Economists welcome budget and reply, even if they don't like every policy

Jim Chalmers has been praised by economists for presenting a bold tax reform program, even if they don't agree with every element of it. (AAP Image/Lukas Coch) Link copiedShareShare articleIt has been almost two weeks since the federal government released its budget. It had big ideas and big themes. A concerted media campaign is now being driven against some of the changes. Liberal leader Angus Taylor's budget-reply speech had some big ideas of its own. He wants to index the personal income tax scales to inflation and link immigration to housing supply. Now that we have had time to absorb both documents, what do economists make of the policy offerings of the Government and Coalition? We spoke to some economists about the bigger picture. The independent economist Chris Richardson said the tax debate in Australia has been stuck on small ideas for too many years. He was really happy to see Labor and the Coalition talking about bold tax ideas again. Chris Richardson says Australia's tax system desperately needs updating. (ABC News: Daniel Irvine) "We've failed to tackle a series of chronic problems on a whole series of fronts," he told the ABC. "Maybe the rise of China allowed us to gain income as a nation that we then parcelled out, one way or another, and it made our political class a bit lazy. "But for whatever reason, we haven't changed enough in 20 years, and that's not the sign of a healthy society." Richardson said he "100 per cent admits" that Australians haven't 'voted in' some of the budget's policy proposals. As the federal budget prompts howls of protest from those who earn the bulk of their income from owning assets rather than working, we shouldn't forget the relative privilege that has allowed many of those people to take those risks. But, he said, he was worried about Australia's future if we didn't fix the chronic problems in our tax system, as well as housing for younger people. "Look at the rise of the One Nation vote. We're getting brittle. Something has to change," he warned. He said he was a fan of changing the 50 per cent capital gains tax discount, but he would prefer to replace it with income averaging, rather than a 30 per cent minimum tax. Income averaging would allow a taxpayer to smooth their realised capital gains income over a number of years. "I wouldn't have done negative gearing. I think if the capital gains discount is fixed, then negative gearing goes away as an issue, because the two interact," he said. But is Australia capable of change? Richardson said that is the critical question this budget is asking. Ken Henry, a former Treasury secretary, has also welcomed the budget's efforts to fix problems that have been ignored for years. "I like the fact that the tax reform agenda is focused on restoring some measure of intergenerational equity," he told the ABC. Ken Henry says Australia will still need a much bigger tax reform package. (ABC News: Ian Cutmore) "In particular, dealing with opportunities for aspiring first home owners, and also dealing with income going through discretionary trusts, which has been an issue for the integrity of the tax system." Henry said it was obvious from the post-budget debate that lots of people were ignoring what Treasurer Jim Chalmers was trying to address in the budget. At the turn of the century, "aspiration" described Australians who wanted to put their kids into private school and university, and to build their wealth by getting an investment property or two. Today, it means something humbler; millions of younger Australians simply aspire to own a home one day, to have some shelter. He said people who were upset about grandfathered changes to capital gains tax and negative gearing were being given a lot of airtime in the debate, but the reality of Australia's aging population, and the fact that the income tax burden will be getting far worse for younger workers if the tax system isn't reformed, was a serious problem that had to be confronted. He said Australia's tax system should be capable of generating more tax revenue when the economy is performing like it is today, but it's become too fragile. "For too many years now, personal income tax has been the only source of revenue that's been increasing as a proportion of gross domestic product. All the others are falling, even GST. We don't have the robustness in tax bases that we really need," he warned. "That's just another way of saying that at some stage we're going to have to have a much bigger tax reform package." Amy Auster is the chief executive officer of Policy Institute Australia, a think tank. She has been an adviser to the Commonwealth Treasury, a deputy secretary at the Victorian Department of Treasury and Finance, and a partner at PwC. Amy Auster says this is economic reform "as it should be". She said in last year's federal election campaign, Labor and the Coalition were both criticised for their small target strategies and lack of policy ambi

Economists welcome budget and reply, even if they don't like every policy

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