Post-pandemic Team Australia

The pre-pandemic economy is a foreign country. We did things differently there. COVID-19 has stress-tested our institutions and health systems; they held up well, especially in suppressing contagion. But the medical response has taken a toll in job losses, business failures and shattered confidence. As we reanimate commerce in the months ahead, the nation needs to reduce what Scott Morrison sees as a productivity-sapping “sclerosis”. On Tuesday the Prime Minister will sketch out the contours of a long-term economic reform agenda, centred on skills and training. It will also be a pep talk and a refocusing of the national will. Former top bureaucrats and the policy elite have set the test for the political class. In a nutshell, as encapsulated by Reserve Bank governor Philip Lowe, the nation needs a better set of incentives for businesses “to expand, invest, innovate and hire people”.

Let’s be clear: we are talking about raising productivity and investment, encouraging economic dynamism, leading to profits, jobs and higher living standards. Debates about settings for income support — extending the JobKeeper subsidy or return to normal for JobSeeker — are housekeeping issues, as brutal as unemployment and underemployment are for millions. Remember, before the crisis we were in the wrong lane. Growth was driven by exports (good), public works (mostly good), population (on balance, good) and bigger government (not good). But construction, investment, agriculture and consumer spending were a drag on national output. The government should be able to do both cyclical fiscal policy and long-range structural policy. For many reasons, the latter task has eluded governments for two decades.

Mr Morrison is keen on a new industrial compact between workers, employers, unions and government to boost employment and remodel the economy after the pandemic, as well as a new and more effective federation. Given consensus was Bob Hawke’s operating mode almost 40 years ago, it’s not possible to revisit that foreign country. Yet we must find a way to break Canberra’s dysfunction and reset the problem-solving capability of the bureaucracy, which has been exposed. Mr Morrison wants to harvest fresh ideas, not have logrollers and rent seekers coming in off a few steps, rolling the arm over. Two of the nation’s most respected former public servants, Peter Shergold and Martin Parkinson, have urged the Prime Minister to use the COVID crisis to reverse two decades of over-regulation, which has “gummed up the wheels of commerce”.

We’ve accumulated a lot of gunk in the system through complacency and poor policy. But the political class has been sucked into third-tier cultural skirmishes and indulgent internecine feuds. The will or wit to act on the advice of the Productivity Commission or Ken Henry’s tax review evaporated. As always, the few losers from proposed reform make a lot of noise but the many beneficiaries are spread across the economy. The caravan moves on, election to election, but sound market principles remain, such as getting the right incentives for investment and pricing infrastructure. Or getting rid of disincentives, such as broken workplace rules, high tax rates and deadweight regulation. This focus must not be lost in a populist trading bazaar where the electoral map holds more sway than rational decision-making.

We need a game plan to grow the economy, get people back to work and give companies the confidence their capital will get a decent reward for risk-taking. Canberra can’t carry this agenda alone. Indeed, reform of the federation offers as much potential as any other area. The national cabinet has shown up the overly complex machinery of the Council of Australian Governments. A country of 25 million should be able to find a sweet spot between co-operation and competition; the national interest is served by making it easier for people and resources to move where the new opportunities are. Like it or not, post-pandemic Australia will be a different country, trying to rebalance trade, competing on quality and price, moving up the value chain, paying back a mammoth debt, and making sure our young are skilled and engaged in work. Healthy, innovative, ambitious, fleet and sustainable enterprises are the vehicles to take us to that future.