Australia must focus on 'friend-shoring': UNSW

The first research from the e61-UNSW Policy Research Partnership has highlighted the major economic policy challenges faced by Australia and made five key recommendations ahead of this year's federal election.

The research found that navigating United States-China trade relations, reassessing immigration and high population growth, and boosting stagnant productivity are among the key economic obstacles facing the country.

The report said regardless of which party holds power, the Parliament's response will be critical to the wellbeing of all Australians.

The report said Australia will need to focus on negotiating a new global order, as one of the key themes.

"As the world moves away from a rules-based system (the current political, legal and economic framework governing international relations), Australia must leverage its comparative advantages in security and resources to its geopolitical and trading partners," it said.

"In particular, Australia must find opportunities in a strategic move to 'friend-shoring' - integrating supply chain production more with trusted trading partners."

Additionally, it called on the federal government to re-examine a high population growth model.

"Australia has one of the highest population growth rates in the developed world, up by 35% in the past two decades (OECD average is just 13%). But this high-growth approach faces political pressure, in large part due to rising housing costs," it said.

"With both major parties seeking to slow the rate of immigration, policymakers must rethink strategies to support an ageing population while maximising the benefits of skilled migration."

The continuing issue of low productively growth was also flagged by the research, which pointed out that Australia's productivity performance has been flat since the start of COVID-19 in 2020.

"With changing global and domestic conditions, it is imperative we address productivity challenges, including low job mobility and a growing care sector," the report said.

Essential to the nation going forward was also restoring fiscal sustainability as budgetary pressures are expected to grow.

"Future budget surpluses are at the whim of iron ore prices and reliant on bracket creep," it said.

"Restoring fiscal sustainability via a balanced budget and low debt can help Australia weather global shocks."

Lastly, the report said the government needs to focus on achieving a sustainably intergenerational bargain.

"Without addressing housing affordability, fiscal pressures and improving productivity growth, Australia risks younger generations being worse off than their parents and grandparents," it said.