The Power of Balance: Economic Reform from the Sensible Centre

Thank you for having me. I want to start by acknowledging the land on which we meet, and paying my respects to elders past and present.

I’m here today to talk about economics – and the need for bolder, more courageous, and more systemic economic reform in Australia.

And I am here to make an offer, and a challenge to the major parties.

Economics matters. So we need to talk about it more. And not just talk about it: those of us in public life must drive economic reform that makes life better for Australians. We are not elected to play it safe and ignore the problems facing our country.

When I think about what is our vision of Australia, I often think back to Sean, a young Dad I met on the Bondi Beach Promenade, one morning with his son. I asked him what was important to him. He said: I care about our beautiful environment and I want to preserve it for my kids. I want to live in a kind society, where we treat each other decently. And I am a small business owner, and that is really important to me.

Australia is truly a wonderful country: prosperous, diverse, and blessed with beauty, natural resources, and economic opportunity. We owe a lot to luck – but also to good people making bold but prudent decisions over many years. We have walked our own path between the breathtaking dynamism but punishing inequality of the USA, and the strong public service but sclerotic environment of Europe.

But the cracks are showing, and have been for a while now, and we must invest in the economic reform that delivers Sean’s vision of who we can be.

The problem

From 1983 until the GFC, we had a run of really rapid growth and were truly the lucky country. But for the last 15 years, the sense of the luck has slipped away,. Many people are struggling – including people who never expected to, who thought they were making all the right choices . We have high inflation now, but it goes deeper than that.

A recent survey by Redbridge found:

• Only 15% of Australians believe home ownership is attainable for young people today without family assistance.
• Less than 1 in 10 [8%] believe the standard of living in Australia will be better for the next generation
• And only around a quarter [27%] are very confident their retirement will be financially secure.

I find this shocking – but not surprising. It’s why we need to do better. The Australian Dream is that you get a fair go. We are a country that rightly expects that if you work hard, as a health care assistant or CEO, you can create a good life for you and your family. That your opportunities, your resilience in tough times, don’t just come down to who your parents are.

In my conversations with people on the streets, in my electorate office, but also amongst experts, people come back to 3 major economic challenges:

1. Generationally low productivity and growth
2. Our kids not having the same opportunities for prosperity that we did
3. Getting an energy transition that is right for the environment, and right for our economy

These are our defining economic challenges. Unless we face these, our future will not resemble our past. The things we have enjoyed will not be accessible to our children or future generations.

These are each huge topics so I will focus on the first two problems, especially because of how interconnected they are.

Growth

The Nobel Laureate, Paul Krugman, famously said that “productivity isn’t everything, but in the long run it’s almost everything”.

Productivity is our ability to do progressively more with less. It’s responsible for 80% of real wage growth, why stuff is better or cheaper than it was in the past. It is the only sustainable path to lower prices and higher wages. And we’ve just had the worst decade for productivity growth of the past 60 years.

There are structural shifts towards services and the care economy that are driving this. And other drivers of productivity are stalling. The capital investment which enables much of our productivity growth is simply not there. R&D investment is a third lower than the OECD. Foreign investment has flatlined for years and is now falling. We invest more capital overseas than we attract to Australia.

There are moves to improve this, such as through competition reform or migration, but nowhere near the scale we need. We don’t even have any response from the Government or Opposition to the Productivity Commission’s Advancing Prosperity recommendations – the number 1 report that is on this topic.

Intergenerational wealth

The story with intergenerational equity is no better.

Younger people are missing the milestones of previous generations. Housing affordability is a primary driver of all this. Sydney has the 2nd most unaffordable housing in the world. Rents are too high for young people to move out and too high for people to save as much as they would like for a home deposit. They prioritise their careers to help them get into homes, which delays relationships and marriages and having kids – sometimes permanently.

Meanwhile, young people are earning less, worth less, and taxed more, than older, wealthier people. From 2004 to 2016 the wealth of older Australians increased by 50%, while those under the age of 35 has barely moved. The current cost of living crisis just exacerbates this, affecting those renting or with big mortgages and low savings even more.

Young people know they are falling behind. They are less hopeful than previous generations. And older generations are worried their children won’t enjoy the lives they want them to.

The cause of our economic malaise

Productivity, intergenerational equity, and housing. These are wicked problems. And politics-as-usual has failed to solve them.

Like most Australians, I am sick of hearing the blame shifting of the major parties. I don’t believe either of them when they say all of our problems are the other party’s fault. I pay attention, I look at the data, and I know these problems have been brewing for decades under governments of all stripes.

Economic policy has swung like a pendulum, with a lot of focus on unwinding what the previous government has done – instead of dealing with the long-term issues. Scare campaigns and wedging. Ideology
trumping evidence. Politics first, not policy. People are fed-up with that kind of politics.

And they are sick of how we conduct the debate. They look at Question Time and think that these people are more interested in 1-liners, in each other, in heckling and being thrown out of parliament, than what really matters to our community.

