In the past 15 years, Australia has been battered by two major economic disruptions: the global financial crisis of 2008-09 and the COVID-19 pandemic of 2020-21. The Australian government, like many others, responded with massive stimulus to prevent an even worse economic disaster. The idea was that when we came out of the financial crisis, the stimulus would be paid back. It never was.
The result is that the fastest growing area of government expenditure is interest on debt – it’s even faster than the NDIS, Gonski schools, age- and child-care, and defence spending. Add to this the high costs associated with the ageing of the population and the move to a carbon-free future. Meanwhile, the inconvenient truth of sticky inflation is now colliding with the federal government’s promises to get wages moving again.
What’s needed is an urgent rethink of policy settings to sharpen the incentives to save, invest, hire and build businesses. That requires a serious supply-side productivity agenda, including reforms to a tax system that over-penalises initiative and to an outdated industrial relations system that prevents businesses from tuning their workplaces into the competitive advantage needed to sustain a high-wage economy.
