The average real income of Australians is $14,500 below the projection in the first Intergenerational Report in 2002, due to a collapse in productivity growth that governments have tried to conceal by turbocharging immigration.
Welcome to Talking Business, a podcast produced in Melbourne Australia, built on the traditional lands of the Kulin Nation. The podcast is available on the Acast site, my own website, the Apple podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at businessacumen.biz
I am Leon Gettler. My job is review and monitor the week’s news in business finance and economics. I bring it all to you every week.
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This is episode number 34 in our series for 2026 and today’s date is Friday September 25.
First, I’ll be talking to Kyle Peacock, the Principal at Peacock Tariff Consulting about the global impact of the trade war between Canada and the US. Kyle says the US tariffs on Canada was a test for tariffs on other markets. We also talk about how middle powers like Canada and Australia can deal with the tariffs.
And I’ll be talking to independent economist Nicholas Gruen about the debate around One Nation’s super scheme and the issues around superannuation
But first, let’s talk to Kyle Peacock
So what’s happening in the news?
So the Treasurer just dropped Australia’s Intergenerational Report — basically Treasury’s 40-year crystal ball for the budget — and the picture isn’t pretty. If our productivity growth stays as weak as it’s been for the past decade, by 2066 we’re looking at debt blowing out past 55% of GDP, the deficit more than quadrupling to over 4% of GDP, and government spending climbing to 30% of the economy — the highest it’s ever been outside the pandemic. The big driver? Health and aged care. As Australia gets older — Chalmers says deaths will actually outnumber births by the 2060s — we’re going to need way more hospitals, more aged care, and that stuff isn’t cheap. Meanwhile, the old reliable revenue streams are drying up. Fuel excise is fading as we switch to EVs, tobacco excise is shrinking too. So increasingly, the budget’s going to lean on one thing: your personal income tax. Now, Treasury’s official forecast assumes productivity magically picks back up to 1.2% a year, partly on the back of AI. Chalmers is betting big on AI here — he’s calling it the biggest economic shift of our lifetime. But a lot of economists are side-eyeing that number, because we haven’t seen productivity growth like that in years. If it comes in lower, at a more realistic 0.8%, the average Australian ends up about 13% worse off in real income by 2066 compared to the rosier scenario. Bottom line: the report says Australia’s economy will more than double in size over the next 40 years, and things are technically in better shape than the last report back in 2023. But whether we actually get there in good shape comes down to one word Treasury keeps repeating — productivity.
Back in 2002, Peter Costello’s first Intergenerational Report warned that Australia needed to lift population, workforce participation and productivity — the “three Ps” — or younger generations would face a bigger tax burden. Comparing 2026’s report against that original, economist Chris Richardson finds we’ve smashed two of the three: population is 18% higher than assumed, and participation has surged, mainly driven by more women working. That’s made the economy about 3% bigger than expected. But productivity has collapsed — running 25% below the original projection. Richardson blames governments for avoiding the tax, workplace and regulatory reforms needed to boost business investment, relying on population growth instead. There’s also controversy in the modelling: Treasury kept its long-term productivity assumption at 1.2% by switching to a 30-year average — a method Chalmers once called “rubbish.” Using a shorter, more accurate average would have wiped out the report’s claimed $500 billion debt improvement. With productivity flat since 2016, that assumption looks optimistic, especially as migration cuts, rising rates and Middle East tensions make 2027 look tough — fuelling support for One Nation.
New analysis shows the average Australian’s real income is now $14,500 a year below what the original 2002 Intergenerational Report projected — a gap economist Chris Richardson blames on collapsed productivity growth that governments have masked with high immigration. Real GDP per person sat at $24,971 in the June quarter, versus a projected $28,715. Richardson says Australia has said yes to more people but no to the reforms — housing, infrastructure, workplace flexibility — that would make them more productive. Former Treasury economist Stephen Anthony called the reliance on population growth a “Ponzi scheme” masking the slowdown. The 2026 report keeps a 1.2% long-term productivity assumption despite growth being flat since 2016, partly by using a 30-year averaging method Chalmers previously criticised. Population, meanwhile, has overshot 2002 assumptions by 18%, and is projected to hit 39.3 million by 2065-66 as fertility keeps falling — prompting Chalmers to defend migration’s ongoing role even as his government tightens visa settings. One bright spot: workforce participation, now at 66.9%, well above the 58% originally forecast.
