‘I wouldn’t go that far’: Productivity Commission boss tables verdict on the economic reform roundtable
Productivity Commission chair Danielle Wood has cast doubt on whether the economic reform roundtable’s outcomes can fully repair Australia’s sluggish productivity.
Productivity Commission chair Danielle Wood says the outcomes from the economic reform roundtable are not enough to fully repair Australia’s sluggish productivity, with Jim Chalmers outlining no immediate policies from the much-hyped summit while vowing to use the discussions to inform future policy development.
The Treasurer said the tax system was “imperfect” for addressing intergenerational inequality, repairing the budget and attracting business investment, but the only outcome of the roundtable on the issue was a promise to keep consulting with participants when reforms were considered in the future.
Declaring the “hard work begins now” on fixing productivity and making the budget more sustainable, the Treasurer said the government would urgently commence policy work in 10 areas, including axing hundreds of “nuisance” tariffs, reducing the complexity of the national construction code and reforming environmental approval laws based on a report authored by Graham Samuel in 2020.
He also said the “quick wins” that could be achieved from the three-day roundtable were releasing advice from regulators on what red tape could be cut, speeding up approvals, building more homes, accelerating work that commenced last parliamentary term on a plan to encourage more investment in artificial intelligence and progressing a model for a national road-user scheme to eventually replace fuel excise.
Dr Chalmers declared the roundtable had also given the government 10 “reform directions” to consider over the longer term, including on tax, red tape, regulating AI, superannuation rules, skills, foreign investment approvals and competition policy.
“I’m so grateful there were clear and broad areas of consensus, probably more than I was anticipating in the breadth and depth of the views that people shared,” Dr Chalmers said. “We were able to make quite substantial progress in a number of areas.”
Speaking to The Australian after the final roundtable meeting on Thursday, Ms Wood said there had been “a lot of progress” during the event with representatives from business, unions, government, academia and civil society.
But Ms Wood, whose five-pillar report helped inform the roundtable discussions, was doubtful the outcomes would be enough to lift productivity growth from minus 1 per cent to Treasury’s target of 1.2 per cent.
“I wouldn’t go that far,” Ms Wood said when asked if the outcome of the roundtable would increase productivity growth to Treasury’s target. “But it was at least pro-growth, which is a good thing.” Last week the Reserve Bank cut its forecast for productivity growth to 0.7 per cent, down from 1 per cent.
Anthony Albanese unveiled a plan for a “productivity roundtable” in his first major speech after the May election, with the Treasurer raising expectations about the summit by broadening it to an economic reform roundtable that would consider changes to the tax system. But Dr Chalmers came out of the roundtable rejecting the need for a “lengthy, public, external tax review” and did not identify potential reforms outside of road-user charging.
He “undertook” to the roundtable that the government would consider reforms that would provide a “fair go for working people”, encourage business investment in a way that did not blow out the budget, and making the budget more sustainable.
While declaring there would be a structure put in place to keep roundtable members involved in tax reform proposals, Dr Chalmers said it would be “primarily a conversation for the government to have about the best way forward”.
“Our tax system is imperfect and one of its most troubling imperfections is best seen through an intergenerational lens,” Dr Chalmers said.
“Almost everybody around the table had a similar view, which is we take our responsibilities to the coming generations seriously.
“It’s one of our motivations for budget repair and getting the Liberal debt down. It’s one of our motivations for investing in housing and skills, doing something meaningful about climate change.
“But it also has implications for the tax system.”
The three-day roundtable brought some of Australia’s most prominent business people, unions and experts to air 327 separate contributions, including the chief executive Australia’s biggest bank, Commonwealth Bank’s Matt Comyn, billionaire Atlassian founder Scott Farquhar and former Treasury secretaries including Ken Henry and Martin Parkinson.
Proposals from road-user charges, alternative taxes such as those on cashflow and removal of capital gains tax discounts and negative gearing were all put forward, along with tax hikes on resources and banks.
There were requests to cut red tape, reform the GST, tweak regulations on superannuation funds, speed up approval process for projects and methods for dealing with the rapid growth in AI.
