I read Jim Chalmers’ essay and these were my takeaways:

A bit of quoting Keynes to set the scene:

“Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist” - Keynes

Keynes insisted that economic ideas – “both when they are right, and when they are wrong” – are almost uniquely stubborn. The entrenched systems and institutions that dictate and drive public and private spending are so complex and vast, and powerful economic interests have so much at stake in keeping them in place.

Translation:

He would like to make some changes to the system that entrenched interests will not appreciate. 

He outlines three key objectives:

- Orderly energy and climate transition

- A more resilient and adaptable economy in the face of climate, geopolitical and cyber risks, unreliable supply chains, and pressures on budgets from an ageing population.

- Growth that puts equality and equal opportunity at the centre. 

He outlines his belief that well functioning democracies lead to better economic outcomes. His definition of a well functioning democracy seems to be one that promotes widespread social and economic equality. 

This passage I found particularly interesting:

“While capital allocation in traditional markets is obviously not perfect, it is based on common metrics of performance. Government spending has too often been characterised by a “spray and pray” approach. If we could redesign markets for investment in social purposes, based on common metrics of performance, many more well-run “for purpose” organisations could get much more of the growth capital they need.

Our economies need to embed and express more than one notion of value. Tracking these metrics over time will give us a more comprehensive picture of whether policies are working. But it will also give us an evidence base from which we can have better, more informed discussions about what needs to be done to lift living standards, boost intergenerational mobility and broaden opportunity.”

To me this suggest an inclination to move away from GDP or at least to raise up other metrics to a similar standing to measure “economic progress.”

Hence:

“Growth that puts equality and equal opportunity at the centre. This is not only fair, it’s good economic policy. As an example, gender equality is not only desperately overdue in its own right, the failure to make meaningful progress remains one of the biggest handbrakes on our economic potential. This is willful neglect, with economic and social consequences.”

I also thought this was interesting:

“We will renovate the Reserve Bank, responding to the RBA Review. And we will renew and revitalise the Productivity Commission as a powerful think tank advising government on productivity, as well as prosperity and progress more broadly.

These institutions need to help deliver change in areas of disadvantage, to prod and inform and empower.”

This suggests that the dual mandate of the RBA of employment and inflation may be expanded. This may come along with a push for new tools to implement economic manipulation such as central bank digital currencies. 

“It’s not just our economic institutions that need renewing and restructuring, but our markets as well.

Here, government has a leadership role to play: defining priorities, challenges and missions – not “picking winners”. This is critical to guide how we design markets, facilitate flows of capital into priority areas, and ultimately make progress on our collective problems and purpose.

Co-investment is a powerful tool at our disposal

We will employ this co-investment model in more areas of the economy, with programs already under way in the industry, housing and electricity sectors.”

Is it just me or does this feel contradictory? In one breath he states government shouldn’t pick winners and in the next he describes co-investment and guiding capital into certain sectors. I suppose this can be read as essentially subsidies to be provided in areas the government considers a priority. In my opinion it probably only changes the optics as to how they decide to implement this. Current actions in the coal and natural gas markets are likely early evidence of this more interventionist approach.

Interestingly there is a little passage about codifying climate risk reporting:

“So in 2023, we will create a new sustainable finance architecture, including a new taxonomy to label the climate impact of different investments. That will help investors align their choices with climate targets, help businesses who want to support the transition get finance more easily, and ensure regulators can stamp out greenwashing.”

Overall not too painful a read. I do think the more they intervene the more they are likely to illicit unforeseen consequences. Buying houses to improve affordability anyone? Personally I’m a believer in a free but regulated market for most sectors. I’m interested but apprehensive about this direction the treasurer wants to take.