Michele Bullock just said the quiet part out loud: unemployment may need to climb as high as 5% to get inflation under control. That’s the most explicit she’s been about the trade-off the RBA is willing to make. This came just before the RBA’s board meeting next week, where markets are fully expecting a rate hike — the fourth this year, taking rates to 4.6%, the highest since 2011. Some economists think there could be two more hikes after that. Unemployment is currently sitting at 4.5%, already near historic lows. So Bullock’s 4.5-5% range basically means: yes, we’re prepared to see more people out of work — as many as 83,000 more, by one estimate — if that’s what it takes to tame inflation. This is awkward for the Albanese government. Treasury, unions, and economists close to Labor have been pushing the RBA to accept that full employment could sit at 4% or even lower without triggering inflation. Bullock’s comments are basically a polite “no thanks” to that idea.
Two curveballs she threw in:
- AI could push up the “natural” unemployment rate (the NAIRU) for a while, as the economy adjusts to job losses from automation.
- She doesn’t expect mass layoffs — more that new grads and school leavers will just have a harder, longer job search.
So, if you’re watching mortgage rates, this is a strong signal the RBA is prioritizing inflation over jobs right now, and won’t be spooked into cutting or pausing just because unemployment ticks up.
The Coalition has unveiled a “Fuel Price Shield” policy, promising to halve the fuel excise — saving drivers about $15 a tank — whenever global oil prices average above US$100 a barrel for two weeks. Opposition Leader Angus Taylor says it would be funded by an 80% cut to the tobacco excise, raising an estimated $8 billion by pulling smokers back to the legal market. Reaction is mixed. Chalmers dismissed the plan as “uncapped and unfunded,” accusing the Coalition of chasing One Nation’s poll numbers. Economist Chris Richardson called fuel excise cuts a “bad band-aid” that just pushes up prices elsewhere. But Westpac’s Luci Ellis argued the last excise cut helped curb inflation, while Saul Kavonic warned that cutting fuel taxes during price spikes removes the incentive to conserve — even though he admits the policy remains popular across the political spectrum. The government previously cut the excise from April to August this year but says another cut isn’t currently on the table.
So ASIC is done being patient with private credit. The regulator’s commissioner, Simone Constant, is fronting up to a room full of commercial finance and property brokers at Strathfield Golf Club to deliver a blunt message: enforcement action is coming. Why now? Because we’ve had some genuine disasters in this space — the Bathla collapse left thousands of home buyers in western Sydney in limbo, and before that there was the First Guardian and Shield Master Fund collapses. ASIC’s been asking the industry nicely to adopt its ten “principles for private credit done well,” and honestly, not enough firms have bothered. What Constant really wants are prosecutions — actual court outcomes she can point to, rather than just speeches. She’s also pushing back on the industry line that this is only a “mum and dad investor” problem. She’s specifically worried about super fund trustees who are rubber-stamping private credit investments without actually digging into the underlying loans, the bad-debt provisions, or whether the manager’s assumptions hold up. Bottom line: the industry has until the end of the year to lift its game voluntarily, or heavier regulation is coming whether they like it or not.
