As if Treasurer Jim Chalmers didn’t have a big enough problem trying to improve the economy’s productivity, we now know Treasury has privately reminded him he’ll need to find additional tax revenue and reduce government spending to keep the budget “sustainable” – that is, to stop the government’s debt getting a lot higher.

Some of the measures he’d like to take to get the economy’s productivity improving could involve reducing certain taxes but, with the budget already overextended, he can’t afford them. He’s had to stipulate that all proposals for improving productivity at the productivity roundtable next month must involve no net cost to the budget.

Treasurer Jim Chalmers has said all proposals for improving productivity at the productivity roundtable next month must involve no net cost to the budget.Credit: AAP

This suggests productivity improvement and budget repair will need to be kept in two separate buckets. If so, Chalmers will probably end up avoiding tax changes and sticking to reforming the regulation of certain industries, which would have little cost to the budget.

But some measures to improve productivity may lead to increased tax collections. If so, it may be better to put together a big package of interlocking measures that together would help improve both problems.

The successful reforms of the 1980s involved big packages, with their size actually helping to reduce opposition to them. When you propose reforms one at a time, those who lose from the measure can make such a fuss that the government decides it’s not worth insisting.

Independent economist Saul Eslake.Credit: Alex Ellinghausen

But you can put together a package........

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