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Tax, industrial relations reforms will optimise prosperity: report

11 November, 2013

A National Productivity Policy (NPP) to review government regulation, pricing and licensing arrangements and phase out industry subsidies must be established, according to the Committee for Economic Development of Australia's (CEDA) latest research.

CEDA's major report, Australia Adjusting: Optimising national prosperity, also calls for reform of the taxation system, the Federation (to reduce overlap), industrial relations policies and education.

CEDA chief executive, Professor the Hon. Stephen Martin said the NPP should be supported by a new inter-governmental agreement that provides financial incentives for the states to undertake reforms.

"The NPP would replace the previous National Competition Policy (NCP). The NCP was successful because there were incentives for the states to carry out the agreed reforms and that will be a key ingredient if the NPP is to be successful," Professor Martin said.

"Industry subsidies should be one of the first areas looked at - the Productivity Commission review announced for automotive manufacturers last week is a step in the right direction - because we cannot keep propping up industries that will not be sustainable in the long term.

"Australia is at a crossroads, we have a new Federal Government and the peak of the mining boom has passed. Rather than hang onto the past, now is the time to identify and focus on the industries that will provide our future prosperity and appropriately skill people to work in these industries.

"Instead of subsidies, to drive growth and develop new industries the Federal Government should provide incentives to increase innovation and its adoption.

"In particular, CEDA is calling for income contingent loans, similar to HECS, for small to medium sized enterprises to help fund innovative activities. This is an area where Australia is significantly underperforming compared to other advanced economies."

On price regulation reform, Professor Martin said key areas that need to be examined are infrastructure based services such as energy, water and transport.

"Tax reform should focus on broadening the GST which would allow for middle class and business welfare tax breaks to be removed and the company tax rate to be reduced to an internationally competitive level," he said.

"Reducing the company tax rate is an important move because to continue growing, Australia is reliant on capital from abroad for major private sector projects, such as infrastructure, and we face strong competition.

"Federal and state governments should also be required to publish long term infrastructure development plans, which would allow the clarity and stability required to utilise private sector investment in these projects."

Professor Martin said this latest research from CEDA draws together leading thinkers from across, government, industry and academia and provides a reform agenda for government based on their contributions.

"Reform has taken a backseat in politics for too long. This report provides an important blueprint for the new Federal Government to once again develop a strong reform agenda for Australia to position us to be prosperous for decades to come," he said.

Report authors will discuss the report findings and recommendations at events around the country over the coming weeks.

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