Committee for Economic Development of Australia chief executive Melinda Cilento believes 2022 will be a critical year in shaping the country’s economic and policy direction as it recovers from the COVID-19 pandemic.
Speaking at the release of CEDA’s economic and political outlook 2022, Ms Cilento argued that now more than ever, “Australia needs policymakers who are forthright in confronting these choices and challenges, and in communicating their priorities and intent”.
She said that Australia’s productivity growth of 0.9 per cent over recent years, falls well short of the long run 1.5 per cent annual growth rate upon which government projections are predicated.
“This is concerning as productivity growth has contributed over 80 per cent of growth in Australians’ incomes over the last three decades.”
To increase productivity, Ms Cilento said Australia needs measures that facilitate greater mobility of workers and greater capacity through skilled migration, education and training.
Ms Cilento also highlighted open trade and investment and pro-competitive regulation as “the most practical and low-cost approaches” that policy makers can adopt to lift innovation, productivity and prosperity.
“Targeting sectors that have been productivity laggards such as the infrastructure and construction sector also makes sense,” she said.
Moreover, she pointed to historically high public infrastructure investment, noting it “should be used as an opportunity for government to unlock greater productivity”.
Overall, CEDA expects to see a strong economic rebound from the second quarter in 2022, as the economy starts to operate more normally and fiscal policy supports growth in the second half. Slower growth is tipped for 2023 as the Reserve Bank starts to normalise monetary policy settings and house prices fall.
The think tank expects the RBA to bring forward the start of rate hikes to late in the fourth quarter, with the cash rate predicted to reach 1 per cent by mid-2023 and 2.5 per cent by late 2024.
