The Grattan Institute thinks the government can save $37 billion: It offers 20 ways to balance the books

Broadening the GST, raising the age of access to superannuation and requiring wealthy retirees to draw down some of the value of their homes before accessing the age pension are three of 20 measures proposed by the Grattan Institute to tackle what it dubs “Australia’s growing budget crisis”.

The report, released yesterday, follows on from the Grattan Institute’s April report on Australia’s government revenue sources and expenditure going into the future.

That analysis found Australia could be facing an annual budget shortfall of $60 billion a year by 2023 as rising healthcare costs, a fall in the terms of trade and spending on big-ticket items like the national Disability Insurance Scheme eat into the nation’s budgetary position.

To address this, the Grattan Institute proposes 20 measures, each more controversial than the last, to raise money, which it says would bring in $37 billion a year.

The Grattan Institute’s proposals are difficult, but necessary, says CEO John Daley.

“Governments cannot put off tough choices indefinitely without imposing heavy costs on the next generation,” he says.

“We need leaders who make the case publicly, design a package of measures that share the burden of reform fairly across the community, and then make the tough choices to raise taxes and cut expenditure early in their term of government.”

To meet just over half of the $60 billion shortfall, the Institute suggests a range of tax hikes and the removal of tax exemptions to raise the $37 billion in government revenue.

The most significant of these is to raise the pension age to 70 by 2035. After that, the institute says, it should rise automatically with reference to increases in average lifespans. This measure alone would bring in $12 billion a year, and raise economic activity by up to 2%.

Apart from measures aimed at boosting the amount of time Australians spend in the workforce, the Grattan Institute also proposes a broadening of the GST base to include items like fresh food, health, education, childcare, water and sewerage. Even if welfare payments are increased to compensate society’s poorest, this would bring in $13 billion a year, the Institute says. 

In a move likely to do little to endear the suggestions to SMEs, the Institute also proposes removing the thresholds at which businesses don’t have to pay payroll tax. The state-based tax is not payable by many small businesses. Removing such exemptions could net Australian government’s $6 billion a year.

Other tax hikes proposed by the Institute include congestion charges (a charge of 10 cents per kilometre could raise $3 billion in metropolitan Sydney alone). The Institute also proposes raising a number of taxes, including income taxes (by 2%), company tax (from 30% to 34%), GST (from 10% to 12%), payroll tax (from 5.5% to 9.1%), and stamp duty (from 4.8% to 8.9%).

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