‘Decades to come’: Major economic meetings begin with precursor roundtable

The former Treasury boss has warned the case for lifting taxes is “much, much stronger” now than in 2002, with the current tax system unfairly punishing young Aussies.

Former Treasury boss Ken Henry says it is time Australia “prepare ourselves for the worst,” warning that while he hopes the government will be able to “avoid” increasing the tax-to-GDP ratio, the case is “much stronger now”.

He made the comments at a tax reform round table convened by Wentworth MP Allegra Spender on Friday, stating that Australia’s current tax setting was overly reliant on income tax and geared to punish young Australians.

“Tax reform packages must be … revenue neutral, and I suggest that we should be thinking about the designing the tax system that would do least economic damage as we lift the revenue-to-GDP ratio over time,” said Mr Henry, who oversaw Treasury from 2001 to 2011.

“I can understand that some people don’t want to quantitate that prospect, but we’ve been aware of the need to avoid that prospect for 23 years since the first intergenerational report was published in 2002 and the case for having to lift the tax-to-GDP ratio is much, much stronger … but I still hope we can avoid it.”

Former Treasury secretary Ken Henry said the case for lifting the tax-to-GDP ratio was ‘much stronger’ now than 23 years ago. Picture: NewsWire / Martin Ollman

Mr Henry stressed the need for “intergenerational fairness,” calling for reforms that “reduce reliance” on bracket creep and boosting productivity as a way to increase wages and drive revenue without upping tax.

He also urged the government to consider “anything that makes housing more affordable,” indicating support for politically risky review of current tax settings on negative gearing and capital gains tax concessions for property investors.

Speaking critically of the current settings, Mr Henry said the current tax system was “not fit for today’s increasingly dangerous times,” adding that “I used the word dangerous quite deliberately”.

Company tax rates were also higher than other peer countries, which disincentivised overseas investment, while proper taxation on a “small number of businesses,” particularly mining companies were kept lower for political reasons.

Ms Spender also advocated for wide-ranging reforms to boost business investment and relieve pressure on younger workers.

She said young people were hardest hit by the current tax system despite being “the group that can least afford it”, with someone of working age earning $100,000 paying double compared to a household over the age of 64 earning the same amount.

“We have a tax system that taxes people most heavily when they are young and under most financial pressure – paying off student loans, trying to buy a house, starting families, paying childcare – and less when they can afford it,” she said.

Wentworth MP Allegra Spender gathered leading economists to talk tax reform on Friday. Picture: NewsWire/ Martin Ollman

Speaking ahead of the round table, the independent MP said she was attempting to make tax reform more accessible, and said she was willing to put herself on the line via social media.

Influencers including Natasha Etschmann of tashinvests and Konrad Benjamin from Punter’s Politics had been invited to attend the roundtable.

“We’re actually doing lifestreaming on YouTube. I’ve been doing some slightly cringe-worthy Instagram videos on tax reform recently, just trying to bring more people into this conversation,” she told ABC’s Radio National on Friday.

“Because tax matters to all people, it influences our country, but it’s sometimes pretty hard to get your head round and I do want people to be able to get informed.”

Allegra Spender says Australia needs to – and can – make hugely beneficial changes. Picture: NewsWire / Monique Harmer

This meeting was also a precursor to broader roundtable meetings organised by Jim Chalmers next month.

“The Treasurer has now opened the door to tax reform,” Ms Spender said on Friday.

“I feel that tax reform has the opportunity to help Australia solve some of its biggest problems like sluggish productivity growth, like the fact that young people can’t get ahead, like the fact that we need to make this climate transition as cheap as possible.

“But to be honest tax hasn’t really been on the table until now.”

The large mandate given to the government set Australia up for meaningful change, she said.

“When I look back at history, you look at the Hawke-Keating reforms, you look at the Howard-Costello reforms, and I think most Australians would say those reforms, they were difficult but they set the country up for the long term,” Ms Spender said.

“And I think we do have an opportunity, in this term of parliament and into the next election, to potentially make the sort of significant reforms that can set up our community for the decades to come.”

The Treasurer welcomed Ms Spender’s round table and said he would “obviously listen to and respect the views put forward”.

Originally published as ‘Decades to come’: Major economic meetings begin with precursor roundtable