As pens and notepads were being laid out for start of the much-touted economic roundtable on Monday, the chair of the Productivity Commission, Danielle Wood, made a number of dark observations in an address to the National Press Club.
People in their 30s today, Wood told us, are the first generation to be worse off than those born in the previous decade in terms of earnings, housing affordability, budget burden and climate impacts. Her comments laid bare how important reform of so many aspects of the economy and regulation are if this situation is to change.
The flipside of the situation facing millennials is the largesse that has been laid out for the boomers, such as tax breaks on housing and superannuation that benefit those with already substantial resources but add to the tax burden of lower-income households who can’t get their foot in even one door. Quite obviously, not every boomer in Australia is sitting back with multiple investment properties and a multimillion-dollar super balance. But boomers were three times more likely to own their own home in their 30s than their counterparts today are.
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And so, while millennials cry out for change, boomers resist even reasonable adaptation such as the removal of tax exemptions on super balances over $3m or phasing out negative gearing.
And it’s not just millennials v boomers. Before seats had been taken at the roundtable, business and unions were firing off at each other over issues such as working from home, work week length and AI adoption. Then add to all that the intense bipartisanship we now see in politics and it’s a wonder anyone sat down together at all.
And this is the rub. When it comes to policy decisions, too many are too quick to focus on what’s in it for them instead of what is best for society as a whole. So, if we make housing more affordable for younger generations, those who are already on the housing merry-go-round cry “unfair”. Increased density proposals are met with cries of “Not in my back yard!”
If we set much-needed strong climate targets to contribute to reducing the horror show of unnatural disasters that have already become much more frequent, and encouraging investment in green industries, then a narrow segment of vested interests (mainly fossil fuel polluters) focus only on the jobs that will be lost. They conveniently ignore the many more green jobs that will be created, not to mention the vast costs from failure to act imposed on individuals, the economy and the budget bottom line each time these exacerbated disasters unfold.
We cannot deny that some policies, even as they contribute to national wellbeing overall, come with a cost to specific sectors or regions or even individuals.
The go-to book in Canberra at the moment is Abundance, written by two American journalists, and described by the treasurer as “a ripper”. Much of the book is devoted to the costs associated with trying to keep everybody happy, but ultimately only delivering increased regulation that leaves us all worse off.
And the Abundance authors are perhaps right in saying we have moved too far in the direction of trying to prevent every possible loss at the expense of collective societal gain. (The authors are also silent on the deliberate spread of disinformation around supposed harms which also create barriers to progress. Think of the nonsense around whales and windfarms).
Much like the Abundance authors, Wood says: “Ministers should always weigh up the impacts of new policies on economic growth and productivity.” This is true, particularly when it comes to “regulatory burden”. (As an aside, it’s worth noting that for all the hype about “red tape” – and there certainly are complex and duplicative processes facing business – Australia rates very highly by international standards in terms of regulatory quality. On one measure at least, we are second only to Singapore).
But I’m not entirely convinced that a “growth mindset”, to use another current Canberra buzz phrase, doesn’t risk throwing the baby out with the bathwater. If we only look at policy from the overarching perspective of growth and productivity, as important as these are, then we overlook other important considerations and by doing so add fuel to the “us and them” fire. And that makes building a widespread consensus of support extremely difficult.
The most critical of these considerations is distributional impacts. Inevitably, big policy reforms will rarely deliver a “win” for everyone. But instead of pretending this is not the case, governments should be upfront both around the challenges and how they intend to address the impacts on those who may be disproportionately disadvantaged and unable to adjust without support.
For example, when we introduced a carbon price scheme in Australia in 2012, widespread compensation was designed for trade-exposed industries and low-income households. When the costly support for the domestic car industry was finally removed, state and federal governments brought in a raft of programs to support workers and businesses in the supply chain. Such solutions may not be perfect but without them we are doomed to be stuck in an economy and society that delivers worse results for successive generations. Surely, we have had enough of that.
The two defining crises of Australia today, I believe, are housing affordability and climate change. Required policies on both fronts involve trade-offs for some individuals, while delivering overall benefits to society. Let’s stop the “us and them”, “winners and losers” mentality and focus on planning for solutions such as density done well, credible biodiversity management schemes and regional economic development.
Instead of placing barriers to reforms with a narrow, vested-interest mindset, I hope those at the roundtable discussions this week will focus on what is best for all of us. And, if it helps, keep the situation facing today’s 30-year-olds in sharp focus and let that not be your legacy.