DIMITRI BURSHTEIN & PETER SWAN: Australia doesn’t need lectures from OECD on how to run its economy

The OECD’s latest Economic Survey of Australia opens with praise: “Australia enjoys high living standards, strong institutions, and enviable human capital”.

The survey notes that Australia’s economy is “normalising” after pandemic turbulence. But having dispensed compliments, the report quickly turns to instruction. Australia must raise taxes, expand regulation, intensify competition enforcement, accelerate its energy transition, and reshape its housing and fiscal systems.

This advice is presented as neutral, technocratic, and evidence based. It is nothing of the sort. It is Europe, ageing, slow-growing, and debt-laden, talking down to a country whose geography, demography, economy, and institutions bear little resemblance to its own.

The OECD styles itself as a global arbiter of best practice. In reality, it is a Paris-based institution steeped in European assumptions about the role of the state, the desirability of high taxation, and a requirement for complex regulation.

These assumptions are rarely made explicit. They are treated as self-evident truths, exported wholesale to countries that do not share Europe’s constraints or its failures.

Consider the fiscal narrative. Australia is chastised for running budget deficits and urged to “improve the efficiency of the tax system”, a familiar euphemism for shifting the burden from income to consumption, property, wealth, and environmental taxes.

The report highlights Australia’s comparatively low GST rate and reliance on direct taxation, implying that higher and broader consumption taxes are inevitable and desirable.

This is classic European advice: tax more, redistribute more, and trust that growth will somehow follow. Yet Europe itself offers little evidence that this model delivers prosperity.

Public debt across much of Europe exceeds 100 per cent of GDP. Productivity growth has been anaemic for decades. Its labour markets remain rigid, and youth unemployment stubbornly high. And its political systems are constrained by the fiscal and social costs of expansive welfare states.

Australia, by contrast, enters this discussion with a growing but manageable public debt, a marginally more flexible labour market, population growth, and deeper integration with the fastest-growing region in the world. It is not obvious why Australia should converge toward a policy framework that has failed to deliver prosperity where it originated.

This same reflex is evident in housing policy. The OECD correctly diagnoses Australia’s housing affordability problem: constrained supply, fragmented planning, and poor construction productivity. But the remedies lean heavily toward greater public provision, more regulation, and a larger role for social housing, again reflecting European norms.

Missing is serious engagement with Australia’s unique geography and urban form. Australia has the lowest population density in the OECD, a high preference for detached housing, and cities shaped by vast distances rather than medieval street plans.

European solutions of densification mandates, social housing quotas, and centralised planning do not transplant easily and often entrench the very barriers to supply they purport to solve.

Climate and energy policy reveal the same pattern. The OECD acknowledges Australia’s progress in reducing emissions and expanding renewables yet insists that “further efforts” are required including through higher fuel taxes and broader environmental taxes.

This advice shows scant recognition of Australia’s circumstances: long transport distances, a resource-heavy export base, abundant fossil fuels, no nuclear power, limited hydro, and an electricity grid already struggling with intermittency.

There is irony that Europe, grappling with its own energy insecurity issues stemming from premature baseload retirement, is urging Australia to move faster down the same path.

Most telling is the OECD’s diagnosis of competition. The survey laments rising concentration, higher mark-ups, and declining business dynamism, recommending tougher merger control, greater regulatory harmonisation, and stronger enforcement.

Yet it also acknowledges Australia’s “unusual challenges”: distance from global markets, low population density, and small domestic scale.

These are not market failures to be regulated away; they are structural realities. Europe’s competition successes, where they exist, rely on dense populations, integrated markets, and short distances. Applying the same template to Australia confuses scale with abuse and concentration with inefficiency.

None of this is to deny Australia’s problems. Productivity growth has atrophied. Housing affordability is acute. Fiscal pressures will rise with ageing. But the solution is not to import a European policy package whose results, even on their own terms, are increasingly disappointing.

What the OECD mistakes for “best practice” is often merely European practice. Uniformity is confused with effectiveness. Convergence is treated as progress.

Australia’s comparative advantage has long rested on adaptability, openness, institutional flexibility, and a lighter regulatory footprint than many peers.

Many current problems come from implementing European style policies. Doubling down will make matters worse, not better. Australia should be wary of advice that would trade its strengths for a model struggling to sustain growth, fiscal balance, and social cohesion.

Before Europe lectures Australia on how to run its economy, it might reflect on its own outcomes. A country with higher living standards, strong but weakening institutions, and deeper ties to Asia does not need to be remade in Europe’s image.

It needs policies grounded in its own realities, not the preferences of a bureaucratic, economically sclerotic, and increasingly geostrategically peripheral empire.

Dimitri Burshtein is a senior director at Eminence Advisory.

Peter Swan is professor of finance at the UNSW-Sydney Business School.