INTHEBLACK April 2022 - Magazine - Page 39
PRODUCTIVITY
ASSUMPTIONS
AND OVERSIGHTS
A L L I N T E R G E N E R AT I O N A L R E P O R T S C O N TA I N AS S U M P T I O N S , A N D I F YO U AS K R A FA L
C H O M I K , S E N I O R R E S E A R C H F E L L O W AT T H E A R C C E N T R E O F E XC E L L E N C E I N
P O P U L AT I O N A G E I N G R E S E A R C H , T H E L AT E S T I G R I S N O D I F F E R E N T.
Chief among the most glaring
assumptions, Chomik says, is
the report’s assertion that
annual productivity growth
for the next 40 years is based
on the average of the last
30 years of 1.5 per cent.
“In the 1990s, growth was
2.2 per cent annual over the
decade, in 2001 it was 1.4,
and in 2010 it was 1 per cent,
and yet the IGR expects it
to go up to 1.5 per cent,”
he says.
“So, it is potentially overly
optimistic, given the trend
we’ve seen over the last few
decades, and it’s probably
the assumption that has the
biggest effect on things like
income and GDP growth and
therefore the tax take.”
Traditionally, Chomik says,
governments have looked
to big economic reforms to
stimulate productivity, such
as floating the dollar,
introducing the GST and
establishing the
independence of the
Australian Reserve Bank.
“The Treasurer [Josh
Frydenberg] himself said that
we cannot float the dollar
twice,” Chomik says. “So,
there is a kind of
acknowledgment within the
government that those lowhanging fruit of the 1990s
are largely gone.”
Chomik notes, however,
that a landmark review
by the Productivity
Commission in 2017
spelled out a range of
micro-economic reforms
across a five-year period.
“There has been no indication
by Frydenberg that the
government intends to ask
the Productivity Commission
to complete another five-year
plan to look at the structural
reforms and government
service delivery
improvements that the
Productivity Commission
could advise on,” he says.
“But that is something they
could ask them to do now.”
Furthermore, Chomik says
that, despite the threat of
climate change, the report
does not offer any number
modelling on its potential
economic impact.
“Climate change could affect
the economy in different
ways – it could mean that
some of our products are not
being sold at the prices that
we might expect, or the
adaptation itself could be
costly in making sure that
there is resilience against
climate-related events,”
he says.
“If you are talking about
sustainability over the next
40 years, then the admission
[of the specific climate
modelling] is the elephant
in the room.”
intheblack.cpaaustralia.com.au April 2022 39