So, I’m not here to propose a couple of silver bullets, to make our problems disappear. They won’t.

People are fed-up with band-aids and the short-termism – designed to distract from the inescapable truth that these problems are far greater than we like to think – and much harder to solve than we want to believe.

Today, I will tell you my priorities for economic reform, and I will make an offer, and thrown down a challenge.

My offer is that I will work, as an independent, with anyone and everyone in the parliament who wants to get results on the issues that matter. We don’t have to agree on all things, but if you care about an outcome more than the politics, come sit by me.

And my challenge is to all parliamentarians, but particularly the major parties. Our legacy as a generation of representatives will be judged on our ability to deal with the 3 biggest economic issues facing our country:

• Growth
• Intergenerational equity
• The energy transition

If you don’t have the stomach to deal with them, then you shouldn’t be in parliament.

Alternative vision

Let’s start with growth and productivity.

If we’re serious about growth, we need to do four things: we need to simplify doing business, ramp up innovation, make our tax dollars deliver, and reform our tax system.

None of this is easy, but it is necessary.

Making it simpler to do business

We should aim to be the best place in the world to start and grow a business. We have what we need – high education, rule of law, abundant resources.

Business is not the enemy. Business is source of our greatest opportunities

But Talk to any business owner and they will tell you the one thing government can do for them is to cut red tape – either industry-specific bureaucracy and regulations or industrial relations. Every government promises cutting red tape agendas and taskforces, but they don’t deliver.

But the need is there in every sector. Government is wasting people’s time and precious resources. medical researchers spend a quarter of their time writing grant applications, childcare workers spend less time with the kids than the paperwork, and clean energy companies waiting 7 years for a wind farm approval. We need every government agency to be proactively thinking about the cumulative impact of the regulation it imposes and ensuring that our regulatory goals are being achieved with the least-possible impact. Services NSW has shown us the customer-centric mentality we need – now we need the Commonwealth to apply that same of sense accountability via executives charged with this responsibility.

Our industrial relations system may be well-intentioned but, in practice, it is an archaic shambles which is no longer fit for purpose. Instead of being there to carefully calibrate how we safely deliver wage and productivity growth, it is an ideological zero-sum game. And the government’s IR changes have come at the worst time of high inflation and low unemployment. We need to remember that reducing flexibility can reduce jobs for workers – as e61 analysis showed when businesses shifted from workers to capital when employment became less flexible.

I know of businesses who now refuse workers the ability to take on additional shifts, or to take on higher duties, because they don’t want to fall foul of byzantine award rules or to be accused of wage theft. That hurts workers and businesses – for no good reason.

I spoke to a business owner just last week who dismissed a worker for bullying - only having to pay them off when to avoid unfair dismissal case. They were trying to protect their other workers and had followed all the right steps. But their lawyer said the uncertainty of legal proceedings was just not worth it. Who is being protected when employees who bully and harass their co-workers get a payout for being sacked?

In the short term, we should start by giving small businesses more relief from an IR system that was designed for conglomerates. We need to simplify awards, and looking for opportunities for employers and
employees to work together in support of greater flexibility in return for greater wages. But, in the long term, we have to modernise or replace the Fair Work Act.

The 2nd key priority needs to be ramping up innovation

e61 has shown that productivity is driven by dynamic, young firms. I have many of those trailblazing firms in my electorate. But those firms tell me their ability to deliver innovation is hampered by a lack of access to capital and contracts. Capital investment in Australian startups is just one-third of the US and half of the UK, and our super funds commitment to venture is shrinking. One of the innovative AI firms in my electorate is selling to a quarter of the UK hospitals, but only a fraction of that in Australia.

It is time to strengthen the early stage capital markets here, including reforming your future your super, to deliver startup growth and innovation. Government needs to be a better customer of our innovators.

The third priority must be making our tax dollar work better for us

Labor is been keen to take the credit for two large surpluses - but the fact is that the Budget is in structural deficit and will stay there for years to come. Neither side has a plan to deal. Most of the community don’t want higher taxes – they want our tax dollars to work better by improved productivity in the public sector.

In my twenties, I worked in change management in a big public hospital, working out how to improve quality of care and patient experience, while simultaneously reducing costs or holding budgets constant. It taught me we can do better with our public resources.

Infrastructure is a good place to start. The Commonwealth spends $10 billion a year but doesn’t always do the basic due diligence to ensure that the benefits outweigh the costs, that money was spent appropriately, that lessons are learnt from future projects. Which means huge amounts of public money is wasted on white elephants like the Suburban Rail Loop.

And this is happening at a time when we actually need those construction companies, tradies, and labourers to be building homes and easing pressures on renters and buyers. Talk about an own goal.
It’s not just infrastructure, of course. But we need a shift in mindset from inputs to outputs. If we can’t take easy decisions on infrastructure, how will we ever take hard decisions in healthcare? I will be introducing a private members bill on this basis.

Number 4 - Tax reform needs to underpin our future

As well as debating how we spend tax, we need to better debate how we raise it.

