislate at least two days a week of work from home.
Ms Wood said the market had naturally found a “sweet spot”, as businesses that offer more flexibility find it easier to attract and retain workers, and businesses that want stricter rules around office attendance tend to have to pay a premium.
“So I guess if I was to apply a growth mindset to this, I would think what’s the problem that we’re trying to solve here? It’s not clear to me that there needs to be a role for government in that,” she said.
“Regulatory hairballs” are everywhere, she argued, from 31-step approvals and licensing surveys for would-be Queensland cafe owners to “evermore stringent requirements for energy efficiency in the construction code”.
The Albanese government has lobbed its fair share of hairballs down Australia’s regulatory gullet, contends opposition productivity spokesman Andrew Bragg.
In its first term, Labor introduced 5034 new regulations and 400 fresh laws, raising the cost of compliance by $4.8 billion, according to Office of Impact Analysis figures cited by Senator Bragg.
“Australia is now one of the most heavily regulated countries in the world,” he said.
The treasurer rubbished the claims, arguing the coalition introduced more regulations in its last term before its 2022 election loss.
“If the coalition had answers on productivity, they wouldn’t have presided over the worst decade for productivity growth in the last 60 years,” he said.
Dr Chalmers acknowledged the government had been getting in its own way with regulation that was slowing down new housing or energy projects.
Some regulation, such as tying government procurement to gender equality aims, was serving a useful purpose, he said.
“Where regulation is unnecessary, where it’s duplicated, where it’s not serving a useful purpose, we should seek to wind it back, and that’s what we intend to do.”
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