Economic growth key, says RBA boss
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.