A national vision for the economy and a renewed round of microeconomic reforms are necessary for strong long-term economic growth, according to Michael Chaney.
A national vision for the economy and a renewed round of microeconomic reforms are necessary for strong long-term economic growth, according to Michael Chaney.
Mr Chaney this week called on the government to take leadership in economic reform, saying tough decisions would need to be made to ensure future economic prosperity.
He said that, with the Western Australian economy growing at a China-like pace and unemployment rates at 30-year lows, now was the time for a new round of reforms.
He also raised a number of concerning signs that the government needed to be conscious of, including the slowdown in productivity growth, the stalling of services and manufacturing exports, and the ongoing trade deficit despite a boom in commodity exports.
“It’s tempting when things are going well to think that this is the new paradigm,” he told this week’s breakfast forum.
“The important thing is to take actions to avoid the boom and bust scenario.”
He identified four key areas of concern that required urgent action: regulation and red tape; taxation; infrastructure; and state-federal relations.
Mr Chaney said that, while regulation was needed to reconcile the needs of both business and the community, the “red tape blow-out” had put a huge drag on the economy.
According to BCA analysis, the amount of new regulation grows at 10 per cent per annum, with economic growth about one-third of that amount.
By the end of the decade, that will equate to roughly 350,000 of new pages of state and federal regulation, up from 33,000 new pages of regulation in 2003.
“Government needs to consult with business about new regulation, conduct cost-benefit analysis and review of what’s in place and throw out what’s not needed,” Mr Chaney said.
He also highlighted the costly and overly complex business tax system, which imposed 51 different taxes on business.
But the fundamental barrier, he said, was federal and state relations, marked by a lack of national vision and coordinated forward planning.
The inefficiencies in Australia’s federal system, particularly evident in areas including regulation, taxation, infrastructure and education, cost more than $9 billion a year.
A BCA report listed 12 recommendations to tackle the problems associated with the federalism, including clarifying roles and responsibilities, and institutionalising coordination between the states by strengthening COAG.
It also suggested holding a federal convention in 2008 so parties can come together and “agree on who should be doing what”.
“We need a national vision,” Mr Chaney said.
“Government needs to put aside politics for the time being and plan for the long term.”
