CEDA's Economic and Political Overview publication, launched
with a series of events across Australia, examined the important
issues of productivity and federal/state financial
relations as well as providing economic and political outlooks
The 2012 publication includes:
- Economic Overview by NAB Chief Economist Alan Oster and NAB
economist Ali Knight examining the year ahead, including the
challenges faced by our multi-speed economy and the European debt
crisis and its likely impact on Australia.
- Political Overview by University of Western Australia Winthrop
Professor and Contributing Editor, The Australian, Professor Peter
van Onselen, examining the potential for leadership challenges and
the likely impact of key policies including the carbon tax, mining
tax, poker machine reforms, the national broadband network and
- Productivity review by Bank of America Merrill Lynch Australia
Chief Economist Saul Eslake examining Australia's productivity
performance over the past decade, the reasoning behind the slowdown
in growth and how to reverse the decline.
- Federal/state financial relations review by CPA Australia
Senior Policy Adviser/Senior Tax Counsel Garry Addison examining
options for tax reform to achieve greater productivity growth.
In summary, key findings include:
- Australia's economic outlook remains positive. However, the
multi-speed economy is likely to again be a dominant feature of the
Australian economy providing challenges as more resources are
pulled to the sectors currently booming.
- In addition, divergent economic conditions across regions are
likely to become more pronounced as mining investment progresses
and consumer caution abates.
- The Australian dollar is expected to moderate, easing some of
the hardship for non mining sectors.
- Forecasts for unemployment and public sector debt suggest
improvements in both these areas.
- Productivity slowing may be a result of cyclical outcomes due
to the nature of Australia's current development and external
conditions rather than structural issues within our economy.
- To achieve surplus commitments, we can expect a tough budget
with shifting of spending commitments to outer years.
- With the Greens now controlling the Senate, this year we are
likely to see the Government focus on bedding down what it has
achieved, rather than embarking on new reforms.
- Both Julia Gillard and Tony Abbott are at risk of challenges to
their leadership. Ongoing speculation around Julia Gillard's
position is likely to have flow on effects for public policy and
business and consumer confidence in 2012. Challengers to Tony
Abbott are more likely to emerge only if they suffer an election
defeat, provided the Coalition's polling remains strong.
- The carbon tax will remain the frontline political issue in
2012. However, other significant policy debates will include poker
machine reforms (a package of reforms is still likely to be
tabled), the rollout of the National Broadband Network, the mining
tax and its revenue forecast, education with the release of the
Gonski Review and asylum seekers.
- Productivity slow-down is partially attributable to the absence
of any productivity-enhancing reforms since the early 2000s.
- Productivity decline since the beginning of the 2000s has been
attributed to the major expansion in the mining and utilities
sectors. However, this investment does not account for the entire
decline in Australia's productivity since the turn of the
- Excluding the mining and utilities sectors, labour productivity
growth in the rest of the market sector has slowed from 3.1 per
cent per annum over the five years to 1999-2000 to 1.3 per cent in
the last five years.
- We need to continue exposing sectors of the economy that have
remained insulated from competitive pressures to greater levels of
scrutiny. This should include service sectors dominated by public
sector agencies such as health care, education, public transport
and law enforcement, private service professions such as law and
medicine and parts of the agricultural and aviation sectors.
- There has been reduced political and business incentive to
focus on productivity-enhancing reforms due to significant growth
in economic activity, employment and household disposable income.
However, business sectors - particularly those adversely impacted
by the mining boom - have renewed focus on productivity.
- If there is not a renewed focus on productivity then it is
likely Australia's economic performance, after the present
resources boom comes to an end, will deteriorate significantly, and
this will impact on the living standards of Australians.
- Australia has dropped from being among world leaders to being
behind the pack in innovation compared to global competitors.
Better targeted investment in skills formation and infrastructure
would contribute to improving productivity.
Federal/State Financial Relations
- Major economic benefits would accrue from eliminating
inefficient state taxes funded by an increase in the GST rate.
- CPA Australia state taxes reform modelling found lifting
the rate to 15 per cent the best option - this would provide a gain
in living standards of $4.7 billion and allow the abolition of 40
per cent of payroll tax and the removal of commercial transfer
duty, insurance duties, the fire insurance levy, motor vehicle duty
and registration fees.
- Any changes to the GST rate would require compensation as part
of the final package.
sponsor of the 2012 EPO: