Five areas earmarked to boost living standards, wages

Five reform areas will be the focus of a federal government bid to lift wages and living standards over coming decades.

The 2023 Intergenerational Report to be released on Thursday will reveal economic growth into the 2060s will be sluggish, mainly because of an ageing society and stalled population growth.

At the same time, the economy will be two-and-a-half times bigger over the next 40 years.

Gross domestic product, or economic output, is projected to grow at an average of 2.2 per cent a year from 2022/23 to 2062/63, which is 0.9 percentage points lower than the average growth of the past 40 years.

The Business Council is seeking to encourage reform and this week said if the country continued “along the low road, Australians are sitting on a wages and unemployment timebomb”.

Treasurer Jim Chalmers said Australia was one of the best-placed nations to respond to the economic headwinds because of its low unemployment and near-record labour force participation.

But he said there were five areas the government was working on in which productivity gains could be made over the next four decades.

One of the areas was to renew economic institutions such as the Reserve Bank, promote innovation and boost competition including in the payments system.

Investing in data and digital infrastructure including digital ID, the National Broadband Network, and the quantum and artificial intelligence sectors would be crucial.

Another focus is building a more skilled and adaptable workforce through improving access to tertiary education, and establishing a Universities Accord and a new national skills agreement.

As well, the care economy will be central to the creation of new jobs and supporting an ageing population.

This will involve ensuring health and aged care spending, the National Disability Insurance Scheme and early education are all working in sync.

But he said one of the biggest changes would be the way Australia shifts to a net-zero emissions economy.

“Ultimately boosting productivity is about increasing our nation’s prosperity, boosting wages and lifting living standards over time,” he said.

Tax and non-tax receipts are set to rise to 26.3 per cent of GDP in 2033/34, before peeling back slightly in the three following decades.

Structural changes to the economy will put pressure on tax revenue, with proceeds from fuel and tobacco excises to shrink as Australia transitions away from fossil fuels and as fewer people smoke.

Company tax and the GST will largely stay in line with economic growth, while the percentage of revenue from personal taxes will increase as incomes rise and the population grows.

Dr Chalmers has ruled out any changes to the GST, but is eyeing off tax reform in the areas of multinationals, high-balance superannuation and offshore petroleum production.

Nationals leader David Littleproud said a “mature conversation” about tax reform was needed.

“We do need political leadership from all sides to have that mature conversation, knowing the burdens that are coming on the NDIS, Medicare, and making sure we can provide that safety net.”

Meanwhile, the latest ANZ-Roy Morgan survey showing consumer confidence dropping by 2.4 points over the week.

Among the mainland states, confidence rose in South Australia and WA, while it fell in NSW, Victoria and Queensland.

The reading for “weekly inflation expectations” jumped 0.3 percentage points to 5.5 per cent.

ANZ senior economist Adelaide Timbrell said the fall may have been driven by some weakness in the Australian dollar, but the four-week moving average of the consumer confidence index continued to edge higher.

Paul Osborne and Andrew Brown
(Australian Associated Press)