Offered a menu of issues to choose from as the most important in the May 21 election, Australia’s top economists have overwhelmingly focused on one.
Three-quarters of the top 50 economists surveyed by The Conversation and the Australia Economic Society named “climate and environment” as the most important issue for the new government and the most important during the elections.
The 74% who named climate and the environment are more than double the proportion who named the four substantive finalists: housing availability and affordability, health, tax reform, and education.
None of the 50 respondents named “lower taxes” as important for the election or the new government, and only 8% named support for business.
The economists chosen for the survey are recognized as leaders in areas such as economic modeling and public policy.
Among them are former IMF, Treasury and OECD officials, and a former Reserve Bank board member.
Many noted that their priorities clashed with those of the two major parties.
Guyonne Kalb of the University of Melbourne observed that Australia was particularly vulnerable to weather-related disasters and that the public seemed to recognize this more than the government.
Being the last country to use outdated technology was “never wise if it can be avoided”.
It was not just embarrassing, but “incredibly myopic” given Australia’s exposure to extreme weather events.
Flavio Menezes of the University of Queensland said the transition needed was massive.
To reach net zero by 2050 (a goal agreed to by both political camps), Australia would need an 800% increase in wind, solar and utility scale hydro generation, as well as an increase corresponding transmission capacity.
The motto of the current government of technology, not taxes was “an empty slogan”. Much of the necessary expenditure should be financed by taxes.
A carbon tax would help
John Quiggin of the University of Queensland described the campaign as the most depressing he had seen in over 50 years of attention. Neither major party offered anything of substance.
Several participants noted that a carbon price (or tax) of the kind that Australia had between 2012 and 2014 would provide a permanent incentive to every sector of the economy to find new ways to reduce emissions, but was “not on the table”.
Consulting economist Rana Roy said Australia actually had many types of carbon prices in place, but their rates varied widely, with emissions from some sectors not taxed, while emissions from other sectors (such as gasoline) were overtaxed.
The third of economists surveyed who identified tax reform as an important issue said it would be needed to address the other issues identified as important: housing affordability, health and education.
Saul Eslake said that in an ideal world, both sides of politics should have an intelligent conversation about the least damaging ways to raise the additional tax revenue of one to two percentage points of GDP that will be needed to fund priorities such as care for the elderly and the national invalidity insurance scheme.
Tax reform would help
Kevin Davis of the University of Melbourne said next year is planned third step tax cuts aimed at high earners (and quantified by the Parliamentary Budget Office at $76.2 billion over four years) should be removed for reasons of fairness only.
The tax on superannuation should also be reformed and tax advantages on capital gains reduced or eliminated. “Massive” tax breaks offered to homebuyers and buyers of investment properties were among the main reasons for the high prices.
Rachel Ong ViforJ, of Curtin University, said shifts away from rewarding ownership of non-productive assets and towards rewarding hard work would be needed to tackle the intergenerational transmission of debt.
Higher productivity would help
Nigel Stapledon of the University of Sydney said none of the political parties seemed focused on the emerging inflation risk of the 1970s and 1980s.
The idea that government could stimulate real wage growth without improving productivity and not fuel inflation was dubious economics and risky policy.
John Freebairn of the University of Melbourne said productivity growth had been below global best practice for a decade, making it difficult to raise incomes and collect taxes.
Tax reform itself could raise taxes further by boosting productivity and reducing inequality, as could better regulation and cheaper public spending.
Former OECD official Adrian Blundell-Wignall said Australia had no plan less dependent on hole-digging. Research and development and a highly skilled population were the keys to sustainable growth.
But there is little optimism
None of the 50 panel members were optimistic that either side of politics was delivering what was needed, at least during the campaign.
Mr Eslake (a Tasmanian) said he was more likely to ‘walk through thylacine poop on my lawn one morning’ than see the smart conversations needed between now and voting day.