Australian National University economist professor Robert Breunig, who was hand-picked by Dr Chalmers to present on tax issues at the roundtable and proposed a tax cut to stimulate business investment, said the Treasurer’s actions were heading in the right direction.
“It’s a start. There is a lot that will nudge up productivity, but there is no big-bang thing,” Professor Breunig said.
“We are probably not across the whole thing yet. Productivity is a wicked problem and there is risk aversion in our society to do things. Politicians are worried about a bad story on the front page of the paper.”
Mr Comyn said the roundtable had been “a really constructive three days”.
“It was a terrific opportunity to roll up our sleeves on some of the big issues, with the goal of making sure Australia’s economy is strong for generations to come,” he said.
“People came with open minds and interesting ideas. I look forward to working with the government as they take things forward.”
Dr Henry said that Dr Chalmers should be “pleased” with the roundtable and that there was a “pretty big agenda there”.
But asked whether it was enough to lift productivity to the 1.2 per cent target, Dr Henry said: “Well I think it’s the beginning of the process, right? There is significant consensus on the issues.”
Independent MP Allegra Spender said she was comfortable with the progress made on taxation. “I didn’t think we could reform tax in a day but I’ve been pushing the government to act on this for three years. Now it’s on the agenda,” she said.
Business groups praised the roundtable for providing a constructive process for some priority areas for reform, including cutting red tape, investment, trade, housing, faster approvals and skills.
Business Council chief executive Bran Black said the roundtable had driven important progress in a number of key policy areas, while the test for the tax policy work going forward was whether it increased business investment. “This has been an important process and, most importantly, it sets us a bit of a course for how we can go about progressing real action over the course of the next months and years ahead,” Mr Black said. “It’s time for the rubber to hit the road.”
Mr Black said the government had committed to a process that business hoped would deliver meaningful tax reform and a further broad review of the system would take a long time and slow any progress.
“One of the points that was very clear throughout the conversations we’ve had over the last three days is there are not a lot of new policy ideas that have come forward,” he said.
“What’s happened is there has been recognition that certain policy points need to be advanced as real priority areas.
“If we have a review that slows things down. If we can get on with the task of recognising that tax is a priority and trying to find areas with which we can find agreement and consensus, and certainly putting forward ideas to the government, then I think that is the best way to go.”
Australian Industry Group chief executive Innes Willox said the roundtable had been a productive three days, contrasting the government’s positive approach to Labor’s Jobs and Skills Summit which he said still gave him nightmares.
“Nothing was going to be achieved in three days that was going to be earth shattering or change the world as we knew it,” he said. “But what we have been able to do is working with others, on behalf of Australia’s businesses from across the board, is to set up a very clear pathway for the future.
“We need to recognise that there is a lot more work to be done. The Treasurer faithfully and clearly laid out some of the work that has to be done in the weeks and months ahead. All of us represented here are up for that challenge and up for that task.
“It’s been a very productive three days. It’s easy to be cynical that not much was achieved or we should have done more or we haven’t up-ended the world and made things easier. We have started on a pathway of making Australia a better place to work and invest.”
Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the roundtable had been an “outstanding process” resulting in practical progress across a broad range of policy fronts, including tax policy, the unwieldy national construction code and improving the environmental approval process. The Council of Small Business Organisations Australia said the time for action had begun. “The roundtable should not go down in history as a talkfest,” it said. “Clear programs of work must now be developed, delivered and implemented, springboarding off the ideas and initiatives presented at the roundtable.”
COSBOA has called out for tax reform that increases business productivity and leads to growth.
Abundium Multinational Business Council Rich Hirst, who represents over 10,000 multinational firms operating in Australia, said while it was positive to see productivity and economic reform on the government’s agenda, he was doubtful about action on tax.
“So far, the 10 priorities and ‘quick wins’ the Treasurer highlighted remain broad statements with little concrete detail, and the discussion around tax reform offered no clarity on actionable changes,” Mr Hirst said.
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