The grim forecasts in the Intergenerational Report released today should serve as a wake-up call for economic reform to preserve Australia’s status as a nation of affluence.

Australia’s reform task is much more than tinkering around the edges, the Australian Chamber of Commerce and Industry said.

“The Intergenerational Report is a sobering study that warns us the next 40 years could be very challenging,” ACCI chief executive officer Andrew McKellar said.

“Even to maintain our level of prosperity for future generations of Australians, the priority must be on lifting productivity.”

The Intergenerational Report has lowered expectations for productivity growth over the next four decades, from 1.5 per cent to 1.2 per cent.

“The trajectory of Australia’s economic condition presented by the Intergenerational Report is bleak, with little indication that the government intends to attempt to raise the productivity of our economy. We cannot ignore this urgent problem, especially with our ageing population,” Mr McKellar said.

“Australia must not sleepwalk into mediocrity. Insipid economic growth of 2.2 per cent a year, on average, will be inadequate to meet our societal aspirations.

“Kickstarting productivity is crucial, but equally important for Australia’s long-term prosperity is comprehensive tax reform.”

Earlier this year, the Productivity Commission released its five-year productivity review, which presented 76 recommendations for how to raise productivity in the years ahead.

“The government is still yet to indicate whether it is prepared to take on any of the recommendations of this important review,” Mr McKellar said.

“Road and rail transport in Australia’s major cities are already struggling under the strain of population growth. We are not building enough houses to meet current demand.

“With population expected to grow by more than 50 per cent over the next four decades, the need to plan for, and build, the necessary transport infrastructure and housing is urgent.

“There are long-term spending pressures that the taxpayers of the future will have to support. This includes the care sector, the National Disability Insurance Scheme and defence, as well as interest on debt.

The Intergenerational Report projects the national tax take rising by 0.5 percentage points of Gross Domestic Product (GDP), but government spending is expected to rise by 3.8 per cent.

“That is unsustainable. It is the clearest warning in the document that trouble is looming without reform, especially the need for a comprehensive overhaul of the tax system. Something has to give,” Mr McKellar said.

“Australian cannot slink quietly off into the night. We urgently need major reforms to our economic system to provide for the next generation.”