Signs are already not good for Chalmers’ productivity testament

This week, the festival of productivity kicked off in Canberra. The quasi-religious ritual will culminate in a productivity roundtable, at which an anointed few will gather to chant the catechism of economic reform.

Policy festivus is celebrated in Australia when a political party is ascendent but its courage is in retrograde. This cargo cult-style ceremony mimics the Accord, a revered moment in Australian political lore when the Hawke-Keating government brought together the heads of the unions and business to reach a groundbreaking arrangement which, it is widely agreed, set Australia on the path of prosperity.

The Albanese government has shown itself to be a great devotee of the Cult of the Accord. In its first term, it held the Jobs and Skills Summit, which lined up all the key players and ideas to simulate the process. Thanks to meticulous planning, the Rites of Full Employment performed at the summit confirmed the government in its conviction that it is the key player in creating jobs. Those who lack faith say that it is doubtful that the summit has led to actual employment outcomes.

Aglow from its success, Treasurer Jim Chalmers launched his next project, “Measuring What Matters”, or the wellbeing budget. But Measuring What Matters had a problematic feature: it opened a window into a deeper theology. Namely, the question of what exactly wellbeing might be. If there is one thing the Albanese government, dominated by Labor Left, will not tolerate, it is the idea that there might be different conceptions of wellbeing than the one which it preaches.

By the October 2022 out-of-cycle budget, wellbeing had been reduced to a tiny addendum. The following May, it was gone entirely, and the addendum from October had been scrubbed from the previous year’s budget papers online. In July 2023, Treasury put the completed paper up online without fanfare. Measuring What Matters was shrunk and sunk.

Not to be deterred – and it is quite refreshing to see a politician doggedly attempt to do his actual job rather than just play politics – Chalmers requested that the Productivity Commission produce a set of proposals for improving Australia’s prosperity. This week the first of these dropped, marking the official start of the festival of productivity.

It’s a doozy. The interim report on “Creating a more dynamic and resilient economy” is brief (under 100 pages), simple and bold. It proposes lowering the tax on companies with revenue below $1 billion from 30 per cent to 20 per cent, replacing the resulting decrease in tax take with a 5 per cent tax on cashflow. Companies with a turnover above $1 billion would continue on the 30 per cent tax rate, as well as paying the cashflow tax. Regardless of size, all companies could immediately deduct capital investment – for instance in equipment needed to grow the business – against the cashflow tax.

The genius of the cashflow tax, which would be the first of its kind in the world, is that it would encourage companies to buy what they need in Australia, creating a further benefit to the economy. In particular, overseas companies with revenue over $1 billion – those that could undertake their procurement anywhere in the world – would have an incentive to make their acquisitions in Australia in order to reduce their tax bills.

This interim report goes well beyond what the treasurer might have hoped, both in the creativity of its ideas and its time horizon. It’s not offering a quick win, but genuine reform.

There are four more of these papers to come in the lead-up to the roundtable at the end of the month. Next one on cheaper, cleaner energy; then harnessing data and digital technology; building a skilled and adaptable workforce; and finally delivering quality care more efficiently. If the first has set the tone, the treasurer will have more ideas on his hands than support in his party to deliver them.

And indeed, the signs are already not good for the new productivity testament. Prime Minister Anthony Albanese and his allies went through five stages of rejection before the Wellbeing Budget was quietly dumped, and it looks like they’re doing it again. It starts with in principle support, moves to qualification, then bemused tolerance, followed by indifference and finally the coup de grâce: neglect.

In his National Press Club address in June this year, Albanese provided in-principle support for the productivity process, announcing that he had “asked the treasurer, Jim Chalmers, to convene a roundtable to support and shape our government’s growth and productivity agenda”. Since parliament resumed last week, the legislative focus of the Albanese government has been to ensure that any proposals would be qualified and toothless in the face of the industrial relations agenda supported by the Labor Left.

Following the release of this paper, we can be assured that Albanese and his allies will move into a phase of bemused tolerance, sitting back to see if Chalmers can spin the proposals into something they fancy. If the Productivity Commission report series produces many more ambitious ideas, expect indifference, with the prime minister rarely commenting on the process and increasingly distant from proceedings. And then, neglect. The roundtable will, of course, result in a paper, which must, of course, be released. The process being complete, the government will move on.

Should Chalmers fight against productivity oblivion, he won’t be excommunicated. But to do so would be to highlight how powerless the Right faction of the Labor Party, from which the treasurer hails, is in the current make-up of parliament. It would also serve as a reminder that the Left favours orthodoxy over the bravery to evolve the Labor scriptures.

The sad fact for Australia is that productivity ideas great and good are predestined to be sacrificed on the altar of political will and factional jostling. They will die for our national sin of complacency. Merry festivus to all the policy people out there.

Parnell Palme McGuinness is managing director at campaigns firm Agenda C. She has done work for the Liberal Party and the German Greens.