AUSTRALIA has been warned to continue the reform process if it wants to cement a reputation as one of the world’s fastest growing economies.
In its annual report on Australia released last week, the International Monetary Fund made it clear that Australia must cut its top marginal income tax rate and carry out further labour market and welfare reforms.
The IMF also warned of the need for further gradual increases in official interest rates if the economy continues to grow in the coming year.
It also backed Federal Government Budget forecasts for the economy to keep growing at around 4 per cent this fiscal year while inflation declines.
“Changes in the tax, income support and industrial relations systems should be considered as part of a comprehensive and coordinated package—with the aim of improving incentives, expanding opportunities for participation in the economy, and enhancing the flexibility and efficiency of the labour market,” the IMF said.
It said the award and wage bargaining systems could be simplified by establishing a single national industrial relations system, moving away from the complicated array of Federal and State frameworks.
“Reforming the personal income tax should be a major priority to enhance the incentive to work, save and invest,” the IMF said
The fund suggested that the top marginal personal income tax rate of 47 per cent be lowered into line with the top corporate income tax rate of 30 per cent, while increasing the threshold at which it applies to help the lower income earners.
