Australia’s Largest Christian News Site

OECD chief Mathias Cormann warns Australia is losing its competitive edge, as excessive regulation, housing pressures, immigration challenges and declining public trust threaten national prosperity.

The Secretary-General of the Organisation for Economic Co-operation and Development (OECD) says Australia is going backwards.

Former Australian Senator Mathias Cormann, now OECD boss, isn’t vague about what’s to blame.

Although Cormann didn’t specifically lay the blame on Labor, the criticisms he shared with John Anderson on Wednesday implicate the Albanese Government.

When sharing his thoughts on globalisation and the OECD’s role, Cormann affirmed objectivity.

He said that the OECD’s data was a strong resource for nations that want to work together to overcome obstacles to market-based democracies.

Cormann then talked about nations needing fiscal buffers to absorb economic shocks.

The Pension Problem: An Ageing Population and Fewer Children

From his unique vantage point with the OECD, he also issued a warning. He said that unless the problem is resolved by politicians with a backbone, Westerners will have to work longer and spend less time in retirement.

Pensions, he remarked, are hit by people having fewer children and an ageing population living longer and healthier.

Cormann said that more people are spending longer in retirement, adding, “either you pay more on the way in, or you get less on the way out, or you stay longer contributing.”

Alongside discussing the hard decisions required to fix this, and the inevitable public pushback on pension reform, he also talked up the economic benefits of women in the workforce.

Cormann argued that gender equality brings balance while at the same time acknowledging there are fewer kids and that the West is facing population decline.

Housing Affordability, Immigration and Australia’s Demographic Dilemma

Marking one area where Cormann and Anderson appeared to disagree, Anderson rightly pointed out that those benefits in the workforce have their ups and downs.

He said, “It’s worth keeping in mind that in Britain, 70% of young mothers say that they would like to be able to work a little less if they could afford it. But they feel such pressure now to go back because of the problem of housing affordability, which seems to be universal across the West.”

Affordability is a problem of demand and supply, the OECD boss replied.

The way to tackle housing affordability, he said, “is to ensure that supply keeps up with the level of expected demand, and that involves many different levels. When you look at planning and local zoning arrangements, there’s got to be a better way to ensure that supply can match the demand.”

Anderson responded by expanding on his point about women in the workforce, saying this is where culture clashes with economics.

Young Australians don’t believe they’ll enter home ownership without inheriting money. Anderson described the numbers as “quite frightening.”

He then added, “It’s playing into the hands of declining demographic performance. People are delaying family formation. Young Australians are spending more — Gen Z — on their pets than their cohorts anywhere else in the Western world. It’s extraordinary.”

Anderson said the simple point is, younger Australians appear to be making spending decisions based on the bleak assumption there’s no point in saving for a house.

This feeds into the demographic issue of ageing populations, mass immigration, and suspicions among young people about higher immigration affecting housing supply and prices.

Another impression, he explained, “is that because we’re having fewer children, we’re not being told upfront that we need higher migratory intakes to do the work and pay taxes.”

As a migrant to Australia, Cormann said that throughout Australia’s history, waves of migrants have helped build and develop the country.

“I would suspect,” he continued, “that going forward, there will continue to be a need to rely in some areas on migrant workers to make up some of the impacts, among other things, of population ageing or those areas where we need skills that we don’t have readily available in Australia.

The OECD Secretary General acknowledged the sensitivity of the subject, stating he thinks the pressure points were due to immigration being handled on a federal level, whereas housing supply is handled by the states.

“There’s a level of disconnect between the two,” Cormann said, adding that without a plan, Australia’s annual immigrant intake will put pressure on infrastructure and housing availability.

In what I would call a damning indictment of the Albanese Labor Government, Cormann added that Australia is a smart, sophisticated country. We should be able to do better than what we are.

Cultural Cohesion and the Collapse of Public Trust

While careful not to go deep into the political influences, Cormann said Australia still needs migration.

The OECD boss asserted that immigrants have a role in developing Australia through specialised skills, talents, gifts and abilities.

Anderson agreed.

Despite the former Deputy Prime Minister not downplaying the importance of migratory balance, he did point out the cultural issues that weigh on public policy.

Drawing on key examples, Anderson argued that “Britain’s foreign-born population proportion is about 15. America’s about the same. We’re on 32 now. It is a big number. And since Bondi, there’s a very deep consciousness in Australia that some of those people are perhaps not culturally aligned with what we think matters. Those things are disruptive, and they do feed a sense of breakdown of trust in government, and I think that’s probably common across much of the Western world at the moment.”

As Anderson asserted, “Prosperous economies are always high-trust societies, and I think one of the cultural issues we need to be aware of is that people are losing confidence, losing trust in our institutions.”

Australia’s Competitive Edge Is Slipping Away

Cormann didn’t disagree. Instead, he seemed to double down on what could be viewed as a massive criticism of the Labor Government, saying that trust matters.

Trust, he said, “is what gives you the licence of continuing to operate a migration program and a foreign direct investment program in the national interest. But it’s a matter of making sure, as a government, you continue to maintain that trust in order to enable you to continue to do what needs to be done.”

Cormann told Anderson, “Australia used to be top of the pops on competition policy, on reform to drive productivity. We’ve been going backwards. We’re now sort of in the middle of the pack. In the end, there are no secrets. The level of regulation has become too high. We need to go back to what is driving open competitive markets.”

Cormann said that when it comes to investment, Australia’s corporate tax rate is too high compared to the OECD.

He concluded, “We used to be at the global competitive edge. Right now we’re not.”

While the OECD boss avoids getting political, his analysis should be read as a blunt criticism of the Labor government.

They’re certainly not an endorsement.

As critics from The Spectator have stated, Australia is facing a cost-of-government crisis, not a crisis to do with the cost-of-living.