Presentation of the 2018 OECD Economic Survey of Australia

2018 OECD ECONOMIC SURVEY OF AUSTRALIA Ensuring further success

Paris, 10 December 2018

www.oecd.org/eco/surveys/economic-survey-australia.htm OECDEconomics OECD

27 years of robust economic growth Gross Domestic Product (real) Index 1975 = 100

Index 1975 = 100

400

400

350

350

300

300

Annual GDP last dipped in 1991

250

250

200

200

150

150

100 1975

100

1980

1985

Source: OECD Analytical Database.

1990

1995

2000

2005

2010

2015

2

Incomes continue to rise Real GDP per capita Index 2005 = 100 115 110

AUS

EA

OECD

USA

105 100 95 90 2005 Source: OECD Analytical Database.

2008

2011

2014

2017 3

Unemployment is falling Rate of unemployment (unemployed persons as % of labour force) 7

6

5

4

3

2005

2007

Source: Thomson Reuters.

2009

2011

2013

2015

2017

2019 4

The quality of life is good Indicators of well-being

Country rankings (1 to 35)

20% top performers

60% middle performers

20% bottom performers

Australia 1

12

11

11

10

7

7

1

5

23 31 Work & life balance

Personal security

Jobs & earnings

Education & skills

Source: OECD Better Life Index 2017 database.

Income

Housing

Subjective well-being

Social Environmental Civic Health status connections quality engagement & governance 5

Monetary policy, housing market and financial regulation

6

Housing markets are beginning to cool House prices in major cities Index 2005Q1 = 100 275 250

Sydney

Melbourne

Adelaide

Perth

Brisbane

225 200 175 150 125 100 75

2005

Source: Thomson Reuters.

2007

2009

2011

2013

2015

2017

7

Household debt remains high Household liabilities as a % of net household disposable income 200

AUS

190

USA

ESP

CAN

180 170 160 150 140 130 120 110 100

2005

2007

Source: OECD Analytical Database.

2009

2011

2013

2015

2017 8

Recommendations on monetary policy, housing market and financial regulation • In the absence of a downturn, gradually increase interest rates • Be prepared for a possible significant correction in the housing market, including bail-in plans in the case of bank insolvency • Assure strong accountability, transparency and competition in the financial sector including an appropriate response to the banking Royal Commission 9

Fiscal policy, tax and spending reform

10

The federal budget position has improved Federal budget balance, % of GDP 2 1 0 -1 -2 -3 -4 -5

2006-07

2008-09

2010-11

2012-13

2014-15

2016-17

2018-19

2020-21

Notes: The balance shown is the “underlying cash balance”, which a main reference balance in federal-government budgeting. It is equal to receipts less payments, less net Future Fund earnings. The dotted line indicates the federal government’s balance projections.

Source: Commonwealth (federal) Budget 2018-19.

11

Australia’s goods and services tax remains low Standard rates of Value Added Tax/Goods and Services Tax, 2018 % 27

24

24

21

21

18

18

15

15

12

12

9

9

6

6

3

3

0

0

CAN JPN CHE AUS KOR NZL MEX ISR LUX TUR CHL DEU OECD AUT EST FRA SVK GBR BEL CZE LVA NLD ESP ITA SVN IRL POL PRT FIN GRC ISL DNK NOR SWE HUN

% 27

Source: OECD Tax Database.

12

Recommendations on fiscal policy, tax and spending reform • Ensure fiscal balances remain on track to reach surplus (“budget repair”) • Further shift the tax mix from direct taxes (corporate and personal) and inefficient taxes (including real-estate stamp duty) and towards the Goods and Services Tax and land taxes • Make public services more effective, notably those in health care and long-term care that were flagged by the Productivity Commission 13

Deepening skills to take advantage of globalisation and technological change

14

There are more jobs for the high skilled Changes in employment share, 2001 to 2016, percentage points 8 6 4 2 0 -2 -4 -6

Low skill

Medium skill

Source: HILDA database and OECD calculations (see Sila and Dugain, 2018a).

High skill

15

Many tasks are being automated Share of jobs at risk of automation, % High risk of automation (>70%)

Risk of significant change (50-70%)

KOR FIN EST ISR BEL JPN FRA SWE CHL IRL TUR AUS DNK CAN NOR ESP USA OECD GBR NZL NLD POL SVN GRC AUT DEU ITA CZE

50 45 40 35 30 25 20 15 10 5 0

Notes: Jobs are at high risk of automation if the likelihood of their job being automated is at least 70%. Jobs at risk of significant change are those with the likelihood of their job being automated estimated at between 50 and 70%.

