An economic blueprint for Australia’s next 40 years will show the ballooning cost to sustain an ageing population and the challenges to pay for it amid sluggish growth.
The latest iteration of the Intergenerational Report will be released on Thursday, painting a picture for the next four decades.
It will show that aged care, health, the NDIS, defence, and servicing debt will grow to become the biggest strain on the budget; and will also warn that without drastic climate action, a global temperature rise of two degrees would cost the budget $423 billion.
While the Greens say a more “progressive” tax policy would generate trillions of dollars to pay for the swelling budget, the Coalition has warned that amid a cost-of-living crisis, Labor should not consider taxing Australians more than they already are.
Finance Minister Katy Gallagher says the government is committed to “incremental” changes, like the “modest” tax reforms the government has already announced – changes to the superannuation tax concession for balances over $3 million, the petroleum resources rental tax, and a crackdown on multinationals.
“I think the position we’ve taken, which is to make those modest changes to tax where we can, but also have those other important conversations about spending, efficient use of spending, and also what are the opportunities going forward?” she told ABC Radio.
“When you look at our budget plan, we have to repair the budget and rebuild the fiscal buffers, get the budget in much better shape. And we’re doing that partly with some of those important changes to revenue, but we’re also doing it in the way that we are using public money through the investments we make and through the savings that we look at, and indeed through the revenue upgrades that we’re returning to budgets so that we can rebuild those fiscal buffers.”
Shadow treasurer Angus Taylor said Australians deserved assurances that they would not pay more tax in the decades ahead to pay for public spending.
“I’m sure (the report) will show that bracket creep will continue to raise taxes without the government doing anything,” he told ABC News.
“A discussion about genuine tax reform, lower taxes and to deliver that – you have to have an economy that grows faster than you’re spending.”
Treasurer Jim Chalmers denied accusations the report was a “Trojan horse” for higher taxes.
“What we have shown over the first 15 months of this government is we’ve been able to get the budget in better nick, with a combination of meaningful tax reform combined with spending restraint and finding $40 billion savings,” he told ABC News.
“We’ve made some really welcome progress … but there will always be more work to do.”
The report will also paint a picture of a sluggish economy with minimal growth, calling for a need for greater productivity.
The report forecasts the economy will only be 2.5 times larger in real terms by 2062-63 – the slowest growth rate since federation.
Dr Chalmers said “it was time” for a broader conversation about productivity.
“One of the things that has troubled me for some time now is we’ve got this national conversation about productivity which is artificially limited to industrial relations to tax,” he said.
“Obviously those things are important, but we will get productivity gains into the future if we invest in our people, and industries, and the ability to adapt and adopt the clean energy transformation.”
It follows a call to arms from Prime Minister Anthony Albanese to business on Wednesday night, where he appealed to industry leaders spooked by the government’s industrial relations reforms, telling them the private sector was key to creating more jobs and achieving climate change targets.
In a speech to the Business Council of Australia, Mr Albanese said the IGR focused on the “transformative opportunities of the decades ahead”, and made clear how crucial business would be to the clean energy transition, technological advancements, and supporting an ageing population over the next four decades.
“This is where our government has been focused on working with the employers and job-creators and leaders in this room, across a whole range of policies,” he said.
“This is where I intend to work with the business community in a structured way; focusing on those long-term objectives and realities – but also taking action together, here and now.
“Across all these areas – energy policy or migration reform, skills, trade – what we decide matters, for the decade ahead. And so does the way we decide it, the how. I can assure you, my colleagues and I don’t seek your input for the sake of appearances. We do it because we want you involved in the design and detail.”