Jim Chalmers’ ambitious drive to boost living standards

Jim Chalmers’ admission ahead of his National Press Club speech on Wednesday that Labor’s budget “is not sustainable” has raised hopes that the productivity roundtable he will host in August will be part of significant reforms to boost growth and strengthen the economy and defend living standards. In his speech, the Treasurer set out a strong case why tax reform was crucial to budget sustainability. We applaud his initiative in taking the public with him to build prosperity. “Our population is getting older, which means more retirees and proportionately fewer working-age Australians,” Dr Chalmers said in his speech. “The global net-zero transition will also reshape our revenue from resources. This evolution in our revenue base is one of the reasons tax reform is so crucial to budget sustainability” in addition to restraining spending and finding savings. But, as he said, tax reform was also about lifting productivity and investment, lowering the personal tax burden and increasing the rewards from work.

After urging journalists at the press club not to play the “rule in, rule out” game, however, the Treasurer was reserved in responding to questions about potentially increasing the GST or dropping the government’s push to tax unrealised capital gains on high-value superannuation funds. Both measures deserve attention in any serious discussion about holistic tax reform needed to lift productivity. Economists have suggested that Australia expand the GST to be less reliant on personal and company taxes. In January last year the International Monetary Fund highlighted our “growing dependence on bracket creep” and called for an overhaul of the tax base towards greater reliance on the GST, with compensation for the least well-off. Questioned at the press club, however, Dr Chalmers restated his previous view: “It’s hard to adequately compensate people and I think often an increase in the GST is spent three or four times over … by the time people are finished with all the things they want to try and do with it.”

In relation to the current debate over increasing defence spending, Dr Chalmers described himself as an “enthusiastic supporter” . But he also talked up Labor’s existing commitment to boost defence spending to about 2.3 per cent of GDP by the early 2030s as a “very substantial commitment”. In a deteriorating geo-strategic environment that view will not pass muster with the nation’s major ally, the US, which has called on Australia to lift spending to 3.5 per cent of GDP. Other middle powers, such as Britain and Poland, are lifting their allocations faster and higher than Australia

At this stage the productivity roundtable, to be held in the cabinet room, which seats about 25 people, will be a small table. And Dr Chalmers has set out three worthwhile preconditions for participants: Ideas should be put forward in the national interest, not through the prism of sectoral, state or vested interests; ideas or packages of ideas should be budget-neutral but preferably budget-positive overall; and ideas should be “specific and practical, not abstract or unrealistic”. That criteria should help maximise the possibility of good ideas being adopted. And Dr Chalmers has given an important commitment in return: “We won’t come at this from an ideological point of view but from the practical, pragmatic and problem-solving middle ground we’re most comfortable on.” On that basis, workers and business, including in the 24/7 hospitality and retail sectors, are entitled to hope that ideas for more flexible work practices that would advantage staff and employers would not be stymied as a way to improve labour productivity and produce sustainable improvements in wages and conditions.

Dr Chalmers’ preconditions for ideas to be submitted to the roundtable and the limited size of the group have been designed to keep the discussion to a targeted productivity agenda. The risk, however, is that valuable voices with practical expertise from Australia’s diverse economic sectors – mining, energy, construction, housing, agriculture, transport, universities, small business, hospitality, manufacturing, medical science, digital technology, media and entertainment, the care economy and many others – could be excluded. They will have opportunities to make submissions and attend other forums. It is important that the limited experience of participants does not limit the event’s potential effectiveness.

Dr Chalmers is stepping up to the government’s most important challenge apart from national security: creating the conditions to improve productivity and reverse the alarming slide in living standards. He has taken on an ambitious challenge and it is vital for this and coming generations that he is able to translate it into delivery. As he said: “Let’s see what we can achieve together if we dial up the ambition a bit and dial down the rancour a bit as well.”