Australian Labor MPs are growing increasingly uneasy about the prospect of further interest rate rises and stagnant living standards, as Treasurer Jim Chalmers prepares the party for a Treasury report expected to expose the country’s long-term economic challenges.
Chalmers held a private briefing with colleagues ahead of Monday’s release of the first intergenerational report in three years. The discussion focused on the Government’s economic strategy, productivity and the political consequences of a possible rise in rates to 4.6 per cent on September 29.
The report will examine economic and social trends over the next 40 years and is expected to intensify scrutiny of Labor’s fiscal programme. Chalmers told MPs that the Coalition would use its findings to portray Australia’s future prosperity in a bleak light, while arguing that the country remained better placed than comparable democracies.
In question time, the Treasurer said Australia had a lower debt burden than “every major advanced economy”. He also said the continuing war in the Middle East was weighing on global growth and that its end “can’t come soon enough”.
Chalmers told the smaller economic policy group that modern productivity improvements would come through a series of incremental reforms rather than the sweeping changes associated with the last century, according to Labor MPs who attended the meeting.
However, the argument has failed to reassure a small but growing group of Labor MPs, including some ministers and a larger number of backbenchers, who are concerned about the Government’s handling of inflation, business conditions and productivity.
One MP said comparisons with countries such as the United Kingdom and Japan risked appearing to justify Australia’s economic decline. The MP referred to former prime minister Kevin Rudd’s warning that Australia could become a second-rate country.
Another MP said the Government had relied too heavily on cost-of-living measures which, they argued, had added to inflationary pressure and made Labor more vulnerable to criticism when rates rose.
“The only way through this is serious tax reform, reducing regulation, restructuring corporate tax to improve investment, and making it easier for small businesses without filling out a million forms,” the MP said, expressing concern that ministers did not fully understand how markets worked.
A third Labor MP said small businesses were struggling and that the Government had done too little to support them beyond an instant asset write-off.
“People are getting quite worried. Small business is doing it very tough and we aren’t doing enough for them. We’ve done an instant asset write-off but not much more, and we’re making enemies with the CGT changes,” the MP said.
None of the MPs who raised concerns was prepared to speak publicly. Labor backbencher Ed Husic has previously said MPs who speak out can be punished, meaning those seeking changes have generally favoured a quieter and more collaborative approach.
Several MPs nevertheless welcomed Chalmers’ willingness to engage with their concerns. They also expressed hope that Labor’s housing measures would improve affordability over the longer term.
Prime Minister Anthony Albanese told caucus members that voters understood the Government was trying to make a difference, including through changes to property tax concessions. “People get that we are trying to make a difference,” he said.
The comments came after former union leader Bill Kelty criticised Labor’s economic direction, arguing that flat wages were contributing to support for One Nation. He also said it was insulting for Labor to welcome falling house prices while real wages were going backwards.
Shadow treasurer Tim Wilson said Kelty had been right to question the Government’s approach. “Finally,” Wilson said, “Labor’s backbenchers have woken up from Pyro Jim’s spell.”
Productivity at the centre of Australia’s economic debate
The intergenerational report is also expected to draw attention to the assumptions Treasury has made about productivity, a key measure underpinning long-term living standards. Treasury and the Reserve Bank have both downgraded their productivity forecasts.
Richard Holden, a professor at UNSW, said the central question would be whether the Government’s collection of modest reforms could produce a substantial improvement in economic performance.
“The government has thrown sand in the gears of the industrial relations system and made it harder and more expensive to create productivity growth. In its first term in particular, you’d say every major policy they enacted made it harder to get major productivity growth for business or at least didn’t help,” Holden said.
Chalmers announced a productivity package in the budget that he said would reduce regulatory costs by 10 billion Australian dollars. The Government and Treasury are also relying heavily on artificial intelligence to help achieve an assumed average productivity growth rate of 1.2 per cent a year over the next 30 years.
The Government is considering changes to Australia’s copyright laws as it seeks to attract investment in artificial intelligence. Assistant minister Andrew Charlton has said the technology will be important to the country’s future growth.
New ACTU leader Melissa Donnelly has called for Labor to establish a licensing regime to determine whether new technologies are safe to introduce.
Holden said the report should prompt a serious debate rather than simply becoming another weapon in the political contest.
“I’m sure the intergenerational report will be picked up by the opposition and I’m sure Jim will paint it as his opponents bullshitting, and there will be a degree of truth in that. But we should have a real discussion about what it says,” he said.
