Workplace reform the key to ‘offsetting ageing costs’

BUSINESS leaders have urged ­reform of tax and workplace relations to curb threats to the nation’s prosperity as the population ages.

BUSINESS leaders have urged ­reform of tax and workplace relations to curb threats to the nation’s prosperity as the population ages.

Ramping up its calls for tax reform, industry seized on findings in the Intergenerational Report that Australia’s reliance on corporate income taxes was “among the highest in the developed world” and that bracket creep in personal income tax could reduce incentives to work.

Some industry representatives argued the emphasis on productivity growth and workforce participation across the next 40 years made industrial relations reform important.

“The challenge now is to ensure the insights from the Intergenerational Report underpin critical reforms in tax, federation and workplace relations,” said John Osborn, Australian Chamber of Commerce and Industry director of economics and industry policy.

INTERACTIVE: The InterGenerational Report

KPMG Australian chairman Peter Nash warned of the effect of bracket creep: “Bracket creep is really quite insidious and it discourages people coming in to work.”

David Murray, the former Commonwealth Bank chief executive who led last year’s financial system inquiry, said productivity improvement and workforce participation were key to “offsetting the ageing costs of the whole system”. But he said there had to be more discussion about the industrial relations system “and whether it’s best suited for the type of economy that we have”.

“Our system still looks very centralised and inflexible and that doesn’t go with a market economy,” he told The Australian.

“We don’t hear any claim that the opening up of the economy, from the late 1970s on, was a bad thing. It seems to be a bipartisan view that that was a good thing to do, yet that’s not accompanied by a view that we need to open up the industrial system.”

Mr Murray also said incentives to work were needed, “not the opposite”. “It’s no good overtaxing, taking ambition and incentive away from people,” he said.

He also said these issues were important to dealing with youth unemployment, “the social cost of which we can’t afford to increase”.

Robert Milliner — who was the “sherpa” for the peak business group that advised the government during Australia’s G20 presidency — said he hoped the report would “get everybody on the same page about the need to do things”.

It was crucial to “take some of the politics away from what it is that we need to address and get more bipartisan support about key initiatives”, he said.

Australian Industry Group chief executive Innes Willox said the report highlighted that “Australia’s taxation system as it stands will no longer serve the nation” and “sensible” tax reform, along with “real and significant” workplace reform, was needed.

Business Council of Australia president Catherine Livingstone said the report showed “timely” policy action could claw back future deficits: “The IGR projects that real spending growth will average 3.1 per cent a year through to 2055 on current settings, underlining there is no escaping the need for a sustained effort to bring spending growth under control, and that action must start now”.

AMP and CSIRO chairman Simon McKeon said that, while he had yet to see the report, improving productivity was one of the most important issues as “we were asleep at the wheel” during the 2000s. A big part of fixing the problem was innovation, not just working harder, he said.

Additional reporting: Matt Chambers