The Missing 'P' - Opinion Piece for the Australian Financial Review

THE HON JOE HOCKEY SHADOW TREASURER | 04/02/10

It is now part of the furniture in Intergenerational Reports that the challenge of Australia’s changing demographics is addressed by a 3P solution – participation, productivity and population.

The latest IGR released this week predicts that over the next 40 years Australia’s workforce participation will decline from its current high level of 65.2% to less than 61% by 2050.

A decline of this magnitude will have serious consequences for the economy, yet the only solution Treasurer Wayne Swan offered on Tuesday was a $43 million call centre and the establishment of the Consultative Forum on Mature Age Participation - yet another committee.

Recently Prime Minister Kevin Rudd spent seven days preaching on the second P – productivity. But his seven-day oratory did nothing.

Gary Banks, head of the Productivity Commission, late last year identified that three key areas for productivity improvement were: “rethinking infrastructure” via cost-benefit analysis (which the Government refuses to do on the national broadband network); “regulatory reform” (which has been shuffled off to COAG) and that “industry support ought to be reviewed regularly to determine whether it is generating net benefits to the community” (which the Treasurer has ruled out).[1 - Gary banks, Presentation to the Melbourne Institute/Australian Economic and Social Outlook Conference, 5 November 2009]

So for all the rhetoric and bluff and bluster, where are the productivity improvements going to come from?

That leaves us with the missing P – population. Compared with the 2007 Intergenerational Report which predicted a population of 28.6 million in 2047, yesterday’s report updated this forecast to almost 36 million by 2050.

In October last year when Treasury Secretary Ken Henry first revealed this increased population forecast, Kevin Rudd was incredibly enthusiastic, saying “I actually believe in a Big Australia, I make no apology for that. I actually think it’s good news that our population is growing.”[2 - Kevin Rudd, 7.30 Report with Kerry O’Brien, 22 October 2009]

Many were shocked to hear the Prime Minister so eagerly welcome what is the equivalent of a new city of around 7 million people by 2050. Such a massive increase with a lesser level of growth should certainly warrant some trepidation in the Prime Minister’s remarks.

At Question Time on Tuesday, Rudd misses the third “P” – population in his scripted Dorothy Dixer on the IGR. He followed the lead of his Treasurer at the Press Club and the population debate was dismissed.

But didn’t Rudd open the batting on 36 million? Now after losing a few wickets he declares the innings closed.

The latest IGR predicts growth will be slower, costs greater and wealth comparatively less even with a bigger population. Instead of tackling these challenges head on, Rudd is running from the debate.

If we are not to go backwards in our standard of living, we must have adequate infrastructure, affordable housing and an economy which delivers real increases in prosperity for all Australians.

This will involve tough decisions. Without delivering clear policy on these important issues, population will remain the missing P.