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Treasurer Jim Chalmers will unveil Australia's seventh Intergenerational Report on Monday, offering a portrait of the nation in 2066, 40 years from now.
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Chalmers → publish → 2066
In fact, they have a mixed record when it comes to making long-term predictions.
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it → have → predictions
That said, they are a useful tool to force politicians to think about how their short-term decision-making can have long term consequences for the country.
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making → say → country
Without productivity growth, meaning producing more value for each hour worked, almost every political promise becomes a mirage that quickly fades away.
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that → produce → hour
Peter Costello's 2002 report offered a stark warning.
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report → offer → warning
The 20-year projection for the economy's total size was almost exactly right, but only because net overseas migration has been roughly double what was forecast and workforce participation surged.
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participation → forecast → size
Productivity growth was dramatically weaker than expected.
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growth → expect → ?
Australia became larger by adding bodies and hours, not by getting better at producing things.
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Australia → become → things
Consequently, GDP per person fell roughly 10 per cent short of Costello's projections.
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GDP → fall → projections
The latest national accounts show the same pattern is happening again.
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pattern → show → ?
The economy grew by 0.4 per cent in the June quarter, but GDP per person flatlined, real disposable income per person fell by 0.4 per cent, and output per hour was lower than a year earlier.
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output → grow → hour
This is why people's lived experiences are very different to the numbers politicians use to claim all is well.
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all → live → numbers
Treasurer Jim Chalmers will unveil Australia's seventh Intergenerational Report on Monday
According to the Productivity Commission, Australia's productivity is barely one per cent above its 2015-19 average.
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productivity → unveil → average
In the non-market sector, it has fallen below 2007 levels.
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it → fall → levels
Three years ago, Treasury cut its long-run productivity assumption from 1.5 to 1.2 per cent, a seemingly small shift, but it wiped 9.5 per cent off the projected size of the economy for 2063.
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it → cut → 2063
Now, Chalmers faces an uncomfortable choice: Retain the 1.2 per cent assumption, and the projections rely on a sharp productivity recovery Labor hasn't delivered.
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Labor → face → recovery
Lower it, and he admits future incomes and government finances will be weaker than forecast.
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incomes → lower → it
Chalmers recently warned Labor MPs that the Coalition would weaponise the report, which they no doubt will.
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they → warn → report
But he's worrying about the wrong political opponent.
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he → worry → opponent
With the Coalition polling at just 19 per cent and One Nation surging to 30 per cent, Labor's real danger is that Pauline Hanson's team uses more bad news to build (or consolidate) support.
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team → poll → support
Internal anxiety is mounting amongst Labor MPs over the plight of falling living standards, struggling small businesses and looming interest rate hikes expected before the end of this year.
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anxiety → mount → year
When Labor royalty such as Bill Kelty and Kevin Rudd warn of falling real wages and a slide into second rate status as a nation, their concerns can't be dismissed as Coalition talking points.
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concerns → warn → points
The 2002 report by then-Treasurer Peter Costello was almost exactly right with its 20-year projection for the Australian economy's total size
External shocks such as the Middle East conflict are real, we know that.
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we → know → that
But they don't excuse domestic policy failures.
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they → excuse → failures
Chalmers boasts that Australia's public debt is lower than many other major advanced economies around the world.
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debt → boast → world
We also currently have a $31.5billion deficit, more than $1trillion of gross debt which we have to pay interest on, and there are no signs of a return to surplus for a decade or more.
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we → have → decade
Chalmers will use the report to claim that gross debt in the early 2060s will be hundreds of billions of dollars lower than previously forecast.
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debt → use → dollars
But this is not money Labor has banked.
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Labor → bank → ?
It is the difference between two Treasury projections stretching almost four decades into the future.
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It → stretch → future
The fact that the estimate has shifted by more than $500billion in just three years reveals how sensitive these forecasts are to changes in assumptions, not how certain the improvement is.
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improvement → shift → assumptions
The more optimistic number depends on future governments maintaining spending restraint, delivering difficult NDIS savings and producing economic growth strong enough to prevent continuing deficits from driving debt higher as a share of GDP.
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governments → depend → GDP
History suggests some humility is required.
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humility → suggest → ?
But Australia has endured several significant global events since the last report, including the Covid pandemic.
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Australia → endure → pandemic
Pictured people wearing masks line up in Melbourne during a lockdown
Since Costello released the first report in 2002, Australia has endured a global financial crisis, a pandemic and repeated spending blowouts that no 40-year model anticipated.
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model → picture → that
Gross debt has now passed $1trillion.
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debt → pass → 1trillion
Presenting a favourable projection for 2062 as an achievement today is wishful accounting masquerading as fiscal repair.
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Presenting → present → repair
It's just political spin that's unlikely to ever happen, but Chalmers and others will be long gone by then, so they won't be held accountable for the failure.
Chalmers argues that modern productivity requires many small reforms rather than another Hawke-Keating style reforming revolution
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productivity → happen → revolution
But small changes only work if they move in the right direction.
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they → work → direction
Labor's promised regulatory savings are swallowed up by complex workplace laws, higher government spending and expanding subsidies that make it harder to invest and employ in this country.
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it → promise → country
As UNSW professor of economics Richard Holden, who is also my co-author on our forthcoming book The Lost Decade, puts it: 'The government has thrown sand in the gears of the industrial relations system'.
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government → put → system
…and 14 more, not listed.
The Aporia
