The idea of an Intergenerational Report (IR) sounds noble when the people of today try to guess the future and then make decisions to ensure our children and our children’s children don’t one day look back and say: “What a bunch of selfish bastards our forebears were!”
As I say, it’s a noble intention but what gets promised and what actually happens rests on a lot of assumptions, lots of vested interest politicians and even technology that might not yet be conceived and invented. And it assumes the people of 40 years’ time will have goals about life that we can understand today.
I know 40 years ago I would never have thought newspapers would be on death row and people would go to restaurants and sit together and spend more time looking at a strange electric device for more time than they spent actually eating and talking! And they’d take photos of their food using a thing called a mobile phone!
And despite my good fortune to be asked by many media businesses to do an economic oracle thing for about 40 years, I have to confess I never saw a pandemic that would lock down the world in my crystal ball. Neither did any respected economist or Treasury boffin linked to the previous Intergenerational Report.
The latest one, generated by Treasurer Chalmers and his Treasury team, has looked at possible looming problems such as the debt of a future federal government surging to over 55% of GDP. It’s currently around 26%, so avoiding an out-of-control spending government like the current one, might be something that should be crucial to this Report.
Happily, for Jim, he sees Artificial Intelligence (AI) as the white knight that will help us defeat the debt-creating dragon.
Here’s a summary of the main points of his IR:
- AI will be the productivity play that will beat inflation and escalating government debt.
- Productivity is tipped to grow at 1.2% a year, which economists think is dodgy: too big a call.
- Our population will be heading towards 40 million.
- His property tax reforms were praised because they will pay for tax cuts in the future.
- The IR says the Albanese Government has helped start the process of Budget improvement, though some economists might dispute this claim.
- Treasury projected that real GDP per person, now at $99,200, would reach $157,300 in 2065-66.
- We will be driving electric vehicles so the fuel excise tax take will fall, along with the tobacco tax collections, which suggest the current black market won’t be closed down!
The AFR reports that “Chalmers said artificial intelligence would be the biggest economic transformation of a lifetime and would play a pivotal role in helping productivity growth reach Treasury’s 1.2 percent annual growth forecast.”
In his own words he told an ANU audience: “The productivity, investment and labour market impacts of AI will be dramatic.”
It’s important to point out that modelling says if AI only delivers a 0.8% gain in productivity, then the government debt-to-GDP ratio will head towards 30% of what we produce, which is akin to what happened during Covid.
Treasury said AI was expected to increase productivity globally, but the question was the extent to which Australian firms would adopt the new technology. The Treasurer says two-thirds of Australian businesses had adopted AI in some form, but less than 10% described it as significant.
The bottom line for this optimistic IR is that if we get 1.2% productivity growth from AI we will have less government debt problems, lower taxes and a materially better life. And interestingly, the Treasurer paints a pretty productivity picture that gives higher wages and lower taxes for “workers”, as he likes to call those who have enjoyed the Albanese Government’s tax cuts and other benefits.
However, there’s an irony here that Jim mightn’t see, so let me sum it up for him. I will use something I used to call “Sussan Economics” when I lectured at UNSW. You know the old ad: “This goes with this, goes with this at Sussan.”
The Albanese Government made worker life better, but this goes with making employer lives harder and this goes with lower productivity, and this goes with less profits. All this goes with employers looking to replace workers with AI technology. So, indirectly, Jim has given incentives for employers/entrepreneurs to lose workers.
The Albanese Government has a great respect for workers, but it ignores the people who take the risks with their money and their lives to provide the work for workers.
Great political leadership needs to evolve so we see a win-win future, where both workers and employers benefit from working together. Maybe AI in the future will serve to make this happen but it’s not a goer right now.
