Leaders must stop slide towards ‘unlucky country’

In a week when the Albanese government shifted the nation closer towards the planned economy favoured by the left, which seems incapable of understanding the process of wealth creation, the Business Council of Australia pressed ahead with its drive to encourage government to overhaul economic policy to encourage productivity improvements. While Jim Chalmers announced his intention to break open the Future Fund to invest in renewable energy, housing and “nation-building” projects, further enlarging the government’s economic footprint, a forum hosted by The Australian and the BCA explored how and why, with productivity growth at its weakest for 60 years, the nation’s economic trajectory needed to change. The Reserve Bank board has made clear that sluggish productivity is contributing to underlying inflation, and therefore to elevated interest rates and living cost pressures.

At the forum, speakers noted that unchecked growth of the public sector and ever-increasing red tape on businesses of all sizes were starting to have a serious impact on the nation’s economic prospects. Almost two-thirds of jobs created under the Albanese government have been public sector jobs, we have reported. Much of that expansion has added little to productivity and taxpayers are footing the bill. A government-funded jobs bonanza may look good when ABS employment figures are released but it is not the same thing as a healthy and growing productive economy.

At The Australian/BCA forum, the chief executives of three of the nation’s most dynamic companies – Wesfarmers’ Rob Scott, BP Australia’s Lucy Nation and medi-tech player Cochlear’s Dig Howitt – outlined a blueprint to prevent the nation becoming the “unlucky country”, marked by lower living standards, poorer job prospects and less opportunity. The re-election of Donald Trump in the US makes a reboot more urgent. The president-elect has promised to slash government regulation and cut taxes, which is likely to trigger a wave of investment in the US. There, the corporate tax rate is 21 per cent, compared with 30 per cent in Australia. As Mr Scott, who leads one of Australia’s biggest employers with retail brands such as Bunnings, Kmart, Officeworks and Priceline, said, tax reform needs to be comprehensive and include the states, tackling stamp duty and payroll taxes.

He is right. The low growth/ low productivity/high government spending pattern has become entrenched. Piecemeal measures will not suffice. A good starting point, Eric Johnston writes, is cutting red tape, including labour regulation, to allow businesses to invest, hire and operate more freely. Australia had followed the European path of adding regulation, which had stifled productivity, Mr Howitt told the forum. Regulation existed to solve problems but the stifling effects of over-regulation needed to be taken into account, he said. “Australia has a real choice, and that choice is perhaps even more stark now with Trump having this department of government efficiency, Elon Musk and Vivek Ramaswamy,” he said. “Let’s have a look at government expenditures being done efficiently.”

The forum followed a recent BCA analysis that found Australia had become a more difficult and expensive place to do business, which had contributed to living standards – measured by real household disposable income per capita – falling to 2014 levels. Labor’s workplace laws had put a handbrake on productivity growth, it warned.

As Ms Nation said, Australia was in a global race for capital. We were resource-rich but capital-poor and needed “a huge amount of foreign direct investment” for which other countries were also competing. While such issues extend beyond the usual scope of retail politics, they are directly relevant to living standards and need to be a focus at the next election.