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The Admirals’ Breakfast Club Roger Kerr 26 August 2011.

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Presentation on theme: "The Admirals’ Breakfast Club Roger Kerr 26 August 2011."— Presentation transcript:


2 The Admirals’ Breakfast Club Roger Kerr 26 August 2011

3 A Nation at Risk

4 International backdrop ‘Old’ OECD in deep trouble GFC has morphed into fiscal crises –bank bailouts –stimulus Offset by rise of emerging economies Australia

5 Key challenges Rebalancing of the economy Lifting productivity growth

6 Rebalancing No growth in traded goods sector since 2004 – in fact 10% down, back to 2002 levels Non-traded goods sector, especially government, grew rapidly Gave rise to 8% CADs Not a savings issue

7 Rebalancing contd Source of high external liabilities Up there with Greece and other cot cases One point of difference is equity CAD now low, but why wouldn’t same problems re- emerge? (CAD of 7% forecast with recovery) Primary deficit higher than in 1984 At risk of our own financial crisis (credit rating downgrades etc)

8 Productivity What is productivity? Big increase after reforms Drastic slump in last decade – close to zero Main basis of improvements in living standards No growth in real per capita income since 2004 At risk of out-migration

9 Implications 4% pa growth to 2025 → economy 70% larger 2% pa growth to 2025 → economy 30% larger Loss of management talent, skills, firms Income gap with Australia would continue to widen (already 38%)

10 How to reduce risks? - vulnerabilities Focus on international competitiveness/ export profitability Shrink government spending share of the economy (credit rating) – spending cap bill Curb excessive regulation (Regulatory Standards Bill) Other improvements eg partial privatisation

11 How to reduce risks? - productivity ‘200 things you must do’ 2025 TF reports Smaller government: spending, regulation, ownership Must regain 1990s performance and do better

12 Can we catch Australia? Yes – institutions and policies matter Not natural resources, size, location Think Hong Kong, Singapore

13 Obstacles ahead Public understanding Leadership in business circles MMP


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