What Avril Lavigne can teach Chalmers ahead of budget
Why did the government have to go and make things so complicated?
That’s the question Finance Minister Jim Chalmers should be asking as he prepares to jump-start the country’s flat productivity performance in Tuesday’s budget, says one of Australia’s leading economists.
Efficiency (basically how effective an economy’s workforce is at using the tools necessary to turn materials into matter) is key to improving living conditions in the long run and allowing the economy to grow faster without causing a burst in inflation.
Westpac chief economist Luci Ellis said on Thursday the best thing the government could do was get out of the way rather than assume it could boost productivity with tax changes or announce new spending.
He said lawmakers increasingly feel that problems need to be solved with more regulations.
As a result, companies must gain approval from more and more agencies to build something or must navigate increasingly complex regulations and laws.
“I am reminded of a quote from the well-known feminist philosopher Avril Lavigne: Why did you go and make things so complicated?” Dr Ellis said in her Women in Economics speech at the National Press Club.
“The answer, of course, is that there is always something else that the best-intentioned person has to think about.”
The former Central Bank economist said if every negative event continues to be met with a new intervention to cushion the blow, governments risk “learned helplessness” becoming entrenched rather than making the economy more resilient.
For example, when European standards already consider a bike helmet or car booster seat safe enough to use, why would Australia need to go further and impose additional requirements, which would increase compliance costs and limit the availability of products?
Dr Chalmers has made productivity one of the key plans in the next budget.
While leaks from the Treasury have so far mainly included changes targeting intergenerational equality, The Australian reported on Thursday that the budget will also include tax write-offs for businesses to encourage new investment.
The Australian Financial Review also reported that the treasurer will increase the cap for research and development tax relief.
“The best way to move productivity in the right direction after two decades of underperformance is to achieve what economists call capital deepening,” Dr Chalmers told Sky News.
“This means greater investment in things like the energy transition, the technological revolution, the changing composition of our industrial base.”
Further cuts to bureaucracy are also expected.
Dr Ellis said one of the budget’s tests for improving productivity was to ensure that new policies and programs were not overly complex and did not eliminate options or encourage learned helplessness.
“And if there’s one thing I hope for from this and future budgets, it’s to take Ms. Lavigne’s words to heart and make things less complicated,” he said.
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