Budget Blueprint 2022: From recovery to resilience

Since Federation, Australia has grown from a colonial outpost to a leading global economy on the back of a series of commodities booms. Successive generations have benefitted from continually improving living standards. But by inheriting lucrative, plentiful natural resources like coal and iron ore, our development has not cultivated the diversification necessary to thrive in an interconnected 21st-century economy—an economy that will be defined by a shift away from the fossil fuel resources that have powered the globe since the industrial revolution.

Our historical good fortune has bred complacency within the public policy community. A ‘she’ll be right mate’ attitude permeates public policy decision making ranks on both sides of the political divide. Seduced by the simplicity of reactive policy making, we are sleepwalking into a future that will be defined by long-term, existential threats to our prosperity and way of life. Put simply, decades of geopolitical, economic, and social stability have dulled Australia’s understanding of risk—and its willingness to proactively confront it.

It is tempting to write off the Black Summer bushfires and the COVID-19 pandemic as isolated, anomalous events. But these events have revealed that Australia is disconcertingly reliant on global supply lines that are ill-equipped to deal with disruptions and disasters. As we write, the world is coming to terms with the security and economic implications of Russia’s invasion of Ukraine, while floodwaters imperil whole communities. Australia is not immune.

A new virus or a conflict in Ukraine carries consequences that ripple far beyond national borders. Our vulnerability to global events is unprecedented. We can no longer use our geographic isolation to shield us from the trials and tribulations of our peers. Our Budget Blueprint sets out three key priorities:

1. As we emerge from the pandemic, our first priority must be to improve our nation’s capacity to respond to, and withstand sudden catastrophic disturbances like pandemics, climate events, and regional conflicts. If we can better anticipate and address these crises, we can soften or even avoid the need for impromptu interventions that are both inefficient and inflict unintended, second-order harm. To achieve this, we recommend policies to future-proof our supply chains, establishing an institution to oversee our preparedness and responsiveness to crises, and ensuring that we have adequate labour supply to withstand future shocks.

While improving our capacity to address crises is important, we must also recognise that a series of worsening structural deficiencies in our economy imperil our future resilience and prosperity. We highlight two structural reform priorities: productivity and equality of opportunity.

2. Reigniting productivity growth—which has been almost static for more than a decade—is critical because it determines the long term trajectory of wages and living standards. A more productive society is better equipped to prepare for an uncertain future. To boost productivity, we must reform the way we fund basic research, and get the incentives right to foster productivity enhancing investments from businesses. To that end, our policy recommendations would raise innovative R&D funding, increase the productivity of our research universities, and deliver reform to our creaking tax system.

3. The resilience of our nation depends not only on economic arithmetic, but also the social bonds that tie us together. Yet the resurgence of populism is straining these bonds of trust as never before. Politicians of all ideologies are increasingly exploiting people’s mounting cynicism with the government for political gain—appealing to the frayed emotions of the electorate by disregarding factual accuracy and simply telling people what they want to hear. Worse, when countering these falsehoods, teachers, scientists, academics, and other individuals with deep area knowledge are now derided as ‘out of touch’ or ‘not living in the real world.’ Such scorn for vaguely defined ‘elites’ has its roots in the increasing divide between rich and poor. An economic system that rewards the richest without offering equality of opportunity has the potential to cause long-term damage to the foundations of liberal democracy.

We know that pervasive inequality corrodes our social fabric—if people believe they are unfairly excluded from opportunity, they are less likely to embrace policies advocating for the common good. Closing equity gaps must therefore be at the heart of every federal budget.

Our policy recommendations to boost equality of opportunity and ensure everyone has a ‘fair go’ include action on housing affordability, measures to improve access to vocational education for young people who choose non-academic pathways, and true unemployment insurance to give people the security they need to pursue the best job for them.

This Budget should herald the beginning of a new period of reform—much like the major reforms of the 1980s and early 1990s—to set the stage for tomorrow’s Australia. If we get it right, we can be sure of a secure society in an uncertain future, and set up our economy for generations of growth.

This Blueprint shows how.