Australians should brace for a bumpy economic ride

Healthy economic growth and an unemployment rate “with a ‘3’ in front” are clearly good news, but they belie very real cost-of-living challenges with inflation outpacing wages growth by a considerable margin.

Governments can’t do much to relieve short-term cost of living pressures. But they should at least avoid making the problem worse by adding stimulus to a constrained economy. Unfortunately, the former government locked in measures that will do just that – most notably a supercharged tax offset that will hit bank accounts in coming months. While difficult to wind back, Labor should commit to not adding more fuel to the fire in its October budget.

Measures that reduce the costs to households of government-supported goods and services can also make a difference. Policies already announced to reduce out-of-pocket costs for childcare and medicine should help at least some households.

In the medium term, the government can improve living standards by boosting productivity and dismantling barriers to workforce participation.

Promised reforms to boost women’s workforce participation by making childcare more affordable and accessible are crucial and need to be well executed.

The new government must work with the states to create a in integrated national energy and climate policy, including well-planned investment in the grid to support growing renewable energy penetration. This is the only way to implement the energy transition while keeping power prices low – crucial for Australia to thrive in the coming green industrial revolution.

Finally, the education and skills agenda should be paramount – a country’s human capital is essential for its long-term success. For too long, education and skills have been beset by poor policy and implementation.

Australians are in for a bumpy short-term ride but if the new government can settle and focus on these critical fronts, the economic future should be brighter.