Aussies should follow our GST lead
Australian Treasury secretary Martin Parkinson says Australia could learn "some lessons" from New Zealand's example when it came to laying the political groundwork for a controversial hike in the goods and services tax.
In a hard-hitting speech to the Sydney Institute in Sydney on Wednesday night, Parkinson warned that Australian's standard of living was threatened by weak productivity growth, falling commodity prices and an ageing population.
He also made a strong case for raising the goods and services tax and cutting personal income tax, pointing out that research consistently demonstrated that relying more on indirect taxes, rather than income taxes, can support higher growth and living standards.
Asked about increasing the GST, Parkinson said that he was "not going to speculate on what tax changes...Australia might want to do - that's a matter for the political process."
But, he added, "looking across the Tasman gives you a very interesting and contrasting experience to Australia. There was a long public debate about increasing the GST and cutting personal income tax rates.
"And when it came time to do it, the political heat just wasn't there. And I think there's probably some lessons for us to learn the way New Zealand conducted that debate."
Parkinson also warned of the dangers of the growing community backlash against foreign investment.
"Foreign investors, like Australian investors, will look for profitable opportunities. Now the difference is that in many cases they're looking across the world. So if we want them to invest in Australia, we actually have to have an environment that's welcoming for them.
'Our foreign investment regime has served us well over the decades. But we have to be careful that some of the community debate that has started to emerge doesn't become a negative for foreign investors because at the end of the day Australia is a capital importing country."
He warned that "if we don't have foreign investment in future, we won't have the living standards that we want to have and that means that we've got to be open to foreign investment across the board."
Parkinson also disclosed members of the Group of 20 (G20) were hoping that Australia would "focus and sharpen the agenda" during its year-long presidency.
As a result, he said, Australia had chosen to highlight a few key issues, such as the erosion of the tax base through large multinational profit shifting, and finalising the reforms to financial regulation that were agreed in the wake of the financial crisis.
"But I think the most interesting and important thing that we're doing is focussing on a commitment to increase economic growth and coming out of the Sydney meeting was a commitment of the members to take actions that over five years would lift economic growth by 2 per cent. Now that's a couple of a couple of trillion dollars of additional GDP a year."
He added that if "we're able to deliver on that, that will be an absolute game-changer."
He said that the time the G20 leaders meet in Brisbane in November "every country ....has committed to have a fully worked-up action plan."
If they don't, he said, "what we've got is a vehicle for peer pressure to actually take more action and what we've already got is a vehicle for peer pressure to actually keep the acid on countries to deliver what they committed to."
Sydney Morning Herald