6 steps to jumpstarting Australian growth
The Australian Institute of Company Directors (AICD) last week released its latest Blueprint for Growth, a comprehensive plan to help boost productivity. With economic problems mounting, it is time to stop tinkering around the edges and get serious about reform, argues AICD Chief Economist Stephen Walters MAICD.
With the wages of the average Australian showing no significant growth, many young people locked out of the housing market and the Federal budget in persistent deficit, the national discussion around policy reform is as important as it’s ever been.
The Australian Institute of Company Directors (AICD) recently launched a reform agenda to start to address these issues. The AICD believes that urgent action is needed on national reforms to drive long-term growth and prosperity for all Australians. The focus of the program is on the measures required to lift productivity, one of the few drivers of long term improvement in national living standards.
Governance of the Nation: A Blueprint for Growth recommends national policy reforms that should deliver real benefits and longer-term focus for national policy making.
Importantly, this is not a job for government alone. The Blueprint explicitly recognises the vital role that the private sector – and directors and boards, in particular – must play to drive reform and boost productivity. For too long, the private sector has left the heavy lifting to government. The regrettably partisan nature of modern politics, however, has made achievement of crucial national goals all but impossible.
In launching the Blueprint, our chairman, Elizabeth Proust AO, neatly summarised the worrying policy inertia that has beset Australia. “It’s time to stop tinkering around the edges and deliver a real plan for our future,” she said.
It is particularly important to take bold policy action to address Australia’s unsustainable financial position. Our deficit is $36 billion and Commonwealth spending is currently set to remain at above 25% of GDP over the next four years. It is clear now that we have both a spending and a revenue problem. It’s time to tackle both, with targeted spending restraint on the one hand, and comprehensive tax reform on the other.
The AICD’s Blueprint sets out a plan for long-term growth with recommendations in six areas.
- Reforming national governance, calling for fixed, four-year terms for the federal government, reforms to the Council of Australian Governments process and leadership from Australian directors in governance standards and practice. All-important cooperation between the state and federal government via COAG has become close to dysfunctional, and needs wholesale reform.
- Fiscal sustainability, calling for spending reforms to return government expenditure as a percentage of GDP to pre-GFC levels, and tax reform to promote economic growth, improve fairness and increase competitiveness. A change in the tax mix from inefficient direct taxes is recommended, supported by a lift in the GST rate (with compensation), and a broadening of the tax base. The revenue raised would allow company and personal tax rates to be lowered, and negative gearing and the capital gains tax discount to be reviewed. The proposed reforms also would allow states to be incentivised to reform inefficient state taxes like stamp duties, which are among the least efficient in the federation.
- Innovation and entrepreneurialism, calling for a pushback against protectionism in all its forms, review of regulatory settings that encourage risk aversion and increased engagement between business, government and academia. Some progress has been made in areas like expanded safe harbour reforms, but much more needs to be done.
- Partnership with not-for-profits, calling for five-year funding cycles for the NFP sector and national harmonisation in NFP regulations, such as fundraising.
- Human capital, calling for an increase in female participation, industrial relations reform, and a national focus on skills training and education. Our education system needs to be fit for purpose, able to produce talented graduates skilled for the jobs of the future, not those of the past.
- National infrastructure, calling for a 15-year infrastructure plan with project reporting, benchmarking and governance, increased use of ‘good’ debt to fund productive infrastructure, and greater use of private sector funding models. We are not calling for the wheel to be reinvented, but for existing resources and institutional arrangements to be better utilised.
The AICD recognises that the prospects for achieving meaningful reform in the current contested state of politics is a greater challenge than ever before. But we believe that a time like this calls for informed advocates of change to progress the arguments for reform, not shrink into the background and remain silent.
The AICD regularly runs courses and events for directors, aspiring directors and executives, covering governance and business best practice. Click here to see our upcoming courses in Western Australia.