The Courier-Mail

Economic growth key, says RBA boss

- JASON CADDEN

RESERVE Bank boss Glenn Stevens believes the budget debate should focus on how to increase tax revenue by lifting economic growth, rather than the distributi­on of the proceeds.

Mr Stevens told the National Reform Summit in Sydney yesterday that despite record low interest rates and about average business and consumer confidence, economic growth had not reached 3 per cent.

“It may be that potential growth is a bit lower than we used to think though I don’t think we can know whether that is so at present,” he said.

He said the challenge of setting a federal budget that was fair for all got easier when there was more tax revenue.

He said most people understood that economic policy was about increasing economic growth on a sustained basis and that most budget measures to improve growth were only short-term solutions.

“The kind of growth we want won’t be delivered just by central bank adjustment­s to interest rates or short-term fiscal initiative­s that bring forward demand from next year, only to have to give it back then,” he said.

“A key question worth asking is: How do we generate more growth? Not temporary, flash-in-the-pan growth, but sustainabl­e growth.”

Business Council of Australia president Catherine Livingston­e told the forum bold changes required collective leadership that presented an “ambitiousl­y positive vision”.

Confronted with a rapidly ageing population and rising demand for health and aged care services, a rudderless Australia would “not have a reinvestme­nt capacity to sustain its social wellbeing”, she said.

In a side forum discussing tax initiative­s, Australian Industry Group chief Innes Willox said the capital gains tax discount on shares could be extended to other forms of investment income.

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