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ICAA futureInc 100 days paper


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In its new paper, The first 100 days: priorities for a stronger economy, the Institute has outlined a number of key policy areas that need addressing by the new federal government to put our economy on a more sustainable path. This is the latest paper in our future[inc] series, a two-year program of work that explores the major public and economic policy challenges confronting the nation over the coming years and decades.

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ICAA futureInc 100 days paper

  1. 1. 100 days the first PRIORITIES FOR A STRONGER ECONOMY
  2. 2. Our country is facing some significant economic policy challenges including an ageing population, slowing productivity growth and an unemployment level that is set to rise – all against a backdrop of global uncertainty and a mining boom that has reached its peak.
  3. 3. There is a short window of opportunity to set up processes that will help the new government deliver effective policies throughout THIS term in office. A rigorous policy-making process will result in better policy outcomes. It will ensure that every foreseeable consequence is identified and that these implications are properly weighed up against the national agenda. Meaningful and timely consultation with key stakeholders outside of government must be a mandatory part of the policy- making process to ensure new proposals are practical and sustainable in the real world. Setting up good processes is not glamorous, but it’s important work. If the new Coalition Government takes the time to embed the right processes early on, it will pay huge dividends down the track. The government also needs to be accountable to the Australian people in both the short and long term. While this paper focuses on the first 100 days in office, it should serve as a starting point for the next decade to deliver a smarter, stronger, more productive nation. The first 100 days of any new government is crucial
  4. 4. THE FIRST 100 days: PRIORITIES FOR A STRONGER 01Policy making The new government must provide the public with timeframes for the implementation of each Coalition election commitment within the first 100 days. Additionally, it must announce the start of a comprehensive review of all outstanding policy announcements from previous governments that have not yet been implemented. This review should include a clear schedule for enacting or abandoning each outstanding announcement. Taking these steps will provide immediate certainty in relation to longstanding policy announcements that have never been finalised, some of which extend back as far as a decade. Looking ahead, the government should maintain this approach by providing specific timeframes for enacting legislation when policies are announced. It must also ensure that the relevant government departments are properly resourced to guarantee timely implementation. Business needs to be involved in a more robust and transparent consultation process on policies that impact our economy. This consultation should be genuine and start at the beginning of the policy making process. Too often business is consulted after the policy has been designed when it is too late to have effective input or fix unintended consequences. The use and timing of regulatory impact statements should also be revisited by the Coalition Government within the first 100 days. They are an important tool for identifying the true compliance cost impact of particular policy changes and any unintended consequences of the proposed measures. Changes need to be made to the processes around the mandatory preparation of regulatory impact statements to achieve these outcomes. 02The Federal Budget The government needs to take a more business- minded approach to balancing the federal budget. In recent years we’ve become fixated on a set timetable for a return to surplus. That thinking must change. An artificially accelerated timetable ‘back to black’ could inflict further stress on sectors in our economy that are already doing it tough, which would result in a far worse economic outcome than delaying a return to surplus. The Coalition Government must provide an update on our fiscal position in the Mid-Year Economic and Fiscal Outlook within the first 100 days. There are some ‘big ticket’ items on the Coalition’s list of election commitments including the proposed new Paid Parental Leave scheme, continuing the roll-out of the National Disability Insurance Scheme and the abolition of the carbon pricing mechanism. There is also every chance that our fiscal revenue position will continue to weaken over the short term. If further cuts to expenditure are deemed necessary by the government, then the dimensions of these cuts must be outlined as they are realised. The government must also outline the terms of reference for its proposed Commission of Audit within the first 100 days. The first steps towards a stronger economy
