Ensuring Australia’s economic sustainability
Government Agenda - 2014
No excuses. The incoming Government must act immediately to implement major government and economic reforms.
Australia is about to hit the perfect economic storm, caused by the intersection of the:
- New realities of a global economy
- Cost pressures of an ageing population
- Loss of GDP growth as the mining boom declines
In the challenging months ahead, we need an incoming Government with the courage and vision to introduce the major government and economic reforms required to create a sustainable economy.
Many of the drivers of Australia’s precarious situation are demographic. Our ageing population creates multiple issues for government:
- Increased demand for expensive social services
- A declining revenue base
- Slowing GDP growth
While the past 40 years have seen annual average growth in real GDP of 3.3%, in the next 40 years growth is projected to slow to 2.7%, as a direct consequence of an ageing population.
But others are of our own making. One of the biggest challenges for the incoming Government is to restore confidence. The policy backflips that have been the hallmark of minority government have devastated confidence at all levels, for: businesses, consumers and global investors.
It is extraordinary that, at a time when Australia has one of the most resilient OECD economies, foreign direct investment actually declined by 13% from 2011 to 20121.
To begin restoring confidence, the incoming government needs to take decisive action.
- Set out a clear and credible fiscal policy that charts a path back to surplus
- Refine and reorient Australia’s tax system to support growth and participation
- Develop a total economy and the infrastructure to support it
- Increase productivity
- Remain competitive on carbon policy
- Make wholesale changes to the business of Defence
- Change the funding model for human services delivery
- Develop the right skills to support our future economy
- Restructure Australia’s balance sheet
History will remember the September 2013 election as a pivotal moment for Australia: either the start of our national decline into recession; or the catalyst for reforms that established a sustainable economy for the long-term. EY and its clients strongly urge the incoming Government to take the steps required to make it the latter.
1FDI in figures, April 2013, OECD