Economist urges Labor to follow in footsteps of Curtin and Hawke with ambitious reform

Australia Broadcast Center

06-05-2025

The Albanese government has an opportunity to "change Australia forever" in the next three years, economist Ross Garnaut says.
He says Labor's historic election victory on the weekend was reminiscent of John Curtin's famous victory in 1943 that paved the way for policies that led to decades of full employment with rising incomes after World War II, which permanently altered Australian history.
"There's an opportunity to do something like that again," he told the ABC.
Historic opportunity to reshape Australia
Professor Garnaut was a key member of Australia's last generation of genuine economic reformers.
He was principal economic adviser to Labor prime minister Bob Hawke from 1983 to 1985, a period in which Australia's dollar was floated, Australia's first affordable and universal system of health insurance was introduced (Medicare), and wages and income policies helped to finally rid the economy of stagflation.
He said the Albanese government had a lot of work to do and it would not be able to do everything in this next three-year term.
Photo shows
Ross Garnaut leans on a dead tree.
Ross Garnaut says we have an opportunity to pursue "transformational economic reform" by tackling the rising problem of economic rents, writes Gareth Hutchens.
But it could still do "a lot of big reform" with the policy framework it put to the election on the weekend, and it could build on that foundation.
And, he said, its desire to deliver productivity-enhancing reforms would benefit from focusing on two things in particular in the next three years: a return to full employment, and getting the energy transition right.
"Australia's had unnecessarily high unemployment for too long, certainly since 2013, and we can take unemployment lower without risking inflation," Professor Garnaut told the ABC's
The Business.
"I think the Reserve Bank's been learning lessons about mistakes it's made over the past 12 years, and it's ready to support the government in moving to genuinely full employment.
"That will do wonders for the budget deficit. It will also lay the foundations in the community for acceptance of the structural change that's necessary for rising incomes," he said.
You can see his interview in the video below.
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Professor Garnaut said the Albanese government had to get the energy transition right in this term, and grasp the opportunities to build new zero-carbon industries that would be in great demand in coming decades.
"These are the most important things that have to be done, and the government has laid a foundation in its first term for doing them," he said.
He said the government was now free to push ahead with its
"Some will be necessary, but we're actually using less gas now than we did a few years ago, and we will need less in a few years' time than we need now," he said.
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Mining haul trucks working in an open cut mine.
Australian policymakers have blown the mining boom, and it will take years to turn things around, says former Treasury secretary Ken Henry.
And on the topic of tax reform, he said there were great ideas sitting in the Henry Tax Review that could be implemented, especially the idea of a minerals resource rent tax, and Australia's economy would benefit from having a carbon price, but those could be ideas for down the track.
"They'll be in no hurry to add new things to what's a pretty big agenda," he said.
"I don't think they'll start with that, but let's let the policy discussion run, and if we have a good discussion about what's necessary for raising productivity in Australia, raising Australian incomes in the longer term, if business talks the truth and is prepared to point out the advantages of carbon pricing so we can let markets work, if all those things happen, then a foundation can be laid for carbon pricing sometime in the future," he said.
In late 2023, Professor Garnaut pointed out that Australia's government would now be collecting
He said that money could have been used to pay for a lot of important tax reform in the last decade.
Time for major tax reform
Other economists say the time is ripe for Australia to have a genuine conversation about tax reform.
Sally Auld, NAB's chief economist, says the first nine months of last year were "pretty difficult" for the economy but things did seem to pick up in the fourth quarter, and she expected that momentum to continue into this year.
She said the improvement in the economy would provide a decent foundation for 2025 and beyond.
NAB chief economist Sally Auld says we need to fix the tax system and improve productivity.
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ABC News: John Gunn
)
"One of the good things we have going for us in Australia at the moment is the government starts its second term with the unemployment rate very low, [and] with inflation … almost where the Reserve Bank wants it to be," she told the ABC.
"That's a really encouraging starting point for us.
"The global backdrop is clearly more challenging, and you know, a lot of that has come about through quite a significant shift in US trade policy. Businesses that are exposed to that global environment are clearly facing into very elevated levels of uncertainty.
"But all else equal … we do think the Australian economy is probably well-placed to navigate some of those challenges," she said.
Ms Auld said the Albanese government's election win, which resulted in an increased majority, would provide financial markets, investors and forecasters with a sense of certainty and predictability about the near-term future.
She said the Reserve Bank had capacity to cut interest rates "quite aggressively" in coming years if the global economy were to deteriorate a lot.
Photo shows
Ken Henry #2
Australia's tax system is stacked so heavily against younger people that it's threatening the social compact, former Treasury secretary Ken Henry has warned.
And on the topic of tax reform, she said Australia needed to talk seriously about ways to lift productivity and fix the structural problems with the federal budget.
She said we needed to find ways to redistribute some of the tax burden away from taxing incomes so heavily, to taxing other parts of the economy.
"We know we have to raise tax revenue, because that's how we fund many of the things that you know are important to Australian voters, whether it's the health system or, you know, tertiary education, or whatever it might be," she said.
"We have to have a discussion about, like, what is not just the most efficient way to do that, but what is also an equitable way to do that.
"We know from many years ago when Ken Henry did the White Paper on tax reform that there's a lot that … could have been done, but, you know, governments of both sides of politics have, up until now, not really decided to front up to the challenge," she said.