Tax reform is “crucial” to addressing Australia’s economic challenges, Treasurer Jim Chalmers has said in his strongest signal yet on the thorny issue.
Boosting stagnant productivity, bringing the budget back into balance, and making the economy more resilient are the treasurer’s main three priorities this term, he revealed on Wednesday in his first major speech since Labor’s landslide election win.
Dr Chalmers previously flagged changes to competition and regulatory frameworks to fix Australia’s productivity slump but had shied away from commitments to additional tax reform, beyond those the government took to the May 3 poll.
But calls for reform have grown louder as an ageing population erodes the tax base and places increasing demands on health and aged care spending.
“This evolution in our revenue base is one of the reasons tax reform is so crucial to budget sustainability, on top of restraining spending, finding savings and working on longer-term spending pressures,” Dr Chalmers told the National Press Club in Canberra.
“But tax reform is bigger than just managing the difficult balance between spending and collecting.
“It’s also about lifting productivity and investment, lowering the personal tax burden and increasing the rewards from work, creating a more sustainable, simpler system to fund vital services, and improving intergenerational equity.
“No sensible progress can be made on productivity, resilience or budget sustainability without proper consideration of more tax reform.”
The treasurer will convene a productivity roundtable from August 19-21, bringing together government, employers, unions, civil society representatives and experts to “shape the direction for long-term economic reform”.
Dr Chalmers has not confirmed whether Opposition Leader Sussan Ley or shadow treasurer Ted O’Brien will be invited to the roundtable, but the limited space in the 25-seat cabinet room where it is being held will keep the attendance list concise.
The roundtable will be a “genuine attempt” to build consensus, after business groups felt 2022’s Jobs and Skills Summit was used by Labor as a way to rubber-stamp unions’ wishlist for workplace reforms.
The treasurer promised to consider any good ideas, but rolling back Labor’s changes to industrial relations laws – including multi-employer bargaining – are unlikely to be on the table.
“The solution to these challenges is not to torch workers’ rights and benefits,” he said.
“Lifting productivity is about empowering workers and making the most of our human capital, teaching and training them to adapt and adopt technology.”
Cutting the company tax rate or providing more tax incentives for business investment are expected to be at the top of priority lists for business groups, after the issue was floated by Productivity Commissioner Danielle Wood.
Dr Chalmers said he would continue to work with states and territories on the future of road user charging, with electric vehicles threatening crucial revenue for road maintenance collected through the fuel excise.
Dr Chalmers said Australia’s economy has made good progress in recent years, with inflation down and growth prospects improving, but the nation needed to recognise “three blunt truths” standing in the way of higher living standards.
“Our budget is stronger, but not yet sustainable enough,” he said.
“Our economy is growing, but not productive enough.
“It’s resilient, but not resilient enough – in the face of all this global economic volatility.”
Weak productivity growth is a major problem for advanced economies around the world.
“Too often it’s seen as a cold, almost soulless concept when it’s really the best way of making people better off over time, creating more opportunities, making our economy and our society more dynamic,” the treasurer said.
In Australia, labour productivity has stagnated since the COVID-19 pandemic but has been slower than trend for more than a decade.
The latest economic growth figures showed activity slowed in the year to March to 1.3 per cent.
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