Challenges aplenty call for brave leaders to bring about real reform

This year is shaping up as a pivotal year in politics and the economy with Australia needing leaders to be brave in making choices that will set up the next generation of social and economic prosperity. 

There are challenges aplenty as the tailwinds of globalisation that have supported economic growth here and around the world wane, our baby-boomers reach old age, and we look to manage the impacts of climate change and the legacy of COVID-19 and our response to it. Australia must leverage growing business appetite to invest in emissions reductions by striving for more ambitious emissions reductions sooner and for greater focus on transport and agriculture. Businesses around Australia are calling out for skilled workers, particularly in tech, digital and data roles. These will be critical to realising the benefits of rapid digital take up through the pandemic and in laying the foundations for innovation in the years ahead.   

It should come as little surprise that a recent CEDA survey found Chief Financial Officers more worried about skills than tax or regulation when considering investment opportunities. Our approach to the skill needs in our economy must encompass both immediate and long-term strategies that include migration working alongside training and education programs, and improved skills matching.   

Implementing the recommendations of the recent Joint Standing Committee inquiry into skilled migration would be a good first step towards Australia having a nuanced skilled migration program – one that ensures we are attracting the skills we need now and for the future that can be altered depending on the changing needs of our industries. The inquiry supported more responsive and accurate mechanisms to identify skills shortages and streamlined migration for intracompany transfers for large multi-nationals, something CEDA has been advocating for some time now. 

I am not expecting the words ‘tax reform’ to be uttered through the next election campaign, or at least to mean anything more than income tax cuts. However, tax reform must surely come. The challenges here are simply too great. The only way to rebuild a sustainable fiscal position, meet the growing demands for high quality customer centred health and human services such as aged care, and maintain a competitive tax environment and revenue resilience is through bolder reforms than we have seen in decades. Nearly 12 years ago, Dr Ken Henry delivered a comprehensive analysis of the tax reform options and opportunities available to Australia. It’s time to dust that report off and update and build on the findings and priorities based on the current landscape domestically and globally.  

The biggest challenge that faces Australia is of course our declining levels of productivity. The story here is well known and traversed. Productivity growth has contributed more than 80 per cent of the growth in Australians’ incomes over the last three decades but has been slowing significantly since the early 2000s. Averaging 0.9 per cent in recent years, productivity growth is well short of the 1.5 per cent annual growth rate upon which government projections in the intergenerational report are based and well short of delivering the boost to living standards many are looking for. 

Treasurer Josh Frydenberg has called for workers to switch jobs to boost productivity and wages. We can make it easier for people to relocate or move freely between states by the states following through on occupational licensing reform and the abolition of stamp duty on residential property in favour of a land tax. However, labour mobility is just one indicator and driver of business and economic dynamism, and much more is required.   

We need to adopt a comprehensive strategy to encourage and enable the creation of new businesses and innovation to unlock new products and services and reduce costs for consumers. While there often seems to be a reluctance to own the promotion of innovation as an important policy goal, the fact is it contributes the lion’s share to productivity growth. Our OECD peers are harnessing and centralising all their resources with more deliberate innovation strategies to both attract and create world-leading companies through agencies such as Enterprise Ireland and the Singaporean Economic Development Board.  

In contrast, Australia’s policies and programs are fragmented across numerous agencies and levels of government, and our fear of “picking winners” has left us with a plethora of small programs, lots of activity but no comprehensive industry and innovation agenda.  

The real risk is that it is simply sub-scale to have the impact desired. We must see sharper focus and consolidation, clearer accountability at ministerial level and a stronger national narrative on the importance of innovation and a dynamic business sector if we are going to get the bang for buck we need from both government and business investment. The government’s recent package to focus the commercialisation of the six national manufacturing priority areas was a positive initiative that must be built upon as part of a broader strategy.    

Policy actions over the past decade and more have not disturbed the downward slide in our productivity performance. New thinking and a greater risk appetite are needed.  There is no low ‘hanging fruit’, there never was really, but there are some tremendous opportunities in areas of decarbonisation and technology that are there for the picking, if we are brave enough to enable them.   

The lack of policy politics may have worked for governments in the past but as we come out of this pandemic there is a broader desire by the public to have our leaders show us their vision for the future. 

This article originally appeared in The Weekend Australian.