Global expat tells Australia to lift its economic game
Australia needs to cut company taxes and regulations to boost productivity, a foreign head of a leading global economics body has told Australia.
Matthias Cormann, the first Australian to lead the Organization for Economic Co-operation and Development and former federal finance minister, said the country was lagging other member states in attracting investment, leading to lower productivity growth.
“Australia’s regulatory and tax policy environments need to reassess their international competitiveness,” he told the annual ASIC forum in Melbourne on Thursday.
While productivity challenges are common in developed countries, Australia’s labor productivity is expected to grow by just 0.5 per cent annually between 2010 and 2024, well below the OECD average of 0.9 per cent, he said.
“Australia can and must do better,” he warned.
Labor has made reviving productivity growth one of its key policy priorities since its re-election in May.
Productivity growth is the main driver of improving living standards in the long term. Essentially, it means doing more with less, allowing the economy to expand its capacity without contributing to inflation.
At an economic roundtable in August, Chancellor of the Exchequer Jim Chalmers promised to simplify overly complex regulations.
He has also signaled further work on tax reform, but plans to cut the corporation tax rate are unlikely to succeed after the Productivity Commission’s proposal, which includes a new net cash flow tax, was met with widespread opposition.
Mr Cormann urged Australia not to give up on reducing its corporate tax rate.
“To boost investment, increase productivity and growth, Australia can and does need to take a fresh look at its business taxation arrangements and how they compare with other more productive economies such as the US and the UK.”
Mr Cormann also said the compliance burden for companies wishing to list was very high.
He praised corporate regulator ASIC for its efforts to make it easier for companies to list on the ASX by shortening the initial public offering process, but encouraged further easing of prospectus requirements and lowering fees for smaller firms.
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