Monday, 21 September 2026

Australian Financial Review

Libs will reform IR and repeal CGT to fill Labor’s IGR productivity gap

The Albanese government has taken the wrong lessons from the Intergenerational Reports – if we don’t increase the economic pie, younger Australians will pay the price.

The Intergenerational Report highlights the urgency of an economic reset in favour of economic growth and ending the Albanese economic model that is corroding wealth and wages.

The intent of the first Intergenerational Report in 2002 was to plan “for the challenges of an ageing population” with much larger pressures “expected to emerge when the ‘Baby Boomer’ generation starts reaching old age”.

And whether the problem is the ratio of working Australians to retirees, the narrowing of the tax base, or the rising cost of health and care, the answer remains the same: economic growth.

Reading back through the reports, the consistent story is productivity aspirations versus productivity reality.

The 2015 Intergenerational Report identified that “Australians produce twice as many goods and services for each hour worked as they did in the early 1970s”. Unsurprisingly, incomes nearly doubled during the same timeframe.

The 2021 report outlined that “productivity has been the most important source of income growth in Australia, contributing over 80 per cent of growth … per person over the past 30 years”.

The first report assumed productivity growth of 1.75 per cent. By 2021, the report found that achieving a 1.5 per cent-a-year level of productivity “will require an improvement over recent performance”, and the 2023 report abandoned the 30-year average and lowered the assumption to 1.2 per cent, the 20-year average.

“The volume of regulation is turning engines of enterprise into corporate bureaucracies.”

The gap is whether the data show Australia is richer or that Australians are living better lives. We all know we are living the former, but not the latter.

As the 2023 report outlines, if it had used the 2021 productivity assumption, the economy would have lifted by nearly 10 per cent over the next forty years, and wages by nearly 9 per cent, from a mere 0.3 per cent increase in productivity.

That isn’t what is happening.

Recent ABS data show that more than 1 million Australians are now working more than one job.

So even though the number of hours worked per employed Australian over the last thirty years has declined by about 8.2 per cent, the total number of hours worked increased by 65.6 per cent.

Since the introduction of the Fair Work Act in 2009, Australian wage rates have risen by 54.5 per cent, while consumer prices have risen by 52.5 per cent. That means real wage rates increased by only about 1.3 per cent in total over 16 years.

And in recent years, Australia has experienced the largest drop in living standards among advanced economies.

Rather than investing and providing incentives to ensure each working hour is worth more, we are working longer and pumping in more people.

Australia’s birth rate has not been at replacement since the mid-1970s. Migration has filled the gap, running at nearly double the 2023 report’s assumption of 235,000 a year.

The only productivity in the Australian economy is the growth of regulation and non-market jobs dependent on public spending.

A study by the Australian Institute of Company Directors found that nearly $100 billion in Commonwealth regulation has been added over the past decade, taking the total cost to $160 billion a year, consuming around 5.8 per cent of GDP.

The volume of regulation is turning engines of enterprise into corporate bureaucracies.

Since the Albanese government came to power, it has added 28 public servants each day, and a majority of job growth has been in non-market roles funded by public spending. At one point, it reached nearly eight in 10 jobs.

If we keep this up, Australians will work longer, for less, to support a struggling economy where wages continue to be outstripped by inflation, with higher interest rates and prices at the supermarket.

Fixing it requires an economic reset to get back to a growth trajectory.

A growth trajectory starts with industrial relations laws that support employment and link productivity gains to higher wages, so Australians’ incomes rise faster than inflation.

It also requires incentivising private investment. That starts with repealing the increase in capital gains tax, which has been an assault on private investment.

Doing so will also ensure the balance of job growth shifts back in favour of the private sector, not public spending.

It also requires ending trickle-down regulation from big business to small business, such as reporting requirements that require motels to report scope 3 emissions and modern slavery compliance statements to provide accommodation to mining companies.

We also need taxes to back Australians so hard work pays off. That requires ending income tax inflation through the Coalition’s Tax Back Guarantee, which keeps tax thresholds in line with wages.

The Albanese government has taken the wrong lessons from the Intergenerational Reports. The intention was to highlight that if we don’t increase the economic pie, our nation will increasingly turn to younger Australians to pay more.

Instead of avoiding it, we are living it, and their approach to regulation, industrial relations and tax is compounding the problem and bringing it forward.

Originally published in the AFR, available here.