After 22 years of continuous economic growth, Australia now faces the risk of falling incomes and increasing government debt. PwC estimates that the combined annual deficits of Australian governments will rise:
And our governments’ debt levels as a proportion of GDP will rise:
These trends are unsustainable as the population ages. Australian governments risk not being able to meet the key needs of our community and a further slide into debt. And higher debt at the Commonwealth level would mean that another shock like the GFC in the next few years could see its debt climb to 30% of GDP by 2025-26.
PwC believe there is a clear need for comprehensive tax reform – done the right way. The ‘right way’ means increasing those taxes that have the least effect on investment and employment, and at the same time reducing reliance on taxes that distort incentives to work, invest and transact business. It also means addressing those factors which increase the complexity of the tax system and the cost of compliance.
This is an issue that will not go away. As part of a broader community discussion about the challenges Australia faces, we need an informed and intelligent conversation on tax. Leaders of civil society, business, unions and the public policy community must drive this conversation if we are to realise the benefits across all parts of society. The overall objective is twofold: economic growth, and enhancing the well-being of the Australian public.