  5. 5. THE FIRST 100 days: PRIORITIES FOR A STRONGER 03Tax Reform Tax reform is fast becoming the number one structural problem facing our economy. In the past few months we’ve seen how drastically revenue write-downs can affect the nation’s budget position. This in turn impacts on the capacity of the government to deliver existing programs and future reforms designed to improve our prosperity. In its first 100 days, the new government must outline what steps it will take to manage the deterioration in the tax base revenue projections. There’s a big opportunity for the new government to kick-start the tax reform agenda. A lot of the hard work in relation to analysing the problems with our existing system has already been done – we don’t need to replicate that work. Instead, the government must start to identify a tax reform blueprint for the future which moves us towards a more sustainable tax base. This would help to deliver the fiscal capacity future governments will need to fund increases in expenditure in areas such as healthcare, infrastructure and education. We also need a tax system that is competitive on a global scale to continue to attract business into Australia. The conversation about tax reform is going to be an uncomfortable one and it will need a community education campaign on why this topic is too important to ignore. We are going to need to talk about whether our current tax base needs to be revised upwards and the role that a broader based GST with a higher rate might play as part of a longer-term rebalancing of our tax system. 04Carbon pricing Australia will be taking a step backwards if the carbon price is repealed. Driving businesses to become more carbon efficient is critical for our future. Similarly, if the Clean Energy Finance Corporation (CEFC) is disbanded there will be a gap in our ability to encourage investment in clean energy technology. If the government pushes ahead with the repeal of the carbon pricing mechanism and disbanding of the CEFC, a multi-stakeholder expert taskforce should be formed to help manage that process from the outset. Repealing the carbon price 18 months or more after it has been implemented will have a significant impact on business including, for example, the potential impairment of units held as assets on balance sheets. While a transition ‘back in time’ might sound simple enough in theory, in reality, there will be a broad range of potentially significant consequences that government and business haven’t yet fully considered, such as the potential impact on financial reporting and profit results. The government must also provide a clear and unambiguous commitment to reaching the 2020 emissions target to reduce carbon emissions by five per cent on 2000 levels – without a caveat on costs. Businesses need this certainty so they can invest in low carbon business practices in the knowledge that they are taking steps in the right direction.
  6. 6. THE FIRST 100 days: PRIORITIES FOR A STRONGER 05Minerals resource rent tax The government’s proposal to repeal the Minerals Resource Rent Tax (MRRT) must be carefully thought through, particularly in relation to the unwinding of deferred tax assets. Consultation, not just with the mining sector but with broader business representatives, is paramount. The government should retain some of the concessions that have been linked to the MRRT package, including the small business instant asset write-off and the carry-back of company tax losses. These measures were recommended by the Henry Tax Review and help to support small businesses at a time when the economic climate is fragile. The government should also retain the low income super contribution scheme to help low income earners save for their retirement. 07BUSINESS REGULATION Reducing the burden of regulation is central to making life easier for small to medium-sized businesses and the government’s election commitment to make at least $1 billion worth of red and green tape cuts each year is the right thing to do. The government must provide an outline of how it intends to cut the first $1 billion of compliance costs within the first 100 days of office. A blueprint for future cuts to red tape would also be beneficial for small to medium businesses to help them plan for potential changes. Equally important is consultation with business, as they are best placed to advise on what changes will provide the greatest administrative relief – the answer may be different in different sectors of our economy. 06Infrastructure The Coalition committed to a range of standalone road projects during the election campaign, however industry experts agree we cannot build our infrastructure network on an ad-hoc basis when the national infrastructure deficit is estimated at over $770 billion. In the first 100 days, the government must commit to providing an overarching national infrastructure plan that addresses this deficit and looks at our long- term infrastructure needs. The government should also facilitate better cooperation and planning between state and federal governments so that major infrastructure projects can be rolled out in a coordinated format, where prioritisation is given to projects that provide the greatest economic and social returns to the nation as a whole. 08Skills and education Education is vital to boosting productivity. It pays long-term dividends both socially and economically. In these first 100 days, the Coalition Government must silo the entire education sector from budget cuts. It cannot be the go-to department when times get financially tough. The Gonski school reforms should press ahead as promised by the previous government so our students can get the education they need in order to stay globally competitive. The government must also move to immediately ‘scrap the cap’ – that is, abandon the proposed $2,000 cap on the tax deductibility of self-education expenses. This policy proposal announced by the previous government is a short-sighted savings measure that will damage the future productivity of our workforce. A monetary cap is bad policy and the new government should not be afraid to stop it from being implemented.
