“It additionally makes the economic system very brittle as a result of when your own home costs are seven to eight to 9 instances earnings, home costs can fall lots additional.
“American economist Henry George mentioned we ought to be taxing the unimproved capital of land – and it is a highly effective perception.
“A minimum of in precept, such a tax raises income with out imposing prices – a holy grail in tax coverage.”
Whereas unemployment was a comparatively low 5.1 per cent earlier than COVID-19 struck early final 12 months, the economic system’s productiveness and wage progress had been struggling for a lot of the earlier decade.
Aggressive reform agenda
IFM Buyers chief economist Alex Joiner mentioned the bounds of efficient financial coverage had been now being examined and the RBA was seeking to governments to assist financial progress.
“Fiscal coverage each within the type of direct stimulus, which is comparatively simple spending taxpayer cash and extremely seen. And extra importantly an aggressive reform agenda to bolster much-needed productiveness progress – this, whereas extra mandatory for the economic system, is extra politically tough and fewer seen to the citizens,” Dr Joiner mentioned.
Trade Superannuation Australia chief economist Stephen Anthony mentioned the RBA anticipating a big stream by for asset costs was a “one-card trick”.
Mr Anthony has advocated the introduction of a company money stream tax, reforms to power markets and infrastructure funding to spice up the financial restoration.
The federal government is pursuing industrial relations adjustments to extend flexibility within the labour market, however unions have opposed key parts of the bundle.
The October federal finances additionally included some short-term incentives for enterprise funding and acceleration of non-public earnings tax cuts.
The latter had injected an additional $7 billion into folks’s pockets within the final six months, Treasurer Josh Frydenberg mentioned on Monday.
On the state degree, NSW Treasurer Dominic Perrottet is pursuing arguably the most important reform, by flagging plans to phase out stamp duty on property transactions and gradually replace it with an annual land tax.
RBA governor Philip Lowe has repeatedly urged the federal and state governments to embark on productivity-boosting reforms to raise the economic system’s progress potential.
He had nominated reforms to tax, competitors, industrial relations, innovation, training and abilities as areas which might be ripe for reform.
The International Monetary Fund has repeatedly recommended that Australia scale back taxes on firms and staff, and shift to higher taxation of consumption and land.