By Michael Chaney
President, Business Council of Australia
Underlying the Business Council of Australia’s agenda for renewed economic reform is choice. As the council advocated in its Four Reform Steps advertising program last year, Australia can choose to lock in its current prosperity by moving on a new round of reforms in key areas of the economy.
Alternatively, we can choose to allow the economy to stand still and be overtaken by our competitors.
There are a growing signs that after unprecedented expansion and growth, the performance of Australia’s economy is slipping.
We need to act now if we are to avoid a return to low growth.
Australia’s productivity has declined, debt has fuelled recent growth in an unsustainable way, and business regulation is strangling innovation and diverting productive resources into red tape compliance.
But as the council and others have argued over the past 12 months, a low-growth future and its consequences are not inevitable.
Australia’s recent prosperity has come about as the result of making deliberate choices about the sort of country we want and having the courage to make reforms that have stood us in good stead.
Last year, the council commissioned independent research to bolster the case for renewed reform by showing how Australians would benefit if reforms were made to the economy that allowed it to grow at 4 per cent a year for the next 20 years (the average rate a year over the past decade).
The research showed that by 2025:
- The average Australian would be $74,000 better off (in today’s dollars).
- The economy would be almost 40 per cent bigger than it would otherwise be.
- Australia would be the third most prosperous nation in the world.
The federal government will have more than $80 billion in extra revenue – enough to fund new spending needs to meet the demands of an ageing population or, alternatively, cut taxes by 30 per cent.
The research found that unless future changes keep the economy strong and competitive, Australia could slip to 18th in the ladder of developed countries, the same place it occupied in 1983 when its economy was at an historic low.
In short, Australia now faces a similar choice to that of the 1980s when it started the changes that resulted in the widespread prosperity that we have now.
This is why the council, as well as other policy leaders, have been urging our political leaders to use the economy’s current strong position to opt for a future of prosperity and strong growth, rather than decline.
In June, the Council of Australian Governments, representing the Prime Minister and state and territory leaders, agreed that change was crucial to lock in prosperity.
At the time, COAG stated: “The challenges facing Australia over the next decade are significant. They are structurally based and a sustained and co-operative effort is again required to meet them.”
The litmus test for change will be today when COAG meets for the first time since last year.
The signs are promising that significant steps will be taken, particularly where concerted and co-ordinated action is needed across federal and state governments to resolve current imbalances and barriers to future growth.
In particular, the council is looking for COAG to untangle the complex, costly mass of red tape tying up business and the community.
Red tape is growing three times as fast as Australia’s rate of economic growth. Much of the problem stems from overlapping red tape between governments, and a mindset of regulate first, ask questions later.
As the council has argued, COAG needs to go beyond just cleaning up the existing stock of regulation and agree on solutions that resolve the underlying systems and processes that continue to produce poor, overlapping regulation.
The other area of concern for the council is infrastructure. There have been high-profile examples of bottlenecks in our ports that have impeded our competitiveness. But these bottlenecks extend beyond our export infrastructure. Our energy, water and transport networks – the basic building blocks of our economy – are also stretched.
As the council has advocated, Australia needs a whole-of-nation approach to better plan and co-ordinate its needs. First and foremost, we need a two-yearly national audit that allows government and community to better understand demands on key infrastructure areas as the economy grows, and how such demand can be met.
We also need a system of assessment and planning that sets down specific responsibilities for and between governments.
These are but two of several important issues that COAG will look at today.
This time tomorrow we will know the extent to which our political leaders have moved beyond the rhetoric of change to a program of concerted action that sets Australia on a path of sustained growth and prosperity.