|
What are the achievements of economic policies?
In the last decade of the 20th century, Australia became a model for other OECD countries in two respects: first, the tenacity and thoroughness with which deep structural reforms were proposed, discussed, legislated, implemented and followed-up in virtually all markets, creating a deep-seated “competition culture”; and second, the adoption of fiscal and monetary frameworks that emphasised transparency and accountability and established stability-oriented macro policies as a constant largely protected from political debate. Together, these structural and macro policy anchors conferred an enviable degree of resilience and flexibility on the Australian economy. The combination resulted in a prolonged period of good economic performance that shrugged off crises in its main trading partners as well as a devastating drought at home. The short-term outlook is for continuing strong growth of productivity and output, low inflation and budget surpluses accompanied by tax cuts.
Key indicators in international perspective (1)
1. Figures for 2004 are OECD estimates.
2. OECD excludes high inflation countries. For Australia, inflation in 2000 and 2001 also includes the effect from the introduction of the goods and services tax.
Source: OECD, Economic Outlook 76.
What are the main policy challenges?
The pace of reform has recently not been as strong as it could have been. However, there is now an opportunity for Australian governments to pursue a new nationally co-ordinated agenda to reinvigorate reform and meet future challenges, including:
-
raising Australian per capita incomes towards the highest in the OECD area, and
-
preventing the fiscal burden from rising significantly from current levels in the face of demographic pressures and rising underlying costs of delivering health services.
International comparison of income and productivity levels
United States = 100
Source: OECD, Science, Technology and Industry: Scoreboard of indicators (2003).
Rising to these challenges will require policies that increase both productivity growth and labour inputs over the long term. These are ambitious objectives, but by no means impossible: Australian productivity levels are well below those recorded in several other OECD countries, as are participation rates among some working-age population groups. Hence policies should:
-
Maintain stable macroeconomic conditions via macro policies that aim at low inflation and at least budget balance on average over the economic cycle. Such policies are important to manage risks around the short-term economic outlook, including the price of oil, exchange-rate volatility and adjustment in the housing sector.
-
Promote higher productivity growth by further strengthening competitive pressures in the economy via: completion of unfinished business of the National Competition Policy (NCP) agenda and the adoption of an extended reform agenda, following the Productivity Commission inquiry into the future of NCP.
-
Explore ways of ensuring optimal investment in regulated network sectors that operate across several jurisdictions.
-
Ensure that the labour market functions more effectively by: promoting the negotiation of wages and employment conditions at the enterprise and individual levels; removing disincentives to hiring, especially of low-skilled workers; enhancing human capital by improved training and education; and creating stronger incentives to participate in the labour market, especially for older workers.
-
Promote national water policies that aim at removing distortions in pricing as between classes of users.
Return to the OECD Economic Survey - Australia 2004 homepage
A printer-friendly Policy Brief (in PDF format) may also be downloaded. The Policy Brief contains the executive summary and the OECD assessment and recommendations, but does not necessarily include all of the charts available from the above pages.
-------------------------------------------------------
The complete edition of the OECD Economic Survey for Australia is available from:
-
SourceOECD for subscribing institutions and many libraries
-
-
Olisnet, under "Publication Locator", for government officials with accounts ( subscribe)
-
|