A cross-party Senate inquiry wants Telstra stripped of its role overseeing Australia’s Triple Zero emergency line — even though its contract doesn’t expire until 2032. Instead, they want an independent statutory authority to take over.This comes after a brutal 12 months: the Optus outage in September last year that’s been linked to two deaths, and a separate Telstra outage this July. The inquiry, chaired by Sarah Hanson-Young, didn’t hold back — she says telcos have repeatedly let down the public and that regulation simply hasn’t kept pace with how essential phones and internet have become. Other recommendations include letting people text Triple Zero, mandating domestic roaming so you can jump onto a rival network during an outage, and a compensation scheme with real penalties attached. Optus also copped criticism for running key network operations out of a centre in Chennai, where staff reportedly didn’t feel empowered to flag engineering mistakes — though Optus says it’s bringing that function back onshore. Labor and the Coalition aren’t fully aligned on this — Labor senators opposed the independent regulator review and the roaming mandate, and the Coalition doesn’t back stripping Telstra’s role either. So it’s not a done deal yet, but the pressure is clearly building.
Australia’s joined twenty other countries plus the EU in a joint statement demanding that AI stay firmly under human control — think mandatory safety testing, independent evaluators, and possibly a new UN-style body to set global standards. Timing is everything here: this dropped just days before Trump and Xi are due to meet, with AI expected to dominate that conversation. The US and China are essentially locked in an AI arms race and have both brushed off calls — including from Anthropic’s Dario Amodei — to slow down frontier model development. Interestingly, Washington and Beijing did agree this week to some kind of “notification mechanism” for AI incidents tied to national security, which Treasury Secretary Scott Bessent framed as a move toward more transparency between the two AI superpowers. Albanese says Australia helped shape the statement and is positioning this kind of leadership as part of its pitch for a UN Security Council seat in 2029-30. He also used his UN appearances to push the case for Security Council and broader UN reform, and separately reaffirmed Australia’s emissions targets while doubling down on gas as the transition fuel.
So, following on from that story about Australia and 20+ other countries — including the EU — signing onto that joint statement about keeping AI under human control… here’s a story that shows why that’s not just diplomatic box-ticking. A senior figure at ASIC — that’s the corporate regulator — has basically admitted she had to scare some businesses straight on AI-driven cyber threats. ASIC commissioner Simone Constant said she’s not sure yet whether it worked. Back in May, she sent out a pretty blunt warning letter to major players in the market, telling them to urgently beef up their cyber defences because AI models — she specifically named Anthropic’s Mythos — are getting scarily good at finding security holes, fast, at scale, and in ways we haven’t really seen before. Her line was: “The clock is at a minute to midnight — if you aren’t on top of your cyber resilience already, the time to act and prepare is right now.” And she’s stood by that tone. She said ASIC doesn’t use language like that lightly — they did it because they’re genuinely worried. Especially in financial services, where she says there’s “real inconsistency” in how seriously companies are taking this. She’s hearing from senior risk management people inside these firms that it’s basically “war footing” stuff. Now, here’s where it gets interesting — not everyone agrees on where the real danger is right now. Cameron Whittfield, a partner at law firm Herbert Smith Freehills Kramer, pushed back a bit on the doom-and-gloom framing. He reckons a lot of the recent talk from tech executives about AI’s “existential threats” is basically clickbait — and worse, it risks distracting companies from the threats that are actually hitting them today. His take: it’s not that AI is directly storming the gates and breaching company defences. It’s more that hackers are using AI tools to sharpen their traditional attacks — think AI helping design malware, or even drafting ransom demands and negotiating with victims. His blunt assessment: “Most of the threats we’re dealing with are teenage or young men coming from gaming communities, or state-based threats, or insiders. The AI-enabled threats are relatively low at this juncture.” So you’ve basically got two experts looking at the same landscape — one saying “the AI threat is urgent, act now,” the other saying “don’t lose sight of the basics, that’s still where most of the damage is coming from.” Which, if you’re a business trying to figure out where to spend your cybersecurity budget, isn’t exactly a simple answer.
And that’s it for this week.
And next week, I’ll be talking to entrepreneur and supply chain specialist Sarah Barnes-Humphrey.
And I’ll be talking to AMP Capital chief economist Shane Oliver about the latest Intergenerational Report.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com or whatever your favourite podcast platform is.
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