Opinion article

Economic reform as a result of crisis is not what we need: Professor the Hon. Stephen Martin

Political capital and courage is what Australia desperately needs right now as economic conditions tighten.

However with the Federal Government apparently intent on continuing the same narrative on a Budget perceived as unfair and even post-Abbott leadership near-death experience, the outlook is not good.

There is little doubt that business and the community at large expected the change of government in 2013 to provide stability and some policy certainty and boldness beyond its three catch-phrases. Unfortunately we’ve had more of the same.

In this sense it is about the message and to a lesser degree the messenger, although conflicting statements from senior Ministers have not helped. Policy decisions have lacked evidenced- based reform that will deliver real and long-term benefits to our economy but rather have been seen as surprises for which the community had not been primed.

Current economic indicators aren’t great. On the back of falling terms of trade post the mining boom and an increasing rate of decline in resources investment, it is likely that GDP growth will remain below average in 2015. Unemployment is tipped to keep rising as it has for the past three years, perhaps even touching seven per cent.

The RBA’s decision last week to cut interest rates was not a generous post-Christmas gift but suggests they are very concerned about our current economic climate.

As the economy continues to tighten the importance of implementing smart reforms becomes ever more vital because without it there may well be serious ramifications for the living standards of Australians.

Following the Abbott Government leadership circus on Monday it would have been reasonable to expect a change in tact on the Budget conversation, but that hasn’t happened.

Key areas that should be on the table such as broadening or increasing the GST as part of a genuine consideration of taxation reform have already been ruled out by the Prime Minister in this term. By the way, where is the Taxation White Paper discussion paper Joe?

While the Medicare co-payment has been pursued notwithstanding strident opposition from the community, reforms to the Pharmaceutical Benefits Scheme to reduce ineffective subsidies and over-pricing of drugs that could potentially save billions of dollars don’t appear to get any air.

Similarly it will be interesting to see what action the Government takes following the Senate inquiry in corporate tax avoidance due to report by June.

Superannuation tax concessions that primarily benefit the wealthy is another example. The list goes on.

A serious discussion on improving the Budget underlying structural weakness is required that recognises as the old proverb says, there is more than one to skin a cat. Seeking a solution that relies solely on attacking the expenditure side is short-sighted and fails to recognise community expectations. 

To be fair, Treasurer Joe Hockey is right when he says we need to live within our means, but how we do that is what needs greater debate and discussion.

With its second Budget rapidly approaching the Abbott Government needs to seriously examine its policy agenda, because to date they’ve made little head way and we don’t want economic reform as a result of crisis.

Professor the Hon. Stephen Martin is Chief Executive of the Committee for Economic Development of Australia (CEDA). The CEDA 2015 Economic and Political Overview publication is being launched in Sydney today (13 February 2015). Watch free live stream of the event, starting at 9.45am (AEDT) with a keynote address by NSW Premier Mike Baird (1pm).

CEDA’s EPO, which has been produced annually for more than 30 years, provides analysis and discussion from leading economic, political and academic analysts on key issues that will have a significant impact on Australia in 2015.

Download the 2015 EPO publication (pdf)

View the 2015 EPO publication as e-book

The launch event will be followed by a series of events being held in Brisbane, Hobart, Adelaide, Canberra, Townsville, Melbourne, Perth and Darwin.

About the authors

Stephen Martin

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Professor the Hon. Stephen Martin
Chief Executive, CEDA

Professor the Hon. Stephen Martin has had a long and distinguished background in the Australian Parliament, academia and the private sector.

Read more about Professor the Hon. Stephen Martin.

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