The recovering economic outlook, both globally and domestically, means the government must act now or risk more severe corrections later.
Standard Life Investments’ chief economist Jeremy Lawson said a rallying world economy means the current government would be wise enact reform early.
“The recovering global and domestic economy provides a window of opportunity to implement change- if it is wasted, adjustments will eventually have to be far more severe,” Mr Lawson warned.
Over the next 5 years Australia will need to contend with diminished housing affordability, falling inflation, the possibility of blunted monetary policy and a ratings downgrade, a deteriorating long-term fiscal position, and stagnant wages.
“It is critical that the re-elected government tackles all of these challenges at source,” he urged.
“Australian’s think tanks and policymakers are not short of ideas for structural reforms, fiscal reforms and the rebuilding of Australia’s physical and intellectual infrastructure.”
He credited Australia’s current economic status to bygone economic managers, saying the country’s good fiscal standing was “thanks more to the efforts of distant governments than more recent ones.”
He dismissed more contemporary government makers as lacking foresight.
“The RBA has been forced to do too much of the heavy lifting to support economic rebalancing while successive government have avoided reforms and pursued the wrong fiscal mix,” he explained.
He says that with Australia having coped comparatively well in a volatile market and with the mining boom winding down, the opportunity to implement reform is now.
“In many ways the Australian economy has absorbed the shock from lower commodity prices exceptionally well,” Mr Lawson explained.
“The non-mining economy, and especially housing, tourism and broader consumer spending has strengthened enough to partially offset the commodity shock, while the labour market has also performed well, showing the benefits of flexibility enhancing reforms over previous decades,” he added.