Australia could be world’s third richest nation with more reform

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Australia could be world’s third richest nation with more reform

Continuing economic reform, including industrial relations changes, could see each Australian more than $70,000 richer and the country becoming the third richest nation in the world by 2025, according to research commissioned by the Business Council of Australia (BCA).

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Continuing economic reform, including industrial relations changes, could see each Australian more than $70,000 richer and the country becoming the third richest nation in the world by 2025, according to research commissioned by the Business Council of Australia (BCA). 

The research also shows that without the reforms which have occurred since 1983, unemployment in Australian would be 8.1% instead of 5.8%.

In releasing the results of the research, BCA said it believes that quantifying the reform ‘dividend’ for people is important to justify the case for further reform, ‘particularly at a time when imbalances and barriers emerging within the Australian economy highlight that the continued strong growth in the long term cannot be guaranteed’.

Access Economics - analysis

BCA commissioned economic modellers and forecasters Access Economics to quantify the impact of the last 20 years of reform on the livelihoods and wealth of ordinary Australians and forecast the effect of further reforms over the next 20 years.

The analysis found that:

  • The average Australian is better off in terms of real wealth by more than $83,000 (in today’s dollars) as a direct result of the economic reforms of the last 20 years.

  • If the economy continued to grow by 4% per annum over the next 20 years – an outcome only possible through ongoing economic reform – the average Australian would be a further $74,000 better off (in today’s dollars).

  • The gap between a low growth (2.4% growth a year) and a strong growth (4% a year) future can be achieved by building on existing reforms, rather than radical policy solutions, in areas such as increasing productivity, workforce participation, better infrastructure planning, increased investment in education and training, and higher immigration.

  • Without the reforms undertaken since 1983, unemployment in Australia would have been 8.1 per cent in 2003-04 compared to the rate of 5.8%. This equates to 315,000 more people in jobs.

  • Productivity improvements alone – the direct result of workplace relations and other economic reforms – have meant every Australian is at least $3,000 better off a year.

  • Continuing reform leading to strong growth over the next 20 years would result in Australia’s economy being nearly 40 per cent bigger by 2025 than would be the case without reform.

  • As a result, Australia could become the third most prosperous country in the developed world in terms of GDP per capita by 2025. Without reform, Australia could drop to 18th – the position Australia occupied in 1983 when concerted economic reform started. 

  • With the high growth scenario Commonwealth revenues would increase by nearly 9 per cent of GDP by 2025 compared to the low growth scenario. This increased tax revenue could be returned to taxpayers by reducing average personal tax rates by 30 per cent, or could be used to fund much of the Commonwealth’s projected spending on health and education in 2024-25. 

The full report can be found here.

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