Intergenerational Report: Our Standard Of Living Will Drop Without Action

29 June 2021

Originally published by The Australian

This Intergenerational Report paints a disturbing picture of an economy smaller than expected, growing slower than before and saddled with at least four more decades of debt and deficits.

JIM CHALMERS MP
SHADOW TREASURER
MEMBER FOR RANKIN

INTERGENERATIONAL REPORT: OUR STANDARD OF LIVING WILL DROP WITHOUT ACTION

This Intergenerational Report paints a disturbing picture of an economy smaller than expected, growing slower than before and saddled with at least four more decades of debt and deficits.

This is the long shadow cast by the Morrison government’s inability to match its rhetoric on economic management with the reality of stagnant living standards for working families.

This is what the budget last month and the Intergenerational Report this week have in common: both shine a light on generational debt without a generational dividend.

The IGR’s most damning conclusion is that the economy will not grow as strongly across the next 40 years as it has during the past 40. That’s a stunning admission of failure.

Josh Frydenberg seems content to manage this decline. The Treasurer would prefer to stockpile excuses rather than come up with solutions. When it comes to the future economy, he has thrown in the towel.

I refuse to believe that Australia has peaked. Our economy and our society can be better, stronger, more sustainable and more inclusive across the next 40 years but not if we continue down this government’s path.

That path will see growth in living standards slow down. Gross national income is projected to grow by just 1.3 per cent across the next 40 years, compared with 1.8 per cent during the past 40 years. And this projection is reliant on the government delivering the productivity growth it has failed to foster during the past eight years.

Productivity has stagnated, growing just 0.5 per cent on average in the five years following the previous IGR, rather than magically bouncing back to the historical average growth rate of 1.5 per cent assumed in the last two reports. The Coalition has no policy platform to deliver this growth.

Australians will be poorer if the Coalition again fails to meet its productivity targets. If productivity were to grow even 0.3 per cent slower than the optimistic assumption, the economy will be almost 10 per cent smaller by 2060 and Australians will be $32,000 worse off on average.

This government talks a big game but, having repeatedly failed to hit its own projections, there’s nothing to give Australians confidence it will suddenly buck that trend now.

To really get productivity moving we need real leadership, real investments and real ambition – for cleaner and cheaper energy, the care economy, to help teach and train our people to keep up with technological change, and to turn Australian ideas into Australian jobs. None of that will be achieved with more attacks on wages, superannuation and job security or if the Liberals and Nationals use this IGR as political cover for more harsh ideological cuts to Medicare and the National Disability Insurance Scheme.

That would be like setting cruise control on the economic low road instead of steering Australia out of this pandemic and navigating the nation away from 40 years of stagnation.

That’s how we get an IGR that points to the threat of climate change without any detailed analysis of the jobs and opportunities that would flow from cleaner and cheaper energy. It’s how we get a population problem without a plan.

Australians didn’t just need a slide show from the Treasurer pointing out the glaring problems in our economy, they needed a strategy to turn things around.

Instead, the failure of this government to build quarantine facilities or roll out Covid-19 vaccines is matched by a failure to build prosperity or roll out opportunity into the future.

In both areas there’s an urgency here that the Treasurer fails to grasp. It is a race. Try as he may, he can’t pretend all of the dire predictions in the IGR are entirely the fault of the virus.

The rot had set in before Covid-19. The pre-pandemic economy in 2019 was defined by weak growth, weak business investment, stagnant wages and flatlining living standards.

The Treasurer won’t fix the budget without fixing the economy, and he won’t fix the economy unless people get a proper slice of the action when it comes to this recovery. A smaller, slower economy, decades of debt and stagnant wages mustn’t be the thanks Australians get for all of the sacrifices we’ve made for each other throughout this pandemic.

This opinion piece was first published in The Australian on Tuesday, 29 June 2021