AARON PATRICK: Jim Chalmers’ moment has arrived. Will he save Australia from economic mediocrity?
The dire outlook should prompt the Treasurer to take drastic steps to turn around the economy, but there’s little faith he has the guts to do what must be done.
Treasurer Jim Chalmers’ moment has arrived. Will he seize it?
His economic advisers concede inflation is out of control. Share markets are heading towards a correction. The Reserve Bank hasn’t ruled out inducing a recession. The battle to revive productivity — the only sure-fire way to improve wealth — has been lost. The birth rate is falling. Government debt rises and rises. Unemployment is going up.
Australia stands at a crossroads: persist with economic mediocrity or unleash the nation’s potential.
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By continuing you agree to our Terms and Privacy Policy.Dr Chalmers has 54 days until he presents the 2027 Budget in the House of Representatives. He can use that precious time to persuade his colleagues, especially Anthony Albanese, that folksy devotee of bigger government, to embrace the serious and difficult task of economic reform.
In a speech Monday, to an economists’ group in Melbourne, the treasurer had shocking news — exactly the type of revelations that his political hero, Paul Keating, used in the 1980s and ‘90s to galvanise the political class into action.
The federal Treasury now predicts it will take until the next decade for productivity growth — a crucial measure of economic efficiency — to reach a paltry 1.2 per cent a year.
Although the figure sounds abstract, it is the key to a better Australia. Unless the nation learns how to produce more with less, it faces a future of mediocrity. Taxes will rise. Business will suffer. The ambitious will move overseas. Australia will become the home of choice for seekers of generous welfare and good weather.
Promises
Dr Chalmers understands the problem. That’s why, since the 2025 election, he has repeatedly promised an “ambitious and substantial productivity agenda”.
On Thursday, revealing the oil shock will cost the economy $10 billion to $20 billion a year, the Treasurer reiterated the need for a new wave of economic reform.
“Let me be blunt,” he said. “Before this war, inflation was already too high. Productivity growth had been too weak for two decades.”
”Developments in the Middle East make addressing these three challenges even more urgent, not less. This conflict is not the only major challenge we face in our economy, but it exacerbates the others.
Dr Chalmers made three broad promises: budget cuts, changes to taxation and a “productivity and investment package”.
Investments?
The Treasurer’s credibility on cutting spending has been damaged by repeated, false claims the government has “saved” $114 billion since 2022. In reality, it increased spending by $140 billion. The $114 billion is mostly money shifted around.
On tax, the government looks likely to raise more. While welcome from the perspective of balancing the budget, tax rises would not be necessary without the historic government expansion under Mr Albanese.
By adding the word “investment” to productivity, Dr Chalmers may be signalling extra money will be spent under the guise of economic reform. There is no pressure group, from actors to anaesthetists, that does not claim a share of the public’s money in the national interest. They never call it spending. It is always investment.
The unfortunate reality is that making Australia wealthier requires withdrawing government-bestowed benefits from interest groups, rather than giving more to them.
Changing the future
There is no simple solution. But answers aren’t difficult to find either. Over the decades experts have come up with hundreds of ideas. They require political courage. No one wants to work harder, receive fewer benefits, or be exposed to more risk.
Yet lower business taxes, less workplace regulation, smaller government and more competition will benefit all, including the unfortunate few who will always be dependent on the state.
Now Dr Chalmers has told Australians to brace for high petrol prices, persistent inflation and stagnant living standards, will he change the future? If not now, when?
Australians will find out in eight weeks. The Treasurer’s record suggests a new, Keating-like commitment to daring policy is unlikely.
Three weeks into the war, Australians are already worried and uncertain about the future. Dr Chalmers will be able to rely on a reassuring bedside manner for only so long. Eventually, reality catches up to rhetoric.
If he can’t save Australia, how can he ever claim to be worthy of leading the nation?
