Radical GST reform a 'game changer'

INCLUDING food as well as health and education services in the GST and giving mothers much better financial incentives to return to work are among radical "game changer" reforms that could add more than $70 billion to the economy, according to a paper from the Grattan Institute.

INCLUDING food as well as health and education services in the GST and giving mothers much better financial incentives to return to work are among radical "game changer" reforms that could add more than $70 billion to the economy, according to a paper from the Grattan Institute.

The third of the reforms, each worth about $25 billion a year in 10 years' time, would be pushing out the pension and superannuation preservation age to get older people to work longer.

The paper, by the institute's chief executive, John Daley, says that apart from these ideas, "There is nothing else big enough to change the game over the next decade."

It plays down the potential of workplace changes, saying the evidence is not in about what difference they make, and also suggests that Tony Abbott's ambitious parental leave scheme would be less effective than more generous childcare.

"Internationally, government support for childcare has about double the impact of spending on parental leave."

Government could not be serious about increasing the size of Australia's economy within the next decade unless it acted on at least one of the proposed reforms, says the paper, titled Game-changers: Economic reform priorities for Australia.

Broadening the GST would generate revenue for income tax cuts, as well as for a reduction in the company tax from 30 per cent to 23 per cent. Cutting personal tax increases incentives to work, while "the point of reducing corporate taxes is to make profitable investments that otherwise wouldn't be. Although foreign owners will be better off, Australians will also benefit because of increased economic activity."

The paper says the most important change to get more females working is to alter the family tax benefit and childcare benefit and rebate "so that the second income earner in a family usually, but not always, a mother takes home more income after tax, welfare and childcare costs". It points to the Canadian experience where female participation is much higher than in Australia, with more women working full-time to show that "lower effective tax rates and subsidised childcare lead to more women in paid work".

Australia has lower female participation than many OECD countries. Current arrangements are also regressive. "Women with lower earning capacity are more strongly discouraged from work. They take home a smaller proportion of any money they do earn."

The paper says fewer older people work in Australia than in many comparable countries, but not due to lack of jobs. "Encouraging work seems to be more important than finding it for older people," it says, urging a later pension age and superannuation changes to discourage people retiring early.

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