Pages tagged "Budget Blueprints"
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.
This decade could go one of two ways. It could be like the last one—marred by political instability, a few epic policy failures, and a stagnant economy. Or it could be like the last twenties in much of Western society—a decade of economic prosperity with a distinct cultural edge.
Our relatively unscathed emergence from the pandemic is miraculous. We acted swiftly but also with fortitude to save tens of thousands of lives. And our economic supports were difficult to fault under the circumstances. We stand today among the strongest economies on Earth. Employment has returned to its pre-crisis level. All signs point to a robust recovery. And the Treasurer’s rejection of austerity is a relief, charting a smooth path back to normal.
But normal isn’t good enough. Our economy was barely growing as the crisis struck. Investment, productivity, and wages were all languid. When Chinese demand is keeping the place humming along, it’s easy to understand resting on our laurels. But we weren’t booming in the lead-up to the crisis. So what’s our excuse?
This funk won’t solve itself. It requires action. It’s not like there aren’t good options. All of the cruft we’ve accumulated over the years. All of the terrible policies we’ve known about but done nothing about. All of the emerging threats we’ve been perpetually putting off until tomorrow. We already know lots of the answers. There’s so much low-hanging fruit.
The decade we have is up to us. Just as the last roaring twenties—in the shadow of World War I and the Spanish Flu pandemic—were an era of rapid economic and cultural change, these twenties can be roaring too. This Budget Blueprint offers ideas for how we could pop the cork, with four policy areas showing tremendous potential to open a new golden era:
Sparking the next boom
We punch above our weight in science, technology, and the arts, but we’re no global hub of innovation and creativity. We need smarter policies to spark the next boom. And we must make sure a future sudden catastrophe doesn’t put it at risk. Our report calls for the Government to develop domestic mRNA vaccine manufacturing capacity, boost R&D tax incentives, create an Australian Innovation Agency, Arts Future Fund, and the Research Institute for Sudden Catastrophes (RISC).
Igniting the next boom
As we emerge from the pandemic with record public debt, the focus should be on raising revenue in the way that best enables paying it down. That means raising more revenue more efficiently, and shrinking public debt as a share of the economy via rapid economic growth. The Government should introduce a $3,000 standard deduction, end LMITO and keep Stage 3 tax cuts, introduce JobMatcher unemployment insurance, expand the JobMaker hiring credit, reduce the corporate tax rate, and make full expensing permanent.
Powering the next boom
Australia is increasingly isolated on climate action. If we don’t increase our ambition soon, we will feel the heat, diplomatically and economically, as well as physically. We should also position ourselves to take advantage of the new opportunities a net-zero economy promises. The Government should increase funding to the ERF, implement the Coal-Generation Phasedown Mechanism, triple green R&D spending, invest in EV charging infrastructure, and forge an adaptation and diversification plan for fossil fuel regions.
Nurturing the next boom
Our early learning system is anti-productivity. Early learning is not affordable for many families, creates disincentives for parental work, and harms childhood development. Wholesale reform is needed to nurture young minds and unleash a new wave of economic growth. Australia should introduce universal kindy for ages 3–5, create a streamlined, untied, and means-tested payment for those with children under three, and make childcare costs (broadly defined) tax deductible.
Each year the Federal Budget lays out the Government's vision for the nation and its priorities for reform. We do the same. Our Budget Blueprint's provide a roadmap for the policy needed to drive the next economic boom and lay the foundations for the roaring 20’s.
Australia is at a critical juncture. The COVID-19 crisis has cut short three decades of uninterrupted economic growth. We must support the economy while demand remains weak, but we must also give targeted support to the most vulnerable. The combination of welcome discretionary actions and automatic stabilisers have ballooned net debt, and this pressure will only increase in coming years as our needs in areas like health and aged care grow. To pay down this debt, we will need a much more efficient tax base and much faster growth. This will require wide-reaching reforms that were necessary before the crisis, and are now more critical than ever before. We must achieve this growth in an environmentally sustainable way, and investments in clean energy can themselves help power the next boom.