Treasurer Jim Chalmers wants to reset Australia's prevailing economic narrative and adopt a new model of capitalism that's more closely aligned with the nation's values.
In a 6,000-word essay to be published in The Monthly magazine, Dr Chalmers has outlined a blueprint for Australia's economic future that calls for a dramatic rethink of the status quo.
He says Australia's economy has been left vulnerable after repeated shocks - the global financial crisis, the pandemic, and now out-of-control inflation.
And these obstacles won't stop coming - Dr Chalmers says we're moving into a "polycrisis" era that will see separate shocks, such as climate change and the ageing population, coalescing so that "the whole is even more overwhelming than the sum of its parts".
The "negative form of supply-side economics" prevalent in advanced economies, characterised by "a race to the bottom on wages and public investment" and "more market to less", won't cut it in this time of mega threats, he argues.
"The old mental models died hard, even while they were shown to be so inadequate for the new problems they left us: skills shortages, an aged care crisis, energy market chaos, stagnant wages and not enough to show for a trillion dollars of debt."
Moving forward, and ahead of Labor's second budget in May, the Treasurer wants to see "values-based capitalism" ensconced as the new economic paradigm.
This model, he says, nods to the clear link between economic growth and democratic stability.
"By failing to put values at the forefront of how our economies work, we also leave behind reams of wasted talent, a degraded environment and social dislocation - all of which threaten to diminish the productive capacity of our economies and ability to create 'value' in the first place."
Specifically, Dr Chalmers sees value in impact investing and wants to build the market framework to funnel more private capital into areas like aged care, education and disability.
He says co-investment is a powerful tool and pointed to the Clean Energy Finance Corporation as an example of this model's success in the clean energy transition.
"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."
He also says there's a role for regulatory reform to design markets that function effectively and funnel capital into answers to Australia's "collective problems".
Strong institutions will also play a role, which is why the Labor government is working to "renovate" the Reserve Bank and "revitalise" the Productivity Commission.
"My optimism doesn't just come from the beginning of a new year, it comes from believing that, amid all the difficulties, 2023 will be the year we build a better capitalism, uniquely Australian - more confident and forward-thinking; more aligned with our values; based more on evidence and integrity; more capable of building resilience not just building buffers."