  7. 7. THE FIRST 100 days: PRIORITIES FOR A STRONGER 09Workplace productivity The Coalition Government has committed to a Productivity Commission review into child care and associated benefits to encourage parents back into the workforce. Accessible and affordable child care is crucial to improving workplace participation and the review will be an important first step towards addressing the issue. However, the government’s proposed 10-year timetable for enacting change in this sector must be brought forward. We cannot afford to wait for up to a decade before we start addressing what is a structural problem in our economy. The government should initiate the Productivity Commission review within the first 100 days of office. The review should also include a cost-benefit analysis of the government’s Paid Parental Leave scheme to assess whether some of the money allocated to it could be better directed towards other workforce participation measures that would deliver more impactful economic outcomes. The government must also boost productivity by assisting Australian businesses to engage and grow in Asian markets. Australia’s future prosperity is inextricably tied to the living standards and prosperity of our neighbours in Asia and it is incumbent on the government to help businesses move into new markets and compete on the global stage. 10G20 priorities The hosting of the G20 series of meetings in Australia in 2014 is a key opportunity to shape the agenda for what has now become one of the world’s leading economic summits. The G20 nations collectively represent 85 percent of the world economy, and 80 percent of global trade. Hosting the meeting in Australia represents an important opportunity to showcase not only our nation, but also our capacity to ‘think big’ and tackle the major economic and social issues confronting the world economy over the next few years. The official start of Australia’s host year begins on 1 December 2013, and in line with this the government should outline its priorities for next year’s agenda. This will provide the business community with enough time to plan their activities around the business forums attached to this event. The previous government committed to putting multinational tax and base erosion on the G20 agenda for 2014. This should remain. Greater collaboration between countries will help improve the effectiveness of the international tax system and avoid any potential risks that governments will attempt to ‘go it alone’. Australia is heavily reliant on foreign direct investment to help drive growth. Aligning our regulatory systems with OECD standards is an important step in enabling Australian businesses to compete efficiently on the global stage. The G20 should focus on ensuring that new regulatory frameworks involving capital markets strike an appropriate balance between protecting investors’ interests and allowing businesses to compete in global markets. These are the big issues that the Coalition Government must start to address over the next three years – And the planning needs to start in the first 100 days of office
  8. 8. Future[inc] is a two-year initiative that explores the major public and economic policy challenges confronting the nation over the coming years and decades. As part of this initiative the Institute has consulted widely within the business community to identify what business leaders believe are the priorities for developing a sustainable economy and a more prosperous future for our nation. The Institute has released two papers in the future[inc] series so far. The first paper, Developing a plan for Australia’s economic prosperity, was launched in April 2013 and is a comprehensive analysis of our future economic outlook, framed around a SWOT analysis of all corners of our economy. The second paper, An economic policy platform for the next term of government, sets out the big issues the incoming government will have to tackle and ways to strengthen our national economy over the next three years. Disclaimer Copyright © The Institute of Chartered Accountants in Australia 2013. All rights reserved. This publication is copyright. Apart from any use as permitted under the Copyright Act 1968, it may be copied, published or communicated in any form or by any means, provided that it is not amended or adapted without the prior written consent of The Institute of Chartered Accountants in Australia and the ownership of copyright by The Institute of Chartered Accountants in Australia must be attributed at all times. This document was prepared by The Institute of Chartered Accountants in Australia. The information in this document is provided for general guidance only and on the understanding that it does not represent, and is not intended to be, advice. It is not intended to address the circumstances of any particular individual or entity. There can be no guarantee that the information contained in this document is accurate as of the date it is received or that it will continue to be accurate in future. Before making any decision or taking any action, you should consult with an appropriate specialist or professional. No warranty is given to the correctness of the information contained in this document, or its suitability for use by you. To the fullest extent permitted by law, no liability is accepted by The Institute of Chartered Accountants in Australia for any statement or opinion, or for an error or omission or for any loss or damage suffered as a result of reliance on or use by any person of any material in the document. ISBN: 978 1 921245 65 7 The Institute of Chartered Accountants in Australia. Formed in Australia. Members of the Institute are not liable for the debts and liabilities of the Institute. ABN 50 084 642 571. Join the members group Institute of Chartered Accountants Australia Tweet us @Chartered_accts #FutureInc Join the conversation Watch our videos Follow us Follow us 0813-70 More information online at