Successfully boosting private investment is a key to unlocking Australia’s economy
With good reason business people nationwide await with bated breath the outcome of the Prime Minster’s August 19-21 roundtable conference in Canberra. Anthony Albanese has called the meeting of senior public servants and industry leaders to seek a solution to the nation’s productivity decline, now at crisis-point.
It’s Macks Advisory’s opinion that if the conference doesn’t show signs of reaching a consensus for fixing the problem with a more competitive tax regime and effective industrial relations system that encourages private investment, then it will have failed with serious consequences.
Treasurer Jim Chalmers, recognising that declining productivity was a serious problem, said shortly after Labor’s massive election win in May that the government would need a third term to deal with the issue. But the situation has worsened considerably since then, so that action is obviously needed soon rather than later.
Even before President Trump’s wild experimentation with tariffs, data was showing investors were losing interest in Australia, a country bedevilled by decreasing productivity. Private capital expenditure here has just suffered its worst contraction since 2020 – this when there were economists expecting a slight lift, despite lagging productivity.
The concerns of CEOs
As a prelude to this month’s roundtable conference in Canberra, peak industry bodies met in Sydney last month to define and coordinate concerns about the economy. They agreed these stemmed from what appeared to be the Albanese government’s anti-business policies.
The meeting concluded state and federal governments’ betterment of living standards and ability to maintain public services, depended essentially on revenue derived from a healthy and profitable private sector now being undermined by deterrents.
Until Dr Chalmers and state counterparts acknowledge this and accept responsibility for improving the nation’s business climate by removing red tape to encourage capital expenditure investment, then opportunities will continue to be lost and the economy to stagnate.
Macks Advisory understands the Sydney meeting agreed the most immediate opportunity for reform was around business investment and innovation, followed by reduction of approval times for building and other projects.
The NSW business leaders have declared they are unable to relate Dr Chalmers insistence that “the best kind of growth is private sector-led growth “, with policies that were counter in every respect to any plan that might seek a turnaround in lagging productivity.
A to-do list for the Treasurer
Opposition Treasury spokesman Ted O’Brien in a media statement says that to encourage investment Dr Chalmers needs to look closely at Australia’s uncompetitive business tax rates and to listen to calls by business groups to extend business allowances and tax breaks.
Mr O’Brien says Australian businesses want to be able to claim tax deductions for the cost of machinery, plant and equipment beyond the next 12 months allowed under the federal government’s instant asset write-off arrangement. Otherwise, given the current nature of the global economy, they will look for opportunities to invest elsewhere.
Understandably unions and employers will want consensus at the Canberra conference in a few days that sets the foundation for wages and profit growth by linking improvements in wages and conditions to productivity gains.
For the national good Dr Chalmers needs to decide what policies he should recommend to the government that will accommodate conflicting aims.
Unions want to protect penalty rates in awards and above-inflation rate pay rises for 2.9m low paid workers, while employers want to ensure none of this will put a further dampener on investment, wealth generation and living standards – which OEDC data shows are fast losing ground when compared with trends in other developed countries.
A warning on house prices
Pundits are punting that Dr Chalmers will recommend negative gearing and other tax tinkering as a solution to his problems.
However, business groups and economists warn this would advance from extremely difficult to impossible, a whole generation of young Australians’ chance ever to own a home. The Treasurer has been told his focus should be dealing with the elephant in the room, which is housing supply.
Meanwhile Sally McManus, Secretary of the Australian Council of Trade Unions (ACTU) insists on having it both ways. In recent media statements she bemoans the fact that today’s young Australians can no longer have the aspiration of homeownership that generations before them have had yet seems unwilling to offer anything on behalf of unions that might contribute to righting what she sees as a terrible wrong.
Ms McManus points out that housing prices have risen at twice the rate of wages in the past 25 years, and this demands consideration with the concurrent fact that a mere 1% of investors own 25% of all investment properties – the very people, she says, who have been driving up house prices.
“I don’t think we ever intended for this to happen as a result of tax measures, but this is where we’re at.”
Housing Industry Association chief economist Tim Reardon says it’d be disappointing if the forthcoming Canberra economic summit turned out to be no more than a debate about increasing taxes on homes, especially when the ACTU seems to be doing everything it can to reduce home supply and increase rents.
Remember Mr Albanese’s promises to fix the housing supply problem and rejig stage three tax cuts? Have newsletter readers noted Dr Chalmers’ expressed expectation that the 19-21 August roundtable would address housing approval processes, but has also confirmed local government – overwhelmingly the major approver of new home building – won’t be represented a seat at the table?
Macks Advisory and our newsletter readers don’t need Ms McManus to tell us where we’re at. What we’d really like to know is what she’s about to say in Canberra that, with the assistance of industry and business leaders, will ensure the meeting is anything more than yet another talkfest.
