"The IGR shows that we must continue to lift productivity growth, the fundamental driver of our long-term prosperity and living standards,” the Treasurer said at this morning's CEDA event in Melbourne.
“Australia has no alternative but to pursue economic reform, much of which is hard and contested. The recipe for reform is unlikely to be as it was in the past.”
While previous productivity booms were based on “big bang” reforms, future improvements will be based on “incremental” reforms, such as those made in recent years in areas like superannuation and the mutual recognition of occupational licenses, Mr Frydenberg said.
“You can’t float the dollar twice,” he said. “Increasingly, reform is likely to be more incremental.
“That’s my focus. That is the focus of the Morrison government.”
Mr Frydenberg also highlighted that fiscal discipline and a “well-targeted, skills-focussed" migration program will be pivotal to Australia’s prosperity in the decades to come.
“[The IGR] also clearly demonstrates the need for ongoing fiscal discipline even as we continue to navigate the challenges caused by the COVID crisis. This will ensure we can continue to fund the growing cost of essential services, such as health and aged care, as our population continues to age.”
Mr Frydenberg called the slowdown of population growth the pandemic’s “most enduring economic effect”. The projection of reaching 40 million by 2054-55 – outlined in the last IGR, released in 2015 – is now not expected to happen until sometime after 2061.
"This is the first time there has been a downward revision of the population forecast in an IGR.
“This means the economy will be smaller and Australia’s population will be older than it otherwise would have been, with flow-on implications for our economic and fiscal outcomes.”
Falling fertility rates mean migration will be the driver of population in coming decades, he said.
“A well-targeted, skills-focussed migration program can supplement our stock of working age people, slow the transition to an older population and improve Australia’s economic and fiscal outlook.”
The report also looks at the impact of Australia’s aging population, which it calls the “biggest demographic transition of the last century”.
“Many baby boomers are reaching retirement right now. This is contributing to a rapid change in the ratio of working-age people to those over 65. In 1981-82, for each person aged over 65, there were 6.6 people of working age. Today, there are four to one. By 2060-61, there will only be 2.7 to one.
This shift will have “profound” impacts on our economy, the Treasurer said, and “only by growing the economy can we continue to guarantee the essential services that Australians rely upon”.
On the repaying of debt, which has ballooned during the pandemic, the Treasurer said: “Growing the economy is Australia’s pathway to economic repair, not austerity.”
Intergeneration reports are released by the Federal Government every five years and highlight long-term trends in the economy and help lay out a path to future prosperity over the next four decades.
“This intergenerational report depicts Australia well beyond COVID-19,” the Treasurer said.
“Responsible governments must always have an eye to the future. That is why the IGR matters.
“The IGR does not give us a fixed picture of our fate. Instead, it provides us with guard rails to help guide for future government decisions. To set us up for tomorrow, as we tackle the challenges of today.”