Stakes Too High To Turn Back

27 November 2007

The Australian

By Greig Gailey
Business Council of Australia

The federal election result underlined a clear shift in community sentiment about how Australia should harness the opportunities and tackle the challenges before it. Education, infrastructure, climate change, workplace relations and tax were among the many issues presented to the community to decide which party it believed was best placed to take the country forward. That decision was unambiguous.

But so is the imperative now for a comprehensive action plan to build prosperity rather than allowing it to erode, as has been the case during past eras of strong growth. As the Business Council of Australia and others have said many times, the current resources boom offers a unique opportunity to lay down a solid foundation for future prosperity.

It should enable Australia to realise the BCA’s aspiration to lift the country’s living standards into the top five in the Organisation for Economic Co-operation and Development by 2012. This is an achievable objective, given the benefits of past reforms have elevated Australia from 17th among OECD nations in 1990 to 7th in 2005.

But to be a top-five economy, we need to undertake a number of substantial reforms and investments across a range of areas.

We need a comprehensive plan to lift workforce participation to offset the impacts of an ageing population and ensure as many Australians as possible are part of the mainstream economy and share directly in the benefits of prosperity.

We need to unshackle business investment and activity through comprehensive business tax reform and a real reduction in red tape.

We need to see a nationally co-ordinated plan for infrastructure renewal so the basic building blocks of the economy – water, energy and transport – to support growth instead of hindering it.

We need to see improved outcomes in education and health to better meet future needs.

Kevin Rudd and his team have clearly identified reforms in all these areas as important. Business welcomes these commitments, particularly as we are now seeing some of the shine of our economic performance diminish.

Recent interest rate rises and the impacts of a strong Australian dollar should serve as reminders that the risks of falling behind are stark. Political parties have acknowledged the need for a new round of economic reforms that improve our ability to weather future challenges and deliver long-term prosperity.

But we have yet to see a sufficient level of concerted political action that will allow Australia to make these advances. What is needed now is the development of a renewed reform architecture that brings together Labor’s policy commitments in a systematic reform program that lifts Australia’s economic capacity.

The greatest priority and challenge for the new Labor government is to tackle head-on Australia’s current dysfunctional system of federal–state relations.

For too long, Australia’s potential has been hindered by blame shifting and finger pointing between federal and state governments whose roles and responsibilities have become characterised by overlap and duplication rather than transparency and accountability.

According to BCA research, these inefficiencies are costing the average Australian household $1100 a year. That’s not including the cost to the overall economy caused by dysfunctional federalism standing in the way of growth – a figure likely to run into many billions of dollars.

It’s imperative that inter-governmental systems and processes are strengthened so that business and the community can have confidence that future opportunities and challenges will be dealt with effectively.

In short, we need to see a new, long-term approach to federalism because failure to address the current problems of federal–state relations will undermine our ability to achieve all other reforms.

Labor’s commitment to achieving far better co-operation and co-ordination between Canberra and the states is encouraging. Progress on this front will take time, but action needs to start now.

Business looks forward to working with the new government to make sure Australia’s economic performance is a platform for an even more prosperous future, not just another high-water mark of foregone potential.



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