Company taxes and regulation must be cut to boost productivity, Australia has been told by an expat head of a leading global economic body.
Matthias Cormann, the first Australian to lead the Organisation for Economic Co-operation and Development and a former federal finance minister, said the nation trails other member countries in attracting investment and this led to poorer productivity growth.
“Australia needs to reassess the international competitiveness of its regulatory and of its tax policy settings,” he told the ASIC annual forum in Melbourne on Thursday.
While productivity challenges were common across developed countries, Australia’s labour productivity grew at just 0.5 per cent annually between 2010 and 2024, well below the OECD average of 0.9 per cent, Mr Cormann said.
“Australia can and must do better,” he warned.
Labor has made reinvigorating productivity growth one of its key policy priorities since its re-election in May.
Productivity growth is the main driver of improving living standards over the long term. Essentially, it means doing more with less and allows the economy to increase its capacity without contributing to inflation.
At an economic roundtable in August, Treasurer Jim Chalmers vowed to simplify overly complex regulation.
He also signalled further work on tax reform but plans to cut the corporate tax rate appear unlikely to succeed after the Productivity Commission’s proposal involving a novel net cashflow tax was met with broad opposition.
Mr Cormann urged Australia not to give up on lowering its corporate tax rate.
“In order to boost investment, enhance productivity and growth, Australia should have and needs to have another look at its business taxation arrangements and how they compare with other, more productive economies like the United States and the United Kingdom.”
Mr Cormann also said compliance burdens for companies looking to list on the stock exchange were too high.
He commended corporate regulator ASIC for its efforts to make it easier for companies to list on the ASX by shortening the initial public offering process, but encouraged further relaxing of prospectus requirements and reducing fees for small firms.