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What would it take to fix the Australian economy? 7 experts answer

Top economic experts reveal how they'd fix the Australian economy. (Source: Getty)

Australia’s economy is sick.

We are yet to see the full damage of the Australian bushfire crisis and the coronavirus epidemic, which hit just when the economy was showing signs of recovery: indeed, the most recent GDP figures were slightly better than expected.

However, Australia is still grappling with non-existent wage growth, the rising unemployment rate, and chronically low inflation, with Australia’s longest-serving treasurer Peter Costello yesterday noting that Australia’s “unsexy” issues need to be addressed to boost productivity.

The Morrison government is well-aware of the dire economic situation: last year’s $158 billion tax cuts were designed to encourage consumer spending. However, the tax cuts barely made a dent as Aussies saved, rather than spent, it.

Now, Treasurer Josh Fydenberg is preparing to unveil a new stimulus package that would provide businesses with financial support.

But will it be enough? In a post-bushfire and post-coronavirus outbreak era, Yahoo Finance asked seven experts to share their thoughts on the most important thing that needs to be done to kick-start Australia’s economy. Here’s what they said.

Give Aussies cash: Stephen Koukoulas, independent economist

The single, most effective solution would be to have a series of cash payments to householders. 

The bulk of this money would be recycled through the economy, ramping up retail spending and sustaining jobs. To support the economy over time, it could be a payment made once a month for several months. 

The other benefit is that such action is not baked into the budget (unlike tax cuts, which last forever). When the fallout from the virus ends, the payments stop. 

Boost wages: Jim Stanford, Australia Institute Centre for Future Work chief economist

Consumer confidence has been hammered by the fires and now by the pandemic … but it was already staggering because there’s been no improvement in real wages for the last seven years. The string of retail bankruptcies in recent months is more proof consumer spending is historically weak. 

For years the government has been telling Australians to be patient and just wait for better wage growth around the corner. That hasn’t happened – and in fact it is now clear that wage growth will get weaker before it gets stronger. The latest economic and labour market data has been very disappointing. 

Instead of just hoping for better wage growth around the corner, here are four things the Commonwealth government could do right away to strengthen wages.

  1. Provide emergency income protection for workers who lose work because of the pandemic;

  2. Restore penalty rates for hospitality and retail workers;

  3. Lift the minimum wage to a living wage level;

  4. Eliminate the 2 per cent cap of wage gains for public servants.

Incentivise businesses to invest more: Shane Oliver, AMP Capital chief economist

A significant tax inducement available for all businesses to invest more by December 31.

It would basically mean allowing companies to reduce their tax bill by all or a portion of the amount of investment they undertake.  

This is already available for smaller businesses but needs to be extended in some way to big businesses too.

Government should cough up: Kerry Craig, JP Morgan Asset Management global market strategist

The broad answer is to create demand, but this can be achieved in many ways.

It could be done by increased government spending on infrastructure that generates the need for resources and labour, boosting wages, which would flow into the broader economy.

It could be done by incentivising households to spend, and lift consumer demand through tax cuts, rebates or so called helicopter money. It could be done through regulator changes around wage and the labour market or the housing market.

Once Australian companies and consumers feel better about the direction of the economy, job prospects, earnings, then they are likely to spend and invest more, lifting domestic economic activity.

Print more money: Jessica Amir, market analyst, Bell Direct

If I could say one thing that we need in times like these, it’s quantitative easing (QE).

We are expected to see another rate cut next month. But that’s not enough to prop up growth.  

Which is why we are expecting some light quantitative easing (when the RBA will step in and buy bonds, injecting money into markets, which will encourage spending, boost growth and employment.. and hopefully wages will rise too).

Let’s remember there are still too many people unemployed and wages are not high enough to boost economic growth. As they are not in the RBA’s sweet spot, to support and bolster economic growth…we need QE.

Just stop coronavirus: CommSec, chief economists

Nerida Conisbee, chief economist: Towards the end of 2019, the Australian economy was turning around. It wasn’t a quick recovery but slowly we were seeing far better conditions. Already the coronavirus is impacting our economy. 

Tourism and education have been hit hard and this is flowing through to retail trade. We saw an interest rate cut this week but we will also need the Federal Government to start spending again. 

This year’s budget will be interesting and will hopefully include spending measures that combat the tough start to the year. 

Craig James, CommSec chief economist: It’s medical news rather than economic news.

A substantial announcement on treatment for COVID-19 or a successful vaccine would surely lift investor, business and consumer confidence.

Note: Some quotes have been lightly edited for brevity.

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