Governments must undertake tax reform: ACT Deputy Chief Minister

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Governments must undertake tax reform: ACT Deputy Chief Minister


Posted : Friday, March 14, 2014

Australian governments at all levels need to implement tax reforms and not delay difficult decisions, ACT Deputy Chief Minister and Treasurer Andrew Barr has told CEDA's Economic and Political Overview event in Canberra.  

"Every treasurer in the country knows the Federation is broken, that all our budgets are under stress and if we don't begin the process of tax reform, it's going to get a lot harder to achieve that reform in the years ahead," he said

For Canberra and the ACT, tax reform is vital for the Territory's economic future and development.

"The most important thing…for our economy is a continuation of our taxation reforms," he said.

"It's how we will be competitive nationally and internationally…but it's also how we will manage to pay for various infrastructure needs that this community has and the various service delivery needs."

In the ACT, 35 per cent of people are directly employed by the Federal public service and expected cuts are estimated to take $600 million out of the economy which will have flow on effects to the private sector, Mr Barr said.

"I don't think the current Federal Government will enjoy the revenue streams that the Howard government had," he said.

"We cannot rely on the Commonwealth Government and the Territory government has no expectations that the Commonwealth Government will do anything to help Canberra and help this economy for the foreseeable future."

As a result, he said the ACT government's focus will be on developing the private sector, infrastructure and the health and education services.

"There are significant opportunities, we would anticipate a $2-2.5 billion spend on infrastructure over the rest of this decade so it is attracting the attention of national and international infrastructure markets," he said.

Also speaking at the event, ANZ Research Senior Economist, Cherelle Murphy said uncertainty is slowing business activity.

 "In our own business activity has been quite slow, decision making seems to be quite stunted by the uncertainty on the horizon at the moment," she said.

"Local firms are willing to make investment decisions in Sydney and Brisbane but they're not willing to make them here in Canberra."

Ms Murphy said the actions of the Commonwealth Government are going to impact the ACT, noting that in the upcoming budget there is likely to be a fiscal consolidation and contraction.

ABC 7.30 Political Correspondent, Sabra Lane also spoke at the CEDA event, saying the year ahead will be dominated by the budget, new senate and G20.

Ms Lane said the first budget is crucial for any government, especially this one given the pending release of the Commission of Audit Report.

"The Budget gives them a key opportunity to change the nature and tone of government specifically to increase spending or to cut spending to meet the party's election commitment," she said.

It is likely the Budget will focus on healthcare costs especially given health spending increases in the past decade across people of all ages. 

"Health is 19 per cent of all government spending here in Australia," she said.

On the topic of the Senate, Ms Lane said the Government will need to gain six to seven votes on the cross bench to achieve its legislative agenda.

"Each of these senators, the Government will need to negotiate with to get them across the line," she said.

Clive Palmer will have three senators on the crossbench who won't always vote with the Government, she said.

"Mr Palmer is conservative leaning but certainly giving some indication that he won't be helping the Government on particular legislation, for example…he was quite clear he will not help lift foreign ownership restrictions on Qantas," she said.

However, the real test for the Government in terms of public opinion is how they deal with unplanned, often global events such as the Snowden leaks.

"The biggest test for any government is how they deal with the unexpected and unplanned events and how they respond to them gives the public either the confidence to trust what they are doing or to distrust what they do," she said.

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