Setting aside tribalism for great adventure of growth

In a speech to the Committee for Economic Development of Australia on Monday, Scott Morrison rekindled a slogan from one of our most influential economists. CEDA’s founder, Sir Douglas Copland, an academic, bureaucrat and diplomat, tirelessly preached the “adventure of growth”. The Prime Minister said it was a quest that aligns with today’s challenge as we look to recover from twin crises due to the COVID-19 pandemic. Mr Morrison pledged to go for growth and jobs with a five-year plan he has termed JobMaker. He recently set out a skills agenda and a goal for an industrial relations compact. The latest moves involve deregulation and delivering infrastructure.

Mr Morrison has an ambitious goal. He wants the nation to get back to the pre-pandemic growth trajectory by 2025. It will require us to lift our growth rate by more than one percentage point above trend, which is around 3.5 per cent for five years. He said compared with the mid-year budget update it is expected that more than $100bn of economic activity has been lost this year and it will take us an estimated two years at least just to get back to the level of gross domestic product we were at pre COVID-19. However, nonpartisan economists are sceptical about hitting the targets, labelling them a “stretch”. Eight years is a likelier period to return to the previous trajectory on GDP.

Mr Morrison has vowed to make the economy run faster to get people back to work, not through fiscal stimulus but by addressing supply-side factors such as skills, workplace flexibility, red-tape reduction, infrastructure provision and federal-state financial relations. The economy faces a moment of truth when the emergency funding measures taper off in September. The government is correctly highlighting the need to live within our means, given the expected weakness in revenue for some years. The Parliamentary Budget Office has forecast a decade of fiscal deficits and an additional $500bn to $620bn of net debt because of COVID-19. Rather than austerity or higher taxes, the strategy is to clear regulatory blockages and improve the dynamism of the economy to get growth humming.

It’s important to recall that before the crisis hit, the economy was merely meandering along at sub-2 per cent annual GDP growth. Activity was juiced up by population growth, surging exports, big-ticket state capital works and expanding bureaucracy in health, welfare and disability services. But parts of the economy were stagnant or in decline, including consumer spending, business investment and the housing industry. Productivity was on the slide, the key behind insipid wage growth. It’s worth recounting a controversial, if devastating, observation Copland made in 1949. He argued Australia postwar was a “milk-bar economy”, and the nation needed a plan to produce more capital goods for expansion rather than focusing on consumer essentials.

As we argued on Friday, investment is the missing ingredient in our growth formula. Mr Morrison told the CEDA event reforms to unshackle state and federal planning and environmental laws could see approval times for major projects cut in half to 21 months. The idea is to establish taskforces composed of federal and state regulators for each of 15 major projects — including metro rail, dams, mines and roads — to work with proponents, abolishing the many hoops required. A federal review into the Environment Protection and Biodiversity Conservation Act is expected to recommend cutting green tape to speed up project approvals. Mr Morrison said national cabinet will try to change the culture of regulators as well as the content of regulations. “This crisis has shown what can be achieved when regulators are pragmatic and responsive, solving problems without compromising safeguards,” he said.

The Productivity Commission is wisely being brought into the heart of the national cabinet-led reform model to advise on a whole range of issues. But we also need pragmatic and responsive legislators. The past two decades show that hyper-partisanship, fratricide and minor-player veto have killed the impetus for reform, from lower taxes to more flexible workplace laws. As an acute observer and key political player over many years, Labor leader Anthony Albanese understands the roots of Canberra’s dysfunction. He and his party have an opportunity to positively contribute to the adventure of growth by putting down their cudgels and seeking common ground — and using their influence to make policies better, fairer and more forward-looking. This will involve all players setting aside the habits and prejudices of their political careers to work in the national interest for broadbased, sustainable, business-led economic revival. We live in hope.