Economic policy

  • A strong economy is central to the welfare and wellbeing of all Australians. It provides the material basis to deliver the sort of society we want to live in.
  • If GDP growth averages 3.5 per cent a year over the next few decades, average real incomes would be around $40,000 higher ($160,000 in today’s dollars) than projected in the Intergenerational Report (IGR). Tax revenues would be some $290 billion higher (in today’s dollars).
  • On the other hand, if GDP growth were to slow to 2.5 per cent a year then tax revenues would be $100 billion lower (in today’s dollars) and income per person would be around $108,000, not $122,000 as in the IGR.
  • Without stronger economic growth, Australia will sleepwalk into a state of fiscal weakness, slower growth in living standards and heightened vulnerability to economic shocks.
  • Arguing about how the economic pie is divided up does not offer an enduring solution to Australia’s low income-growth predicament.
  • The only way to improve living standards for all Australians is by growing the size of the economy, not increasing taxes to fund ever-growing spending.
  • The government and the Parliament have an overriding obligation to give the community the best value for the over $400 billion in federal taxes it currently pays.
  • Productivity growth is not about making people work harder or paying them less. It is about businesses, and governments, investing, innovating and working smarter to create greater value.
  • Labour productivity growth has been averaging around 1.3 per cent over the decade to 2017-18.
    • Treasury’s confronting arithmetic shows that for real gross national income growth per person to return to its long-run average of 2 per cent per year, annual labour productivity growth will need to increase to around 2.5 per cent.
    • Achieving this would be unprecedented in modern history – higher than the “golden decade’’ of productivity growth in the 1990s when it averaged around 2.2 per cent.
    • It will require a renewed focus on business investment and innovation.