Economy

Appetite for reform must be reignited

Read CEDA Chief Executive's opinion piece on economic reform published in The Australian on Thursday 16 February 2012.

Julia, Tony. Don't you get it? This year presents a key turning point for our economy - if we are to insulate Australia from future economic downturns and international shocks then the political and public appetite for reform must be reignited. What Australia demands is positive, long-term policies in the nation's interest.  What Australia demands is leadership.

So far, Australia has been relatively unscathed by the economic turmoil affecting much of the rest of the world. We are fortunate to have a booming mining sector, high terms of trade and commodity prices, the likes of which we have never seen, and a geographic position that places us in the economic powerhouse of the world - Asia.

However, there are signs that Australia will undergo a fundamental economic restructure in the next few years that will see a significant change to key market sectors - far beyond the changes we have witnessed of late.

This is largely due to substantial changes required to generate real productivity reforms, the continuing high value of our currency, households continuing to save rather than spend, and questions around the future of Australia's manufacturing, retailing and tourism sectors.

While change is important to ensure our economy remains robust, it must coincide with economic reform to ensure our regulatory frameworks and systems keep pace.

Concern around the productivity agenda and the future structure of the Australian economy has been gaining momentum in the business community for some time.  This is only going to increase with industrial relations remaining topical - even though it is only one contributing factor - and significant job cuts announced in sectors such as vehicle manufacturing, banking and telecommunications.

However, we are yet to see any commitment from our political leaders, at either state or federal level, to properly examine this issue and deliver solutions. Frankly leadership tensions and blaming the carbon tax for every ill befalling Australia is a sideshow. To paraphrase, it's the economy stupids.

Today the 30th edition of CEDA's annual Economic and Political Overview (EPO) publication is being released in Sydney. It highlights that while the economic reforms of the 80s and 90s have ensured that Australia has been able to capitalise on opportunities such as the China boom and also weather international economic turmoil, there has been a hiatus from the difficult reform decisions - for more than a decade - that are necessary to ensure our continued strong position.

Many announcements and commitments in the last decade have been depicted as economic reform but in reality these have not delivered genuine changes that enhance Australia's productivity to the level we need.    CEDA commends the work of both the Productivity Commission and COAG Reform Council in this regard, and pleads with government to embrace their recommendations.

Sadly we seem to be stuck in a "my surplus is bigger than your surplus" contest when what we need is a bipartisan agreement from all sides of politics to get on with economic reform.

Urgent reforms include removing inefficient taxes and improving the regulatory environment, which will allow industry and households to respond and adapt to economic events as they emerge.

We also need to properly examine the social economic cost of the significant changes occurring in the structure of our workforce. As some industries, such as manufacturing, diminish, or practices to meet skills shortages are expanded, we need to pursue the most economically sound options rather than the easiest.

And finally, we need to continue exposing sectors of the economy that have remained insulated from competitive pressures to greater levels of scrutiny.

As highlighted in the EPO, 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.

By doing this we will ensure these sectors are more able to adapt or innovate in response to market pressures.

Without action Australia will be increasingly vulnerable to international economic conditions. Given what has occurred in the last few years, it should be obvious to all this is a situation we must avoid.

Professor the Hon Stephen Martin
Chief Executive, CEDA

As published in The Australian on Thursday 16 February 2012.

Media release
EPO publication summary
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