Source: OECD calculations based on the Survey of Adult Skills (PIAAC) 2012, 2015; and Arntz, M., T. Gregory and U. Zierahn (2016), “The Risk of Automation for Jobs in OECD Countries: A Comparative Analysis”, OECD Social, Employment and Migration Working Papers, No. 189.

50 45 40 35 30 25 20 15 10 5 0

16

Student performance needs to be improved 530

Average mathematics scores from the OECD’s Programme for International Student Assessment (PISA) OECD

(8)

AUS

(9) (9)

515

(12) 500

485

(18)

2003

2006

2009

2012

Notes: The number in parentheses indicates Australia’s ranking among OECD countries Source: OECD Program for International Student Assessment (PISA), 2000, 2003, 2006, 2009, 2012, and 2015.

2015

17

Recommendations on deepening skills • Continue focus on disadvantaged students in early childhood education and schools • Improve basic-skills provision in VET education and reducing policy bias in favour of university education • Provide better information for education choices including through a single information platform

18

Increasing inclusiveness to avoid groups being left behind

19

Employment among women can be boosted Employment rates for women (25-54 years old) with at least one child aged 0-14 years

% 85 80 75 70 65 60

Year 2014 Source: OECD Family Database.

DNK

PRT

AUT

NLD

FIN

CAN

FRA

BEL

DEU

GBR

OECD

USA

AUS

IRL

ESP

ITA

50

GRC

55

20

The indigenous population remains significantly disadvantaged 90 80

Continuing gaps for the indigenous population Indigenous

Non-Indigenous

70 60 50 40 30 20 10 0

15-64 year-olds Employment rate (%)

Source: Closing the gap: Prime Minister’s report 2018.

Male

Female Life expectancy (Years) 21

Recommendations on increasing inclusiveness • Incentivise jobactive providers to achieve longer job retention, provide better quality training and on-thejob support • Focus further on lone-parents in terms of childcare availability and affordability, and career guidance and training • Give indigenous communities a greater role in policy design and implementation

22

Urban environments matter

23

Australia is highly urbanised Share of population in greater capital city areas % of state population % 80 70 60 50 40 30 20 10 0

Queensland

New South Wales

Year 2016 Source: Australian Bureau of Statistics.

Victoria

South Australia

Western Australia

24

Metropolitan populations are growing rapidly Recent and upcoming population growth % growth in population over the period 40

2006-2016

2016-2026

35

30

25

20

15

10

5

0

Greater Sydney

Greater Melbourne

Greater Brisbane

Greater Adelaide

Greater Perth

Australia

25

Congestion is lengthening commutes Average travel speed on Melbourne’s freeways during the afternoon peak, km/h 80 75 70 65 60 55 50

2005

2006

2007

Source: VicRoads: traffic monitor.

2008

2009

2010

2011

2012

2013

2014

2015

26

Government investment is being ramped up % of GDP

Total government investment spending

5.0

5.0

4.5

4.5

4.0

4.0

3.5

3.5

3.0

3.0

2.5

2.5

2.0

2.0

2000

2002

2004

Source: OECD Analytical Database.

2006

2008

2010

2012

2014

2016

27

Recommendations on urban environments • Improve infrastructure project selection by raising the prominence of cost-benefit analysis and economic returns • Improve road charging, including distance charging and urban congestion charging • Strengthen urban-area governance through greater leadership from federal and state initiatives and the amalgamation of small local authorities

28

Improving environmental policy

29

A sizeable challenge to reduce greenhouse gas emissions MtCO2-equivalent 700 650

Greenhouse gas emissions 2017 projections

Trajectory to minus 28% target

MtCO2-equivalent 700 650

600

600

550

550

500

500

Target is for 26 - 28 % reduction in 2005 level by 2030

450

450

400

400

350

350

300 1990

1993

2000

2005

2010

2015

MtCO2-equivalent: millions of tonnes of carbon-dioxide and equivalent emissions Source: Department of the Environment and Energy.

2020

2025

300 2030 30

Recommendations on environmental policy • Stabilise and strengthen climate-change policy.

Develop and implement a national, integrated energy and climate policy framework for 2030 • Strengthen priority on biodiversity in project approval and land use

31

For more information‌..

Visit the OECD Economics department website to download this presentation; an overview of the 2017 Economic Survey of Australia and more www.oecd.org/eco/surveys/economic-survey-australia.htm

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