CEDA Chief Economist Jarrod Ball says the 2021 New South Wales Intergenerational Report (IGR) is a stark reminder of the generational challenges confronting the state over the coming decades.
“Bold new policy ideas to address the state’s ageing population, climate change, geopolitical tensions and the uptake of technology are now critical.”
“As we emerge from the pandemic, governments must prioritise policies that address tax, housing, education and climate to secure higher incomes, better jobs and better services for citizens now and in coming decades.
“With demographic headwinds due to the ageing population, and the pandemic population freeze caused by closed borders, our future growth comes down to productivity – that is, how dynamic our economy is.
“The report is clear that boosting productivity requires reforms on a scale we have not been seen in the last decade at least, such as modernising the tax system and lifting school education outcomes.
“But the long-term dividends are worth it – the report finds lifting productivity by just 0.1 percentage points would deliver the equivalent of $11,000 more annual income per household and reduce the gap between shrinking revenues and growing spending pressures.
“By 2061, the NSW population is projected to be older and around half a million people smaller because of COVID-19 border closures. Migration will therefore be even more critical to lift the working-age population and support the rising costs and healthcare needs of the ageing population.
“Australia must boost its quarantine capacity and speed up the vaccination rollout so we can open our borders sooner than mid-2022.
“Globally, governments are using COVID-19 to reassess their approaches to migration to attract the best and the brightest in a post-pandemic world. Australia will fall behind if it doesn’t start re-calibrating. The fact we did well last year will count for little in the future. This report underlines the fiscal and economic importance of getting this right.
“This report highlights the need for a co-ordinated national effort to address climate change and meet a common goal of net-zero emissions by 2050, rather than the increasingly disparate approaches across states and territories. We hope to see more on this in the upcoming Federal IGR.
“The Federal Government should commit Australia to net-zero by 2050. Fully embracing that commitment as soon as possible, and announcing more ambitious policies to get us there, would build confidence and provide greater certainty to business and the broader community.
“The report shows NSW will need to pull every housing policy lever at its disposal to meet the projected demand of 1.7 million new homes by 2060 or 42,000 homes every year.
“The plan to abolish stamp duty in NSW will help people move into new housing faster, but local councils will need to lift their game on planning approvals and housing density to boost supply.
“The report reinforces that federal and state governments’ fiscal destinies are intertwined – both face growing budget gaps and can only close those gaps and boost the tax base by working together.
“The NSW Government expects to rely more and more on tied federal funding for critical services like health. It will become exceedingly difficult to provide the services the community expects sustainably into the future with the strings attached to tied funding agreements, which inhibit innovation and improved service delivery.
“CEDA has previously recommended abolishing tied funding agreements and replacing them with agreements linking funding to outcomes achieved, rather than inputs or specific processes.
“Australia should also move to a whole-of-federation intergenerational report for National Cabinet. We need an authoritative baseline to examine future spending and revenue trends, and the size of the task for Commonwealth-state tax reform.
“A combined report would also provide a fuller picture of the challenges we face in the decades to come. Having that picture would make the opportunities for reform in areas such as tax more clear.”
For more information, please contact:
Justine Parker, Media Manager and Content Specialist
Roxanne Punton, Director, Communications
CEDA – the Committee for Economic Development of Australia – is an independent, not-for-profit membership organisation.