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NSW IGR shows need for bold reforms to fix generational challenges: CEDA

CEDA Media Statement

CEDA Chief Economist Jarrod Ball says the 2021 New South Wales Intergenerational Report (IGR) is a stark reminder of the generational challenges confronting the state over the coming decades.

“Bold new policy ideas to address the state’s ageing population, climate change, geopolitical tensions and the uptake of technology are now critical.”

“As we emerge from the pandemic, governments must prioritise policies that address tax, housing, education and climate to secure higher incomes, better jobs and better services for citizens now and in coming decades.

“With demographic headwinds due to the ageing population, and the pandemic population freeze caused by closed borders, our future growth comes down to productivity – that is, how dynamic our economy is.

“The report is clear that boosting productivity requires reforms on a scale we have not been seen in the last decade at least, such as modernising the tax system and lifting school education outcomes.

“But the long-term dividends are worth it – the report finds lifting productivity by just 0.1 percentage points would deliver the equivalent of $11,000 more annual income per household and reduce the gap between shrinking revenues and growing spending pressures.

Migration/population

“By 2061, the NSW population is projected to be older and around half a million people smaller because of COVID-19 border closures. Migration will therefore be even more critical to lift the working-age population and support the rising costs and healthcare needs of the ageing population.

“Australia must boost its quarantine capacity and speed up the vaccination rollout so we can open our borders sooner than mid-2022.

“Globally, governments are using COVID-19 to reassess their approaches to migration to attract the best and the brightest in a post-pandemic world. Australia will fall behind if it doesn’t start re-calibrating. The fact we did well last year will count for little in the future. This report underlines the fiscal and economic importance of getting this right.

Climate

“This report highlights the need for a co-ordinated national effort to address climate change and meet a common goal of net-zero emissions by 2050, rather than the increasingly disparate approaches across states and territories. We hope to see more on this in the upcoming Federal IGR.

“The Federal Government should commit Australia to net-zero by 2050. Fully embracing that commitment as soon as possible, and announcing more ambitious policies to get us there, would build confidence and provide greater certainty to business and the broader community.

Housing

“The report shows NSW will need to pull every housing policy lever at its disposal to meet the projected demand of 1.7 million new homes by 2060 or 42,000 homes every year.

“The plan to abolish stamp duty in NSW will help people move into new housing faster, but local councils will need to lift their game on planning approvals and housing density to boost supply.

Commonwealth-state relations

“The report reinforces that federal and state governments’ fiscal destinies are intertwined – both face growing budget gaps and can only close those gaps and boost the tax base by working together.

“The NSW Government expects to rely more and more on tied federal funding for critical services like health. It will become exceedingly difficult to provide the services the community expects sustainably into the future with the strings attached to tied funding agreements, which inhibit innovation and improved service delivery.

“CEDA has previously recommended abolishing tied funding agreements and replacing them with agreements linking funding to outcomes achieved, rather than inputs or specific processes.

“Australia should also move to a whole-of-federation intergenerational report for National Cabinet. We need an authoritative baseline to examine future spending and revenue trends, and the size of the task for Commonwealth-state tax reform.

“A combined report would also provide a fuller picture of the challenges we face in the decades to come. Having that picture would make the opportunities for reform in areas such as tax more clear.”

About CEDA

CEDA – the Committee for Economic Development of Australia – is an independent, membership-based think tank.

CEDA’s purpose is to identify policy issues that matter for Australia’s future and pursue solutions that deliver better economic and social outcomes for the greater good.

CEDA has almost 700 members including leading Australian businesses, community organisations, government departments and academic institutions. Our cross-sector membership spans every state and territory.

CEDA was founded in 1960 by leading economist Sir Douglas Copland. His legacy of applying economic analysis to practical problems to aid the development of Australia continues to drive our work today.

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2 comments

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  1. Andrew J. Smith

    Interesting and credible research. This is opposed to the preferred focus upon migration/population nexus or obsessions in Australia with daily reinforcement of the supposed negatives of (undefined) ‘immigration’ through sub-optimal if not outright misrepresentation of data; to feed the existential threat of ‘infinite exponential population growth’ according to Dick Smith.

    The same techniques have been used, one is inferring, to deny an increase in super i.e. the SCG by claiming the working age cohort is substantive enough into the future to support pensions, hence, no need for super, or you can have an increase in SCG or wages but not both……

    The support for this demographic analysis? By using the raw estimated population, padded out with temporaries such as students, etc. with restricted or no work rights and for majority, no potential permanence, via the ‘nebulous’ NOM (inflated in 2006).

    This means those promoting antipathy towards super and/or immigration can claim a symmetric ‘population pyramid’ with lower dependency ratios, that then precludes need for immigration and/or super (increases), and kicking the can down the road…..

    In fact organically most nations are facing not just an inverted ‘population pyramid’ with higher dependency ratios due to ageing not fertility, but a heavy headed upright arrow with a slim shaft that has to support a burgeoning population of retirees expecting at least the same level of services and support; not sustainable without temporary churn over of ‘net financial contributors’ vs. increase taxes and/or decline in services.

    Such analysis is evidenced here by Cameron Murray (who has contributed from early years to the lamentable MacroBusiness blog obsessing about ‘population growth’ and ‘immigration’, and been presenting with Peter Martin via ANU; Coates at the Grattan Institute promoting similar) by assuming same settings in future i.e. tax perks for super and/or homes outside the pensions assets test, while appearing to use inflated raw population numbers for ‘working age’ and ignoring the impact of ageing into the future.

    https://theconversation.com/superannuation-isnt-a-retirement-income-system-we-should-scrap-it-130191

    https://esacentral.org.au/polls-item/40396/the-legislated-increases-in-compulsory-super-contributions-should/?type_fr=902

    Beware the libertarian trap…… being used to encourage voters to vote against, if not their own, but future generations’ interests.

  2. corvusboreus

    All environmentalism is just a front for racism.
    Global human population more than doubled last century without notably impacting biospheric health and diversity, and similarly, Australia’s exponential growth in human population has been an absolute health boon for native biodiversity and ecosysrems.
    Continuous exponential growth within a finite environment is not an oxymoronic concept.
    The fact that over 96% of the planet’s mammalian biomass consists of humans and their domesticates is just amusing trivia, not cause for alarm.

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