Prominent economists have called for bold reforms to stimulate the economy – including cutting personal and corporate tax rates and broadening the base of the GST.
Conservative Party leader Cory Bernardi has pledged to support the Coalition’s complete tax reform package but has urged treasurer Josh Frydenberg to go further.
The Australian reports, amid warnings from Reserve Bank governor Philip Lowe that infrastructure spending and structural policy changes could be embraced to reduce unemployment, the Treasurer argued the Coalition was already taking action to boost productivity and would begin infrastructure projects where possible.
National accounts released yesterday revealed the economy grew 0.4 per cent in the March quarter and 1.8 per cent from a year earlier, with growth at its slowest annual pace in almost a decade.
The government has a $100 billion infrastructure package it plans to roll out over 10 years, or $42.8 billion over the forward estimates, but Mr Frydenberg indicated any acceleration of major projects might be difficult.
Deloitte Access Economics partner Chris Richardson said Australia should be courageous and look beyond monetary policy to fuel economic growth.
“Some of the infrastructure spending is good. More broadly though, if you’re thinking around infrastructure and structural policy, sure we need to build more … we could also do it better,” he said.
“We could have electricity pricing, not just the adoption of a mechanism like the National Energy Guarantee, but also intraday pricing. Introduce smart meters in electricity; at times of peak demand we charge people more.
“Smart people are saying Australia can and should do a bunch of things better. The difficulty is the politicians say ‘we’d like to but the punters don’t want us to’.
“Until we can break that logjam, there’s a certain amount of banging heads against brick walls going on.”
HSBC’s Paul Bloxham said there was a hefty pipeline of infrastructure under way, but there was scope for more projects, especially as the government could borrow at an annual rate of 1.5 per cent for a decade. He said cutting the corporate tax rate, lowering personal incomes tax rates and potentially broadening the base of the GST and lifting its rate should be on the agenda, despite being politically challenging.
“(We need) economic reform that sharpens the incentive for firms to do more hiring and investment and encourages households to participate more in the labour market. These are the things that would be helpful to support growth,” Mr Bloxham said.
“The Reserve Bank of Australia is taking action to support growth by lowering interest rates (to a record low of 1.25 per cent) but we are nearing the lower nominal bound for the RBA’s cash rate. They’re running out of room. Other arms of policy ought to come into play.”
Senator Bernardi told Ali Clarke and David Bevan on ABC Radio Adelaide, he would back even deeper cuts to taxes than the Treasurer is proposing.