I have been calling for the abolishment of stamp duty since 2022, and welcome the Housing Minister and others getting on board. State governments know it’s an awful tax – it penalises people who move home, who downsize, and who get divorced, it raises insurance premiums and it stops about 300k people in NSW owning their own homes – but the states simply can’t give up the revenue. The Commonwealth should step in and provide interim support.

The tax system needs to be deployed to drive more capital investment, unlocking the productivity gains that catalyse lower prices for consumers and higher wages for staff. We should fund this through taxes on economic rents such as in resources and prices on negative externalities, like the harms of social media. There’s a lot of technical discussion about the best way to do this – such as company tax cuts vs investment allowances - and I will be putting forward options for debate in my Green Paper.

We also need institutional change, through a tax reform commission that can provide policymakers with credible, tested options, and a tax reform process in the next parliament.

Intergenerational inequity

Tackling intergenerational equity is no less complicated than productivity and no less important. And we do that through tax and housing.

We need to lower income taxes on working people. We are already too reliant on income taxes and growing more reliant over time – meaning younger, working people are bearing more of the tax burden even while they shrink as a proportion of the population. With our current structure, you can have two households earning $100,000 a year: one working and one retired. The working household will pay twice the tax despite the retired one likely being significantly wealthier.

This clearly is not sustainable.

To reduce taxes on working people – we need to reduce tax concessions over time and be prepared to consider additional consumption taxes.

But while tax is important in the long term, housing is urgent. It is the biggest cost of living challenge we are facing – and the one the political class is most responsible for stuffing up for the last 20 years.

This is the area which calls on the need for the whole parliament to stop the wedging and start working together, because there are good ideas from different sides, and collectively there is an opportunity to start a long-term plan. And the community is disgusted to see politicians wedging each other on this, when this is so heartbreakingly personal to Australians. We have to increase supply and lower construction costs across diverse ranges of housing, support those who are locked out, and look after renters.

I am pushing for increased construction worker migration, sharper incentives for zoning reform and approvals, learning from the experience of Auckland, a slow down on government mega projects that crowd out house building, a construction regulator that drives lawfulness and productivity, and longer term more flexible rental contracts that give renters certainty.

The Coalition, needs to stop fighting housing targets – but rather work out how to deliver them. Targets create accountability and 1.2m homes isn’t even enough. The Coalition and the Greens should back build to rent and shared equity schemes because they solve real problems.

Labor needs to show they are serious about dealing with the CFMEU by supporting a new construction regulator. We won’t unlock supply until we improve construction productivity which has declined by 19% in the last 10 years.

We all need to back Labor incentives for the states to fix planning and Labor and Coalition incentives to put in local infrastructure. Both can lower construction costs. We should all back reviewing negative gearing and CGT, but not until supply is back where it needs to be. Everyone needs to back replacing stamp duty.

The parliament has finally recognised housing is a problem. We will be judged on whether we throw all our efforts to make a difference, or whether, like with climate, we try to score political points. That is how our communities will judge us.

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The policies I have outlined are not a panacea but they would be real progress.

It would take more compromise, cooperation, consultation and courage than we have seen.

But it can be done.

People frequently tell me I’m taking a risk with tax reform. But, after you’ve engaged people in the community, it doesn’t feel like that.

A few weeks ago, on a wet evening in Wentworth, I bought together 120 people from my community to talk tax. We sat around in small groups, discussing the trade-offs of where we can raise or lower taxes – and the compromises that might be needed to make real reform stick.

It wasn’t scary. It was inspiring. It shows that politics can be done differently and that engaging community can be the start of reform, not the tick box at the end when you know what you want.

And while we don’t know what the next parliament will bring, I can tell you that independents aren’t being elected to be timid or to preserve the status quo. My community sees the need for change.

But change through listening to the evidence, negotiating and compromising. Backing a good idea, whatever the source. And continuing to invest in our democracy, through truth in political advertising, stopping jobs for mates and meaningful engagement with our communities.

People across the country are responding to this. They are excited by it. They feel represented – for the first time in a long time. I was talking to a constituent who asked me if I was really independent, how I voted in parliament. At first he seemed a bit sceptical. I told them that when the Coalition has put forward a vote, I’ve supported it 56% of the time. When Labor did, it was 50%. And when the Greens did, it was 49%. He said that sounded pretty independent. Keep doing what you’re doing.

Free to work with all sides for what’s right and free to stand up against what’s not

When the major parties go on trying to create fear around independents and minority government, I come back to the offer I made earlier. I will work with anyone in the parliament on the issues important to my community, to the country. I will judge each issue on its merits, on the evidence, and on the feedback from my community. And I come back to the challenge. Our legacy as a generation of representatives will be judged on our ability to deal with the 3 biggest economic issues facing our country

• Growth
• Intergenerational equity
• The energy transition

If we end up with a minority government next term, it would not be an aberration of our political system. It would be a consequence of that system being broken. And perhaps a route to fixing it.