Economists have weighed in and say the only upside to the economy is that inflation has moderated.
With its re-election secured, Labor government now faces the hard reality of dealing with Australia’s structural economic problems.
Economists warn that beneath slightly easing inflation figures lies entrenched issues: stagnant productivity, unaffordable housing, and a suffocating business environment.
Most agree that inflation, once the dominant concern, is no longer the immediate threat.
Independent economist Saul Eslake links the earlier inflation surge to the Ukraine war and the pandemic response, which saw authorities print millions in extra currency to fund the government’s COVID-19 stimulus.
“All of those things are now subsiding,” he told The Epoch Times. “And ‘underlying’ as well as ‘headline’ inflation is now back in the target range.”
John Humphreys, chief economist at the Australian Taxpayers’ Alliance, says the country’s inflation issues have been driven more by the Reserve Bank of Australia, banks, and government policy.
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“Unless there is a sudden change in policy, I expect that inflation will remain under control in the foreseeable future, though the cost-of-living crisis will continue because economic growth remains stagnant and housing is unaffordable,” he said.
Factors like high immigration and housing grant programs are also putting pressure on home owners.
Productivity Cure Still Wanting
“Productivity is at the same level as it was eight years ago, and the moribund economy is why many people are struggling,” said Humphreys.
He warns Australia’s anaemic growth is being patched over with superficial measures, while long-term reform has been sacrificed for short-term political wins—or due to sensitive polling results that suggest voter displeasure.
“Australia desperately needs significant tax cuts, less regulation on small business, and cheaper energy prices if we want to kick-start the economy,” he said.
Humphreys believes Labor’s tax measures—including modest income tax cuts and a proposed $1,000 standardised deduction—are symbolic gestures.
Gigi Foster, professor of economics at UNSW, warns Labor’s re-election could encourage it to deploy further interventionist measures.
“The real question is whether Labor will muddle through with uninspiring policy that only does minor damage, or whether they interpret the election results as a mandate to drive up tax and regulation even further, which will bring us closer to economic ruin,” she said.
Business Closures Ongoing
Business closures are an ongoing problem.
“Part of this is due to weak demand, partly due to over-regulation and bureaucracy, and part to difficulties in finding reliable workers,” said Foster.
“The government can most immediately address the first two.”
She also links workforce disengagement to a deeper social decay.
“A lot of workers today are stressed, inward-looking, and have varying degrees of social dysfunction,” she said.
“If the government really cared about Australia it would be starting a long march towards the restoration of healthy, functional, confident communities … rather than being subservient to the state.”
Eslake says business closure rates reflect the Australian Taxation Office’s resumption of tax enforcement after COVID.
“The uptrend in business closures is largely attributable to the ATO taking action to ensure that businesses meet their tax obligations—particularly smaller businesses who were granted immunity (in effect) from not paying tax during COVID,” he said.
Housing Solutions Not Apparent
Housing and the rental crisis also remain major challenges.
“None of the policies outlined in the election campaign will have a significant impact on housing affordability,” said Humphreys.
He said high construction costs, tight supply, high immigration rates, and urban sprawl were all contributing—while compounded by political inertia.
Labor party has floated its two signature housing bills—the Help to Buy and Build to Rent bills—as key solution.
“The policies of the major parties will help some young people to edge into the housing market, but they do nothing to address the underlying problems.”
No Political Mood for Real Change
Eslake agrees and offers a blunt political reading.
“For all the crocodile tears they shed over the difficulties facing would-be first-time buyers, they know there are far fewer of them than people who already own at least one property.”
“Governments of both political persuasions keep doing things that keep house prices going up,” he added.
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