The OECD has warned Australia risks leaving younger generations with a weaker economy and a heavier debt burden unless governments tackle the productivity and competition problems driving the cost-of-living crisis.
Secretary-general Mathias Cormann warned temporary relief measures cannot deliver lasting improvements to household budgets, and that Australia must produce more rather than borrow from future generations.
“There is no shortcut to a lower cost of living,” Mr Cormann said in a speech to the Centre for Independent Studies in Brisbane on Saturday.
“You either produce more, or you borrow from your children.
“When competition weakens, as it has, prices rise faster than they should. When productivity stalls, as it has, wages rise more slowly than they should.”
His warning comes as the Albanese government faces continued pressure over household costs, public spending and the country’s weak productivity growth.
Mr Cormann, a former federal finance minister, argued that Australia needs broad economic reform across taxation, education, trade, industrial relations, housing, immigration and government spending.
He raised concerns about the growing appeal of political populism, arguing that public frustration with living standards is creating an opening for policies that could leave the economy worse off.
“The grievances it speaks to are real,” he said.
“Real incomes have gone backwards. A generation is locked out of home ownership. Energy bills have risen. Infrastructure has not kept pace with population. Communities feel that decisions are made about them, without them.
“Anyone who dismisses those grievances as ignorance has not understood what the data is clearly telling us.”
The OECD’s assessment points to the pressure facing households.
Real wage growth at the beginning of this year remained more than 2 per cent below its 2021 level, leaving Australia among only six of the organisation’s 38 member countries to record such a decline.
“And those stagnant wages have to stretch further here than almost anywhere, because Australia is objectively one of the most expensive countries in the OECD to live in,” Mr Cormann said.
He argued that restoring productivity growth to its long-run average would deliver a substantial improvement in living standards.
“Getting productivity growth back to its long-run average would make Australians at least $14,000 a year better off by 2035,” Mr Cormann said.
“No rebate, cap or handout comes close. That is the real cost-of-living relief on offer, and the longer we wait, the more of it our children lose.
“Young Australians are being asked to pay more for a home, carry more of the debt we are running up today, and support an ageing population, all while the productivity growth that would have been able to pay for it has stalled.”
Mr Cormann criticised government measures designed to ease immediate cost pressures, including cash payments and energy rebates, arguing they do not address the underlying economic problem.
“Cash handouts and energy rebates put money into an economy that is not producing more, so prices rise to meet them, and the bill lands on the budget and then on the taxpayer,” he said on Saturday.
He also warned against price caps and protectionist policies, arguing that they can restrict supply and increase costs elsewhere in the economy.
The former Coalition minister’s intervention comes after the OECD issued a separate warning about Australia’s fiscal position in its 2026 economic survey.
That assessment called for greater spending efficiency, tax reform and stronger fiscal discipline as governments face mounting long-term pressures from an ageing population and the climate transition.
The report also raised concerns about Australia’s modest productivity growth, worsening housing affordability and high household debt.
Treasurer Jim Chalmers described the January report as a “powerful endorsement of Labor’s economic management and reform agenda”.
“We’ve made a lot of progress together on the economy, but the job’s not done because people are still under pressure and that’s why we continue to roll out responsible cost-of-living relief at the same time as we modernise Australia’s economy and build more homes,” Mr Chalmers said at the time.
Mr Cormann’s latest warning is aimed at both sides of politics, with the OECD chief calling for a renewed national consensus on reform.
“Reform is hard because the pain comes now and the payoff comes later. But doing nothing is not free,” he said.