Facing today’s challenges to build future opportunity
Faced with mixed signals in uncertain economic times, it is a good moment to take stock of where the nation is headed and what policy options exist to maximise opportunity for the future. Away from the immediate challenges of rising inflation and interest rates and an energy crisis that defies easy solution, there are big structural trends under way both in the economy and society at large. These include population growth, changing work patterns, an ageing population, Indigenous recognition, housing affordability and welfare reform in an era in which people demand more of government. These are the issues that will be tackled on Wednesday at the 2022 Economic and Social Outlook Conference.
The conference, the latest iteration of a 20-year collaboration between The Australian and the Melbourne Institute, focuses on social and economic public policy. The nation has no other conference quite like it. It brings together the biggest thinkers in policy and the leaders who are charged with delivering outcomes needed for future prosperity and wellbeing.
The size of the challenge, and opportunity, is captured by the outlook for aged care where demand for high-level aged-care services is expected to rise by as much as 9 per cent a year as the baby boomer generation reaches the final stages of life. Demand for nursing home care is expected to rise from 200,000 places now to more than 350,000. This is alongside the rising demand for the National Disability Insurance Scheme, more and better teachers and improved health services. The theme of this year’s conference is Opening Doors of Opportunity. It will zero in on how policy and economic innovation can help achieve the vision of a better, more caring society.
These high ideals must be balanced against the economic realities of today. The Reserve Bank of Australia’s decision to lift the cash rate by another 25 basis points will affect households under pressure from higher mortgage and energy costs. But the size of Tuesday’s increase is a good sign that financial regulators are not panicked by the mixed economic signals and harsher medicine being imposed by other central banks around the world. Announcing the latest rise, RBA governor Philip Lowe said the board recognised that monetary policy operated with a lag and the full effect of the increase in interest rates already made had yet to be felt in mortgage payments.
Inflation now is forecast to peak at about 8 per cent later this year and next year because of the ongoing resolution of global supply-side problems, recent declines in some commodity prices and slower growth in demand. The federal government must balance the demands of the fiscal responsibility needed while the RBA seeks to bring inflation back under control with its instincts to deliver what it has called a more care-focused economy. Jim Chalmers said inflation was “the No. 1 challenge in our economy” and the primary influence on last week’s budget. “The budget was designed for these inflationary pressures, which will get a little bit worse before they get better.”
This makes the timing of the Economic and Social Outlook Conference all the more relevant. Policymakers have an opportunity to develop ideas to deal with issues now on the horizon to help build a more resilient society for tomorrow.