Stephen McMahon
July 31, 2013
News Limited Network
HOUSEHOLDS face thousands of dollars in higher bills for fresh food, health and education payments under hard line plans to lift and extend GST payments.
In a recipe to recession-proof the nation’s economy, the Business Council of Australia is calling for the next government to undertake a major overhaul of the tax system to get the nation’s balance sheet back into the black.
And part of their plan is to have consumers paying GST on previously tax-free items such as fresh fruit, bread and milk.
The report has also called for union friendly laws and middle class welfare such as family tax benefits to be reviewed as the nation is at the crossroads after 22-years of consecutive growth.
The lobby group’s 10-year plan also calls for infrastructure spending to lifted to around $55 billion a year or 4 per cent of GDP to improve rail, road and air links as the populations of Sydney and Melbourne hit 7 million in the coming decades.
The blueprint for lasting economic prosperity aims to double real wages by 2050, even if the process will be a painful for some.
Australia’s population will reach 42 million by 2050, six million more than the Federal Government’s target, if migration, fertility and life expectancy continue at today’s pace. Modelling by Australia’s Centre for Population and Urban Research has warned of a doubling of the population in 40 years.
BCA president Tony Shepherd warned that without meaningful reform Australia faces a bleak future with an ageing population, slowing economy and the rise of Asia as the 21st century’s economic powerhouse.
“This is not about boosting company profits it is aimed at securing the nation’s economic prosperity for generations and the reform must begin with an overhaul of the taxation system,” he said.
“The economy is slowing and now is the time for tough decisions to set Australia up for the future.”
This comes as economist warn the Federal budget is likely to face another $20 billion downgrade before the election – pushing out the promised budget surplus to 2016-17 at the earliest.
This will mean the budget will have been in the red for 8 years – its longest consecutive run in more than 40 years.
The business group says increasing the GST rate and widening the base along with an equal distribution of revenues to the state government based on population is a key reform needed to get the economy firing on all cylinders.
Grattan Institute chief executive John Daley warns any plans to lift the 10 per cent goods and services tax or extend it to food, health or education products – which are currently exempt – would potentially add another $3000 a year to average household costs.
The average household paid about $2000 in GST last year but lifting the base level to 15 per cent and widening the base could lift this to around $5200 per annum.
But Mr Shepherd argues the nation’s budget shortfall will blow out to $75 billion in today’s dollars by 2050 if the current approach on spending and taxation is maintained.
“To cover this the GST rate would need to go to 25 per cent or the Commonwealth would need to cease all payments for education, defence and hospitals, which is clearly unsustainable and unacceptable,” he said.
“If we adopt this plan and we can maintain real growth in our GDP of 2.75 per cent per year, which includes achieving annual growth in labour productivity of at least 1.6 per cent, then average per capita income in Australia could double in real terms by around 2050.”
The BCA’s Economic Action Plan for Enduring Prosperity, developed in consultation with government, business and the community, proposes 93 actions over 10 years in the nine policy areas.
The projects could be financed by the issuing of general Treasury bonds to maintain the nation’s AAA credit rating.
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