In its first survey of the Australian economy since 2021,the Paris-based economic think tank said politically difficult decisions,such as taxing the superannuation income of retirees,had to be made to fund much-needed services while ensuring the long-term security of the budget.
The OECD has urged the federal government to overhaul the tax system,starting with a broadening of the GST.Gabriele Charotte
It said increasing the level of the GST while extending it to fresh food,education,healthcare,water and sewerage could raise almost $20 billion a year. Another $7 billion could come from taxing super incomes,with the extra cash pumped into areas such as climate change or childcare.
In its report,to be released on Friday,the OECD said the country had to deal with growing economic,budget,labour and climate pressures.
“Tax and spending reforms that promote fiscal sustainability are a priority,” it said.
“As the population ages and the economy is shaped by global forces including the climate transition and digitisation,policies must continue to promote an adaptable labour force and business sector.”
The organisation said the federal government faced major pressures in health and disability,urging it to consider ways to slow spending growth on the National Disability Insurance Scheme,and channel more people into preventative health programs rather than relying on the more expensive hospital system to deal with health issues.
It made a series of recommendations to raise extra revenue,boost economic growth,reduce pressure in the housing market and deal with climate change.
Tax
The OECD said Australia’s heavy reliance on income taxes put the budget at increased risk during economic downturns and distorted the overall tax system.
It said a broader and higher GST could raise the equivalent of 0.7 per cent of GDP or about $20 billion. To protect low-income earners,it proposed compensation and welfare payments equivalent to 0.3 per cent of GDP.
The government is already planning to double the tax on earnings from,but the OECD said it should go further with a 15 per cent tax on retirees’ super income and a $20,000 annual cap on pre-tax contributions.
Other proposals include states replacing property stamp duties with a land tax,the re-introduction of a mining resource tax and the imposition of a federal inheritance tax.
Michael Keating,a former head of the Department of Prime Minister and Cabinet,will use a speech on Friday to argue Australia needs to increase its tax take to pay for everything demanded by the nation’s voters.
Keating will tell an Australia Institute revenue summit the GST should be increased and broadened,a carbon tax introduced and company tax collections policed more tightly.
“There is ample evidence that government services and assistance in Australia are presently
underfunded,and service provision is therefore inadequate. The only way to fix this is to increase the amount of taxation revenue,” he will say.
Housing
The OECD said Australia’s current “stringent land use permitting systems are holding the economy back”,urging states to overhaul planning and zoning regulations to increase housing density.
It said Australia had one of the lowest housing densities in the world,which contributed to low affordability,affected the country’s productivity and left many people with long commutes to work.
Kooyong MP Monique Ryan will argue that part of the stage three tax cuts should be ditched,with the money poured into social housing and rent assistance.Rhett Wyman
On Friday,independent MP Monique Ryan will call on the federal government to overhaul next year’s and use the extra revenue to lift social housing construction and Commonwealth Rent Assistance.
Ryan will tell the revenue summit the 37 per cent tax rate on incomes between $120,000 and $180,000 should be retained rather than axed as planned.
She will argue this would save the budget $8 billion a year,of which $3 billion could be spent on building 10,000 social homes a year and the rest on expanding rent assistance,which has just been increased by the government.
“I can’t stand by and support the current plan for stage three tax cuts,which give an $8000 tax cut to politicians and CEOs,while we refuse to give enough support to renters living in poverty,” she will say.
Climate change
The OECD said Australia needed to do more to reach its greenhouse gas emission targets,arguing for more spending by the federal government to support new technologies.
It said being exposed to climate-change-related events such as bushfires,heavy rainfall and extreme heat meant Australia required substantial investments and careful planning. That included introducing climate warnings on property transactions.
“Mandatory disclosure of climate-related risks in certain cases such as the sale of property will help raise awareness of these hazards and encourage more effective adaptation,” it said.
Economic growth
The OECD also made a series of proposals it said would help strengthen the overall economy and bring more people into the jobs market,including encouraging more private-sector childcare.
Companies would have to warn the Australian Competition and Consumer Commission of merger proposals before seeking permission. Australia is one of only three countries in the developed world with a voluntary merger notification regime.
It also raised concerns about the lack of competition in key sectors of the economy,backing the federal government’s current inquiry into competition issues.
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