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Problems, causes and solutions - Tony Shepherd on the nation’s economic challenges

Tuesday, 29 August 2017

What is causing Australia’s low growth and economic pessimism? What can Australians and their politicians do to deliver the country from this malaise? And what consequences will there be for the nation if we do nothing?

Tony Shepherd knows the answers to these questions because he knows how to get things done. He led the project to build the Sydney Harbour Tunnel, one of the most ambitious and successful public-private projects in Australian history, was chairman of the Business Council of Australia and is chair of the Greater Western Sydney Giants, who have just finished in the top four of the home-and-away AFL season for the second successive year.

Talking to former Queensland premiers Peter Beattie and Campbell Newman, Shepherd outlined 12 key points:

  • We still have a structural budget deficit, and we cross our fingers and hope growth will take care of it, and we pray that nothing bad is going to happen in the world which is going to bring us down.
  • Household costs have risen and real wages have stuck like glue. The most disappointing thing is that the average Australian family feels that they’ll never get ahead.
  • Youth unemployment is unacceptably high. In some regions it’s 20 per cent. That’s a sign of things to come.
  • Energy costs are through the roof, the cost of electricity to families and business has doubled in 10 years.
  • The budget has an expenditure problem, not a revenue problem. We live in an age of entitlement when benefits have become entitlements. There are still people who  get  support - whether it be health, welfare or aged pension - who don’t actually need it but no government seems to have the bottle to tackle this.
  • Frankly I’m against any new taxes. The theory in modern life appears to be that the government owns all the money and they leave us a little bit for ourselves and we should be grateful for them letting us have it. This is totally wrong. Taxation still needs reform. We are too heavily reliant on company and personal income taxes, which are volatile.
  • We could definitely do with an increase in GST. I’d increase it to 15 per cent but I would reduce the tied grants to the States by exactly the same amount. It would be a zero sum game in terms of the total tax collect of the nation, but the States quite rightly would have more autonomy over their budgets and revenue. I don’t see any great advantage giving the States any more revenue. The pressure has got to be kept on the States to make sure they’re being efficient in their own expenditure and living within their means.
  • I don’t know anybody who fully understands the Grants system. Frankly, it’s very complex and arcane. My view is the States should receive the GST they collect. If a State has a significant shortfall and can’t survive on that then they can get a special grant out of the Commonwealth, but it should be specifically identified as a top-up and it should come with conditions.
  • A company tax cut would have a stimulating impact. A reduction in the company tax rate would, and has been proven in the past to, inspire growth and increase production. Even Sweden, the poster child of the social democrats, has a lower company tax rate than Australia. I think it’s down to about 23 per cent in Sweden.
  • I am in favour of negative gearing. I think the principle that you can offset losses on one investment against profits on another is a reasonable and basic principle of taxation. I don’t see why the government should fiddle around with that.
  • The  Federation needs to be reformed. We’ve got three levels of government, with considerable  duplication and overlap. It’s not working properly.
  • There is a lack of business investment because of a lack of confidence. As a general observation the lack of real  business experience is a problem in parliamentarians on all sides. There are some notable exceptions. Every time they intervene, they have got to be very careful about the unintended consequences.

The Shepherd Review launched the National Challenges Statement on 27 March 27 2017. Download it here.

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