It might not be televised in prime-time, it probably won’t have a worm, and the audience will be filled with journalists. But don’t let that stop you watching tomorrow’s debate between the reigning Treasury title-holder, Peter Costello, and the fast-finishing challenger, Wayne Swan.
As a pitch for the Treasury’s top job, what are the big questions each needs to answer to prove they are fit to manage Australia’s finances for the next three years? Crikey asked three leading economists to identify the important questions facing the combatants.
Scott Haslem, UBS Chief Economist, Australasia. Have we under-funded skills education and training in Australia in the hunt for tax reform? Why is a 1% surplus the right target? Shouldn’t we be having bigger budget surpluses at this point in the economic cycle, given the strength of the global economy and the extent of the stimulus from the China story? The other issue is, how long can the Federal Government sit back and not deal with issues of infrastructure reform and getting faster throughput in our resource base? Do we really need any more tax reform? And is it time to spend a little more on health, education, training, and so on?
Richard Gibbs, Macquarie Bank Chief Economist. The first question I think is how will the Treasurer manage productivity growth? We have had and continue to have a noticeable decline in the rate of productivity growth in the economy. Part of that results from the tightness in the labour market, but we have to move beyond that in terms of the structural issues. That goes to the heart of the provision of resources, and that’s a key question facing the next Treasurer. The second one is tied to that and is the question of inflation, inflationary pressures and capacity constraints. It’s probably now time to take notice of what former RBA Governor Ian McFarlane wrote a couple of years ago, that it is the domain of Canberra and the politicians. There’s little the Reserve Bank can do in terms of structural impediments. What will the government do to control those issues? The third one is Australia’s trade and commercial links. How does Australia develop those while also coping with what is clearly now a revaluation in the Australian dollar? How do you plan to revisit macro and micro policy initiatives to increase Australia’s attractiveness as a commercial partner?
Michael Knox, ABN AMRO Morgans Chief Economist and Director of Strategy. The questions that I think are important are the continuing independence of the Reserve Bank and continuous budget surpluses. Shadow Treasurer Wayne Swan has said he will balance the budget through the present cycle, but Ralph Willis said that and never did it. How do you guarantee that you will run budget surpluses? One thing the treasurer doesn’t have to deal with is controlling interest rates. What he has to do is set macro economic policy so that the RBA will set low interest rates. Will the Treasury target an annual surplus of 1% of GDP? And secondly, will he ensure the independence of the central bank? They are the two major questions the Treasurer and the Shadow Treasurer need to answer tomorrow.