EDITORIAL: Lazy reform can’t solve productivity puzzle

New financial year, new reinvigorated economy?

There’s been precious little cause for economic optimism in recent years. Runaway inflation and skyrocketing interest rates heaps pressure on households, while the threat of a global trade war had businesses on edge.

But looking back over the 2025 financial year show’s there is plenty for the glass half-full types to celebrate.

Contrary to warnings about a potential recession, the share market rose 10 per cent across the past 12 months. House prices rose 5.6 per cent.

In May, unemployment was just 4.1 per cent and the inflation dragon had finally been slayed, slowing to just 2.1 per cent.

After a long hard slog — which included a punishing 21-month per capita recession — Australia was finally getting its groove back.

And there are promising signs that the benefits are already flowing through to households.

According to data from NAB, the number of the number of consumers reporting “very high” stress fell to a three-and-a-half-year low in the June quarter, helped along by steady inflation and falling interest rates, with the expectation of more cuts to come.

That’s giving consumers the confidence to spend again: Australian Bureau of Statistics data out on Friday showed household spending ticked up 0.9 per cent to over $76 billion in May.

Consumers spent 3.7 per cent more on clothing and footwear, along with strong results in transport and eating out, pushing discretionary spending up 1.1 per cent.

All four of the big banks expect Reserve Bank governor Michele Bullock to announce another rate cut after next Tuesday’s board meeting, which would give households another reason to relax.

We’re not out of the woods yet. While optimism is bubbling back, there’s still the significant matter of Australia’s productivity collapse.

Unless we can find ways to shake off the malaise, the same old problems will come back to bite.

The Labor Government is spruiking its economic roundtable set down for August as a solution to this productivity puzzle.

Businesses are keen it doesn’t become a repeat of the Jobs and Skills summit back in 2022, which the Government used as a launchpad for productivity-killing, union-approved industrial relations policies.

Laying out his economic agenda on Friday, Anthony Albanese said he wanted to build broad support for “substantive economic reform”, with no topic off-limits.

On the face of it, that sounds positive. There’s no escaping that the economy is in need of sensible reform. But it needs to be the right type of reform: focused on cutting red tape and providing incentives to businesses to invest.

Lazy, punitive reform, such as the Government’s plan to tax unrealised capital gains on superannuation balances greater than $3 million, only serve as an assault on aspiration and send us all backwards.

We need a fair system in which the vulnerable are cared for and effort is rewarded for the prosperity of all Australians.

Responsibility for the editorial comment is taken by Editor-in-Chief Christopher Dore.