‘Let the ball slip’: Decades of government ‘coasting’ plaguing Australians, AMP’s chief economist Shane Oliver says

Australian governments over the past two decades have “let the ball slip” and squandered the momentum generated by massive economic reform and the mining boom, a leading economist has declared.

Former treasurer Peter Costello on Tuesday warned Australia had shifted from having no net debt to no net worth, with government capital having run down $700b over the past 20 years.

“This will particularly disadvantage the young,” the Howard-era treasurer said at the Aspire conference in Sydney.

Reacting to Mr Costello’s speech, AMP’s chief economist Shane Oliver said Australia’s strong productivity growth and boost in living standards between the beginning of Bob Hawke’s prime ministership and the end of John Howard’s was wasted.

“Unfortunately, since… just less than 20 years ago in 2007-08, governments in Australia have let the ball slip,”  he told Business Now.

“We’ve coasted too much on the earnings from the mining sector. We’ve had good luck on that front, but we’ve dropped the ball in terms of productivity reforms.

“Our tax system is no longer fit for purpose, our economy has become a lot less competitive, we’ve seen the budget turn around from surpluses to perennial deficits… it looks like budget deficits as far as the eye can see, and at the core of all of this has been this big slump in productivity growth.”

Australia’s productivity growth currently sits around historic lows at 0.8 per cent.

Between the 2004 and 2016 financial years, annual productivity growth was either 1.7 or 1.8 per cent.

It took a dive over the past decade by about one per cent.

Mr Oliver said the lacklustre productivity was worsened by large levels of public spending which had put pressure on inflation and interest rates.

“We’re running record levels of government spending and rising levels of taxation,” he said.

“The only way we have a hope of getting the budget back to balance is if we just keep relying on bracket creep.”

Mr Oliver has previously warned Australia could face higher borrowing rates if debt to GDP rises to the point where major agencies are forced to downgrade the nation’s credit rating.

Government spending sits at its highest level in 40 years – outside the pandemic – and spending as a portion of GDP will be 26.9 per cent in 2025-26.