Australia’s tax system needs more reform to ensure sustainable public finances and create incentives for businesses to invest, Australian Treasurer Wayne Swan said.
At least 40 measures have been implemented by the Labor government since coming to office, Swan wrote yesterday, ahead of an address to the Council on Federal Financial Relations tomorrow.
Tax reform is the responsibility of federal and state governments, he said.
“Many of the changes have been hard fought, but they have all been absolutely essential to ensure government finances are sustainable in the long term,” Swan said, citing measures like cutting back tax breaks for those on high incomes. “A large proportion of the savings have been delivered through reforms to the tax and transfer system.”
Australian Prime Minister Julia Gillard’s bid for a A$44 billion (US$46 billion) swing back to a budget surplus in time for an election due next year has been jeopardized by a weaker international growth outlook, lower prices for commodity exporters and the high currency.
Gillard’s policy paper on Australia’s future role in Asia, published in October, highlighted tax reform as one way to ensure workers and businesses benefit from opportunities in the region, Swan said.
Swan said he is inviting submissions ahead of next year’s budget and asking spending proposals be accompanied by ideas for equivalent savings to maintain Australia’s “strong” fiscal position.
Australia’s currency, the so-called Aussie, has averaged about US$1.03 in the past two years, compared with about US$0.73 in the prior decade, as offshore investors sought the relative security of Australian government debt, the highest-yielding debt among the seven nations with stable “AAA” grades from all three major ratings companies.
The Reserve Bank of Australia, the nation’s central bank, has cut the benchmark interest rate by 1.75 percentage points to 3 percent in the past 14 months in an attempt to revive industries outside mining, where investment is expected to peak next year. That is the level reached between April and October 2009, the lowest since 1960.