26 August 2016
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Treasurer Scott Morrison has outlined where he wants to steer the Australian economy through this term of parliament. So what are the risks and does the Treasurer’s plan stack up?
Mr Morrison has emphasised Australia’s growing mountain of debt and warned against economic complacency after 25 years of uninterrupted growth.
Some economic experts say there have never been more threats facing the economy.
“We need to have knowledge jobs, a knowledge economy, to provide services - that's where the best opportunity for Australia's competitiveness lies.
“There are a huge range of potential external shocks – there always are in the world but they’re probably more heightened now than they’ve ever been,” Urbis chief economist Nicki Hutley said.
In Thursday’s Bloomberg address Mr Morrison also expressed his concern.
“I do not want my kids to know what a recession is like, and everything that goes along with that,” he said.
“I’m sure no one else does either.”
Mr Morrison outlined three key problems – first and foremost the Government’s debt of around $430 billion (with interest payments at $16 billion this year alone), as well as low wages and not enough foreign investment.
He warned Government debt could grow to $1 trillion within a decade if the budget is not repaired.
“Once that debt fully takes hold, it will build its own momentum and will only grow more difficult to tame,” he said.
Independent economist Saul’s Eslake told ABC’s PM program if any of the scenarios put forward by the Treasurer during his speech were allowed to continue.
“Australia’s capacity to respond efficiently to any of the risks or threats he pointed to as potentially being on the horizon would be much diminished.
“Therefore the risk that Australia would be unable to forestall a recession in our own economy would be much greater.”
Mr Eslake said getting the Treasurer’s economic plan through to fruition was “a bit problematic”.
“The Government says it expects Labor to engage on expenditure savings they have habitually blocked … whilst at the same time refusing to engage with Labor on revenue measures which the coalition in government has previously blocked.”
Given the challenges the coalition has getting legislation through, Mr Eslake argued the Coalition should be flexible in its approach to getting important economic policies through the parliament.
“While I understand that it’s probably a bridge too far for the Government to consider Labor’s proposals in relation to negative gearing, it doesn’t seem to me to be unreasonable for the Government to contemplate some of the measures Labor proposed with regards to the capital gains discount, for example, which even the property industry has acknowledged is worthy of at least some consideration.”
Ms Hutley said if Mr Morrison wants to bring the nation with him, he should take a few moves out of Labor’s playbook when it comes to focusing on the dividends through investment in education.
“That is absolutely critical to the long-term health of our economy,” she said.
“We need to have knowledge jobs, a knowledge economy, to provide services – that’s where the best opportunity for Australia’s competitiveness lies.
“And if we have a competitive and strong economy that will help get the budget back into surplus.”