Australia earns Iron Man status PDF Print E-mail
Saturday, 15 December 2012 11:04

An international think tank has declared Australia the "Iron Man" of the world's rich nations but advocated sweeping tax changes, including a higher GST and a broader mining tax.


In its special report on the state of the Australian economy, the Organisation for Economic Co-operation and Development also urged the government to allow the budget to slip into deficit if global conditions deteriorated.


While arguing governments at the State and Federal level could undertake a range of reforms to help the economy adjust to the growth of the mining sector, it said Australia had done well recently because of solid fiscal and monetary policy management.

"Australia's long period of uninterrupted economic growth makes it the Iron Man among the OECD countries," OECD secretary-general Angel Gurria said. "The rise of Asia has driven Australian natural resource exports and is providing enormous new opportunities for the agriculture, education and tourism sectors, but it has also imposed significant challenges and strains." Among a raft of proposals, the OECD urged the Federal Government to broaden the mining tax to other minerals.

The Paris-based think tank suggested that once the Minerals Resource Rent Tax had been in place for a while, its rate should be increased because the current level had only a "low impact" on the risk-free profits extracted by mining companies.

It also argued the states should replace their system of royalties with resource rent taxes mirrored on the MRRT, enabling them to set their own rates.

The GST should be broadened and the rate lifted while states should ditch conveyancing taxes, extend land taxes to the family home and axe first-homebuyer subsidies. Other government subsidies that should be ditched include payouts to the car sector and irrigators.

The extra revenue raised by the mining tax would help pay for a deep cut in the company tax rate and States could use their extra cash to ditch poor taxes such as insurance levies.

Canberra should use some mining tax revenues to set up a future fund that could be used when commodity prices fell and put the budget under pressure.

The OECD also backed the carbon tax, saying it was an effective and cheap way to help the Australian economy reduce its greenhouse gas emissions. Treasurer Wayne Swan said the report vindicated the government's economic management.

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