Speakers: Jenny Wilkinson

Transcript

Jenny Wilkinson

As outlined in the budget papers, the impacts of the tax measures on house prices and rents are expected to be modest over the medium term while shifting the ownership of the housing stock towards owner occupiers. Beyond these cyclical developments, productivity remains a long significant long-term challenge. There is no single reform or technology that will lift productivity growth on its own, which is why the government has a broad productivity agenda addressing issues across most sectors of the economy. Sustained improvement will require continued effort across many fronts and active engagement by businesses, workers and governments. AI is expected to make an important contribution, but its impact will depend on adoption and diffusion across the broader business sector, supported by complementary skills, organisational change, investment and policy reforms. These gains will take time to emerge and diffuse through the economy. The 26-7 budget and the 2026 intergenerational report project underlying productivity growth to gradually transition to its long-term growth rate over around five years. This is a more gradual path than previously assumed. Turning to fiscal policy, the 206-7 budget update improved the outlook for the fiscal position. The government has taken steps to restrain spending growth, including significant reforms to the NDIS, reforms to means testing and consumer contributions in age care, changes to the private health insurance rebate and changes to the home batteries programme and the treatment of electric vehicles under the fringe benefit tax arrangements. The temporary reduction in fuel access announced in March provided initial support to households to help adjust to higher prices, higher fuel prices, that is, but the full rate was restored on the 3rd of August to avoid sustained pressure on demand and limit the budget impact. The budget continues to face structural pressures, including from the increasing cost of debt, and continued fiscal consolidation will be needed to strengthen fiscal sustainability and provide the flexibility to respond to future shocks. Treasury will update its economic and fiscal forecasts in my EFO. Significant uncertainty will remain while the conflict in the Middle East is unresolved, and as AI development continues to unfold at pace. The range of possible outcomes is unusually broad.