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Frydenberg signals reforms amid 'mega-trends' of rising debt, ageing population
By Shane Wright
Treasurer Josh Frydenberg will use a major address on a string of mega-trends challenging the global economy as a call to arms for Australia to remain committed to open markets and take on major structural reforms to make the country more competitive.
Mr Frydenberg will use a speech at the Australian National University on Tuesday to argue that while Australia has benefited from the transformation of the global economy over recent years, it will have to prepare for new changes in areas from ageing demographics to rising debt levels.
Treasurer Josh Frydenberg will use a major speech in Canberra on Tuesday to argue the importance of Australia embracing structural reforms to boost the economy.Credit: AAP
The government has been under pressure internally and from institutions such as the Reserve Bank to embark on structural reforms to help boost productivity, increase growth and lift wages.
The Treasurer's speech will touch on how the economy grew on the back of significant international institutions set up in the immediate wake of World War II but substantial domestic reforms will now be needed to deal with new challenges.
"In today's global environment characterised by changing demographics, elevated debt levels, environmental pressures, and great power tensions, it's critical that we pursue reforms at home that retain our competitiveness, openness, and fiscal discipline, and that globally we remain a strong advocate for a transparent and rules-based global economic system that has strong multilateral institutions," he will say.
Mr Frydenberg will argue the World Trade Organisation needs to be "reinvigorated" with a better dispute settlement system plus a broader remit to deal with e-commerce and opportunities in the digital economy.
He will also call for the International Monetary Fund to change its governance structure to reflect the larger role of emerging economies, particularly those in Asia.
"Given Australia's strong strategic, political and economic ties with key partners both near and abroad, we are well placed as a nation to play an active and constructive role," he will say.
"We need to reclaim that spirit as we pursue multilateral and plurilateral arrangements that embed the concept of openness in their rules and norms and support a broader rules based order."
Another issue raised by Mr Frydenberg in an opinion piece written for The Age and The Sydney Morning Herald will be large amount of debt across the world.
Australian households are among the most indebted in the world while despite the government bringing the budget into surplus this year, federal debt is at an all-time high of $550 billion.
"With interest rates low, global debt levels are being managed. However, with global debt levels up fifteen per cent in the last three years, to now be at a record high of US$188 trillion, or 230 per cent of global output, concerns are rising," he will argue.
"At these levels, the ability to respond to future shocks is more constrained; the impact of any future shock is more amplified and future generations will be left to deal with the consequences."
His speech comes as a new survey of business chief executives by The Executive Connection shows a sharp fall in confidence.
CEOs now have a negative outlook for the national economy while confidence about their own operations is barely positive after jumping in the wake of the May election result.
Warren Hogan, chief economic advisor to The Executive Connection, says business CEO confidence is falling on concerns about the economy.Credit: Anthony Johnson
The connection's chief executive adviser, Warren Hogan, said business had "pulled back their relentless optimism" with profitability diving for many firms.
There are some positives, with almost half of all firms expecting to put on more staff while two-thirds believe sales revenues will rise.
But Mr Hogan said confidence had taken a hit from the recent cuts in official interest rates and ongoing questions over the economic policies of the federal government.
"The lack of confidence we're witnessing is further being undermined by seemingly ineffective policy actions from the government and the RBA, uncertainty about the economy and a persistently negative economic narrative," he said.