Economic Policy

Australia’s economic success depends upon strong policy settings that drive growth and ensure we remain productive and competitive. Economic policies need to focus on the system as a whole, through comprehensive tax reform, by reducing unnecessary regulation, encouraging competition, and investing in infrastructure and industry.

As it stands, Australia’s tax system is complex and inefficient by design, with a high reliance on income over consumption taxes. Australia’s comparatively high corporate tax rates are impacting business growth and innovation. Businesses need greater certainty and stability to invest, which can only be achieved through comprehensive tax reform.
Businesses are also struggling to comply with excessive and evolving regulation that is weighing heavily on productivity growth. Regulatory frameworks need to be streamlined to minimise the administrative and compliance burden on business. Fostering competition will also support a more diverse and dynamic business environment, stimulating private investment and driving economic growth.

Australia’s economy is experiencing a range of challenges on a number of fronts, due to complicated taxation and regulatory conditions, and weak business investment. These factors have created the perfect storm for slower productivity, less competition and less innovation, when compared to other similar economies. A multi-faceted approach is needed to see real change, with cooperation between governments at all levels and industry-led policies paving the path forward. Read our economic policy positions below. 

Peter Grist

Chief Economist 

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Fiscal Policy and Tax Reform

Comprehensively reform the taxation system, including simplifying the corporate taxation structure with one rate (25 per cent) for all businesses
Australia’s tax and transfer system is needlessly complex and expensive to administer, making it one of the least competitive in the OECD. Inconsistency in corporate tax rates for small and large businesses contributes to this, at 30 per cent for large businesses and 25 per cent for small businesses. This leads to complexities and limits growth across the economy. To stimulate business investment and economic growth, the tax rate for large businesses should be gradually lowered. We advocate for raising the eligibility criteria to businesses with a turnover of less than $250 million, and a progressive increase to this threshold to eventually align all businesses under a 25 per cent corporate tax rate.

Simplify and harmonise tax systems across all levels of government and across jurisdictions
The Australian tax system is complex and onerous. Tax reform is necessary to modernise a system which is no longer fit for purpose in the modern world. Inconsistency in taxation rules between the states and territories creates a range of challenges for businesses, stifling investment and productivity. We advocate for a simplified system that harmonises tax rates and tax-free thresholds across jurisdictions, reducing compliance issues, and easing administrative burdens. This includes reducing or eliminating distortionary taxes, such as stamp duties, insurance taxes, and payroll taxes, and minimising the burden on income tax.

Competition Policy

Strengthen competition through evidence-based and outcome-driven reforms
Competition drives lower prices, better quality products and services, and more choice for consumers. We advocate for an evidence-based competition framework that’s focused on improving productivity, increasing market efficiency, and delivering better prices for Australians. To achieve this, we call for a comprehensive review of outdated competition regulations, with a focus on implementing outstanding recommendations from the Harper Review, which seeks to create fair and effective competition policy.

Address regulatory barriers that inhibit fair competition
Over-regulation can create barriers to entry for businesses, resulting in less competition. Government should recognise this and make regulation more effective and efficient, including removing those regulations that unnecessarily inhibit competition. This effort needs attention from Governments at all levels. Without complete buy-in, competition will continue to stall and economic growth will be restricted. Government intervention through regulation should be minimal and strategic, focusing on creating a level playing field, particularly between private businesses and public entities.

Regulation and Red Tape

Develop streamlined regulatory frameworks that are outcome-focused and cut needless red tape 
Regulatory burdens on businesses are growing as the Government responds to a range of issues, including the acceleration of digital technologies, erosion of the usual delineation of markets, and enforcement challenges, and fragmentation of regulatory frameworks across jurisdictions. We advocate for regulation that is simple, clear, and outcome-focused and removes needless red tape, enabling businesses to operate efficiently without stifling innovation. A comprehensive review of existing regulations should be conducted to remove antiquated rules and adopt new approaches that encourage growth.

Foster intergovernmental cooperation to manage regulatory burdens 
For regulation to be effective and as least invasive as possible, coordination is required across all levels of Government. We advocate for more information-sharing and the development of frameworks between agencies to improve regulatory settings, without overburdening business. This should include regular reviews to ensure regulation is fit-for-purpose and relevant.  

Business Investment

Provide greater investment incentives for small and medium businesses, including through an increase in the Instant Asset Write-Off
Strong business investment is the key to productivity growth and a major driver of broader economic activity. Investment encourages innovation, like new technologies that boost productivity through skills development. While business investment has bounced back post-pandemic, more investment is needed to lift and sustain productivity growth over the next decade. For smaller businesses, the Instant Asset Write-Off is a positive measure that should be expanded. We advocate for raising the investment cap to $30,000 and for the policy to become a permanent measure, which will result in more investment certainty, productivity, and broader economic growth. 

Provide greater support for larger-scale investments by business
While investment support for small business is welcome, more needs to be done to provide larger businesses with the certainty they need to make large-scale investments. We advocate for measures that ease the burden of expensive upfront purchases, including an investment allowance of 20 per cent of the value of assets worth over $100,000.

Industry and Manufacturing

Develop market-driven industry policy to foster broader economic growth
Clear and competitive industry policy is an important part of long-term planning programs for Australian businesses, Governments and the community. Industry should be driven by market forces and focus on removing barriers to private investment. We believe that any industry intervention from Government should be minimal and encourage innovation and entrepreneurship. 

Prioritise investment in advanced manufacturing and innovation
As technology evolves, there is a need for advanced manufacturing capability that meets this demand. Australia has a well-educated and highly skilled workforce and is well-positioned to become a world leader in this space. However, more investment and support is needed to make this a reality. We advocate for policies that remove regulatory barriers to investment in manufacturing and support technological innovation, prioritsing areas that can deliver long-term outcomes.

Infrastructure, Transport and Logistics

Rely on independent bodies (such as Infrastructure Australia) for comprehensive long-term infrastructure planning
With a rapidly growing population, mostly concentrated in major metro areas, Australia needs targeted and consistent infrastructure investment to support our communities and deliver productivity gains. This includes sustained investment in critical areas like transport, energy, and telecommunications. In a tough economic climate, any future investment in infrastructures must be targeted to priority projects, using evidence-based decision-making and advice from independent bodies, like Infrastructure Australia. This will ensure that future projects are prioritised based on their desired outcome, like productivity gains and community needs.

Encourage more private sector investment to improve infrastructure outcomes
Government funding alone cannot meet all of Australia’s infrastructure needs. While Government should continue to utilise securitised bonds and look at other measures to raise funds, private investment needs to be encouraged. For example, there is significant scope for the superannuation industry to invest some of its $2.7 trillion in funds to support public infrastructure and, in turn, drive economic growth. By aligning public and private sector interests, we can ensure efficient, cost-effective delivery of essential infrastructure projects.

R&D and Innovation

Boost public and private investment in research and development to enhance competitiveness
Investment in research and development (R&D) is fundamental to lifting productivity, promoting innovation and strengthening the competitiveness of Australian businesses on a global scale. While this is broadly recognised, Australia’s R&D investment is comparatively low, at under 1.8 per cent of GDP compared to the OECD average of 2.7 per cent. We advocate for policy settings that encourage R&D to sustain future economic growth. This includes collaboration between Government, industry and education institutions to develop an innovation incentive roadmap with the target of lifting overall R&D expenditure to 2.5 per cent of GDP by 2030.