Economists have one key wish when it comes to tax reform, writes Clancy Yeates.
Raising the GST has topped a wish list of tax reforms suggested by BusinessDay's panel of economists, as state government budgets come under growing strain.
Greater investment in skills, innovation and infrastructure were also nominated as key priorities for lifting the sluggish rate of productivity growth.
Although Labor and the federal Coalition say they have no plans to touch the $50 billion-a-year GST, almost two-thirds of the economists who responded to questions on tax reform and productivity in the latest BusinessDay economic survey said the consumption tax should be raised or widened.
The present tax is not levied on several areas where consumers are spending a growing share of their income, including health and education.
The Victorian and NSW governments depend on the GST for about a quarter of their revenue, so the slower GST growth is hitting state budgets hard.
AMP Capital's chief economist, Shane Oliver, said broadening the GST's base to cover all goods and services, including food, was the most urgently needed tax reform. In return, states could remove payroll tax and stamp duty.
"The tax base for the GST is too narrow and likely to grow too slowly to satisfy state revenue needs," Dr Oliver said.
Nigel Stapledon, the associate head of the UNSW school of economics, also said raising the GST was crucial for state governments, though he conceded the odds of it happening were low. "An increase in the states' tax base is the key to genuine reform. That means an increase in the GST to allow dependence on the most inefficient taxes, such as property and transfer taxes, and gambling taxes, to be wound back," Professor Stapledon said.
Raising the GST was not popular with everyone. The Commonwealth Bank's Michael Workman said the more important priority should be lowering income and company tax rates, which could be funded by curbing deductions.
"The current GST debate, about changing the GST rates and coverage, appears to be run by some business groups who want consumers to fund a company tax cut," Workman said.
Stephen Koukoulas, of Market Economics, also said lowering the 30 per cent company tax rate could create "moderate" gains in productivity, but a tax overhaul was a "medium order issue."
A wider mining tax was suggested by several experts - including Charles Darwin University's Bill Mitchell, BT's Chris Caton and Saul Eslake from Bank of America Merrill Lynch.
Steve Keen, from the University of Western Sydney, said abolishing negative gearing - with exemptions for existing property investors - and making capital gains tax rates match income tax rates were the most-needed reforms.
Aside from tax, the experts put forward a wide range of measures designed to lift the sluggish rate of productivity growth.
Julie Toth from the Australian Industry Group said potential responses could include greater flexibility in workplaces and increased applications of technology and innovation in businesses.
The nation's clogged roads, ports and other infrastructure were also a key concern.
Westpac's Bill Evans said one of the most important steps a government could take would be to overhaul infrastructure funding to exploit Canberra's stronger balance sheet.
"Of particular benefit to the states would be a co-ordinated infrastructure plan whereby the Commonwealth borrows to directly invest in state infrastructure projects without impacting state government balance sheets," he said.
Federal governments are able to borrow at interest rates that are 70 to 110 basis points lower than those charged to state governments, and such a reform would likely add a significant source of domestic growth, he said.
AMP's Oliver argued privatisation of all remaining public utilities was another way to improve infrastructure.
Putting publicly owned infrastructure assets in private hands would allow governments to focus on services such as health and education, while attracting extra investment in infrastructure from the $1.4 trillion superannuation sector, Oliver said.