Ross Garnaut says the Albanese Labor government's thumping election win gives it scope to undertake deep economic and tax reforms to set Australia up for lower unemployment, stronger productivity growth and an accelerated shift to renewable energy.
TRANSCRIPT:
What are the policy possibilities of a majority government the size Labor has secured?
The possibilities are very large, Kirsten. This is an historic election result. The last comparable outcome was in 1943, when Curtin became Prime Minister, having initially led a hung parliament. He then won in a landslide. The ratios of opposition to government—and within the opposition, between the Nationals (then the Country Party) and the Liberals—are pretty much as they are today.
The Curtin government, with Chifley as Treasurer, set up the Department of Post-War Reconstruction and developed a reform program that was implemented after the war, mostly following the 1946 election. That program set Australia up for decades of full employment and rising incomes.
There’s an opportunity to do something like that again.
Will that opportunity come within the next three years of government, or do you see Labor using this term to start a bigger conversation, to put to voters next election?
The government’s already laid a basis for strong action in this term. The most important steps for a productivity-raising reform program are, first, a return to full employment. Australia has had unnecessarily high unemployment for a long time—certainly since 2013. We can take unemployment lower without risking inflation.
I think the Reserve Bank has been learning lessons from mistakes over the past 12 years and is now ready to support the government in moving to genuine full employment. That would do wonders for the budget deficit and lay a foundation for public acceptance of the structural change needed for rising incomes.
The second key step is getting the energy transition right and seizing Australia’s opportunity to build new zero-carbon industries that will be in great demand—especially in Northeast Asia (China, Korea, Japan) and in Europe, where countries are facing difficulties reaching net zero with their own renewable resources.
Does another three years of Labor’s “Rewiring the Nation” policy lock in the transition to renewables?
It doesn’t lock it in, but the foundations are there. Crucially, the government has established several important inquiries that will deliver outcomes over the next six months, setting out carefully considered reform agendas to boost productivity through better use of our zero-carbon opportunity.
They’ve initiated a review of the National Electricity Market, led by energy economist Tim Nelson and a strong team. There are also several Productivity Commission references focused on reviving dynamism in the economy and enabling a smooth transition to net zero emissions.
Privately, work is underway at the Superpower Institute—of which I’m a director, with Rod Sims as chair. We’ll be releasing major reports offering well-developed pathways for moving Australia toward a prosperous zero-carbon future.
The government has laid the groundwork. I think the reports coming in the year ahead will help define a program that can restore productivity growth for the long term.
Is the government’s plan to subsidise home batteries going to help or hinder the transition, especially regarding grid-scale energy storage?
Household batteries—and using car batteries in electric vehicles to feed power back to the grid when it’s scarce and expensive, and absorb it when it’s abundant and cheap—can help a little with stabilising the grid.
But that’s not the main story. Building Australia’s superpower industries is a story of grid-scale storage, grid-scale generation, and grid-scale industries that make a transformative difference to our economic performance.
How big a role is there for gas? Will Labor have to approve new gas reserves, as Woodside and Santos are calling for?
We don’t need much gas for a smooth energy transition. Some will be necessary, but we’re already using less gas now than a few years ago, and we’ll need even less in the future.
A tiny proportion of what we currently export will be plenty. The government’s gas reservation policies from the last parliament could be implemented more effectively to make gas cheaper domestically.
Interestingly, the opposition pushed for an even stronger version of that policy, which points the way forward. We’ll need some gas—but far less than we use today.
With the political capital Labor now has, should it put carbon pricing back on the agenda?
I think Australia would be better off if we did. But the government didn’t promise that at the last election—it didn’t rule it out, but it didn’t promise it. They’ll be in no hurry to add new priorities to an already large agenda.
I don’t think they’ll start with carbon pricing. But let the policy discussion run. If we have a good debate about what’s needed to raise productivity and incomes over the long term—if business speaks honestly and is prepared to point out the advantages of carbon pricing to let markets work—then a foundation could be laid for carbon pricing sometime in the future.
Speaking of structural reform, is it time to dust off the Ken Henry tax review?
Yes. There are several elements from the Henry Review that would be very helpful. The biggest was Ken Henry’s mineral resource rent tax. It was announced, briefly implemented, then repealed after opposition from the mining industry and Tony Abbott.
It would be good to have that back on the agenda, though I imagine the government will take its time.
Henry also raised—but didn’t formally recommend—major changes to the corporate income tax. The review suggested moving towards a cash flow-based tax. With colleagues, I’ve argued for a variation of that approach, which could increase incentives for investment and innovation, support productivity growth, and avoid harming revenue—which is critical, given the current budget pressures.
Professor Ross Garnaut, good to speak to you.
Very nice to talk to you, Kirsten.
ABC News
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