The Reserve Bank has left the official cash rate on hold at 2 per cent, in line with predictions.

In the statement accompanying the decision, Reserve Bank governor Glenn Stevens said the economy continues to grow “below longer-term averages” and so “monetary policy needs to be accommodative”.

Overall, however, very little changed in the statement.

“Further information on economic and financial conditions to be received over the period ahead will inform the board’s ongoing assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target,” the governor concluded.

That is almost identical to September’s statement, which read: “Further information on economic and financial conditions to be received over the period ahead will inform the board’s ongoing assessment of the outlook”.

Recent economic data shows the Australian economy is growing below trend, and inflation remains subdued, providing the backdrop for “easy” monetary policy.

On the flipside, the board members have been wary not to further stoke speculation in the Sydney and Melbourne property markets.

The lower Australian dollar has effectively provided a “grace” period for the central bank as it works to cushion the economy without the need for further interest rate cuts.

“The RBA governor will be very happy that the lower Australian dollar is talking some of the pressure off interest rates, and other sectors of the economy can afford to pick-up, rather than just housing,” TD Securities economist Annette Beacher said.

The Reserve Bank and other central banks, including the US Federal Reserve, have made reference to recent volatility on global markets, but at this point it remains a “wait and see” issue.

Economists say the Reserve Bank may not change its stance on monetary policy until well into 2016.

Article source: http://www.abc.net.au/news/2015-10-06/reserve-bank-leaves-interest-rate-unchanged-at-2-per-cent/6831086

Business, union and community leaders will head to Malcolm Turnbull’s mini-summit with a lengthy wish list.

But the scheduled three-hour meeting with the prime minister on Thursday is unlikely to be long enough to discuss their wants in full.

Even so, Australian Chamber of Commerce and Industry boss Kate Carnell told AAP it is a “great initiative” as a follow-up to a privately sponsored reform gathering in August.

Mr Turnbull is equally enthusiastic about the gathering.

“The future of our country, our prosperity, will depend on the extent to which we can be more innovative, more technologically sophisticated and creative, more competitive and more productive,” Mr Turnbull told reporters on Wednesday.

At the centre of the talks will be the government’s tax reform process and a key plank to lift Australia’s economic wellbeing and international competitiveness.

This will include the need for income tax cuts to tackle the growing number of average wage earners who will find themselves in a higher tax bracket through wage inflation, otherwise know as bracket creep.

Corporate tax rates also remain well above the global average, while the GST rate at 10 per cent is one of the lowest in the world, yet one of the tax system’s most efficient.

Treasurer Scott Morrison said one of the most important things the meeting can accomplish in the taxation debate is to bring the Australian people along with the sort of changes that are needed.

Ms Carnell said there is also the need to address greater workforce participation among women, older and younger people, and a better alignment of vocational and university education with the rapidly changing needs of business.

She and community groups such as National Seniors Australia want retirement policy on the agenda, and in particular changes to superannuation tax concessions for high-income earners that were ruled out under the leadership of Tony Abbott.

“If we are to move to a situation with fewer Australians being reliant on the pension … then we have got to have better incentives for people on lower to middle incomes,” Ms Carnell said.

Australian Industry Group chief Innes Willox said political circumstances have created a window for rigorous and imaginative policy debate and development in the lead up to the election in 2016.

“It is critical that we make the most of this opportunity and use it as a springboard to boost domestic innovation and competitiveness,” Mr Willox said.

Article source: https://au.finance.yahoo.com/news/leaders-talk-reform-turnbull-054508660.html

Treasurer Scott Morrison says he is open to any tax changes, including to superannuation concessions, that would make for a more efficient tax system.

In contrast to the Abbott government’s blanket refusal to wind back super tax breaks, Mr Morrison used a series of radio interviews yesterday to say he was “interested in anything that will help Australians work, save and invest”.

The Treasurer’s comments come ahead of Prime Minister Malcolm Turnbull meeting business, community and union leaders to discuss policies to grow the economy.

“To secure and enhance our prosperity we must be more productive, competitive and innovative,” Mr Turnbull said.

Mr Morrison reiterated the need to address bracket creep before the average wage reached $80,000 a year, pushing thousands of earners into the second-highest tax bracket.

“I am not going to get into the details at this point because we are still working through a package but what I am saying to Australians I think very clearly is, I want the tax system to work for them, not them to work for the tax system,” he said.

Mr Morrison also signalled he would rein in government spending by limiting its growth, such as further tightening eligibility for welfare.

“It is not about cuts, it is about control,” he said.

Mr Morrison accused Labor of wanting to change the tax system simply “to chase its higher spending”.

Shadow treasurer Chris Bowen welcomed Mr Morrison’s willingness to reconsider generous super tax breaks, saying they were the fastest- growing concessions and were unfair and unsustainable.

“We’ll see whether Mr Morrison is just all words or whether he is actually prepared to accept good policy,” Mr Bowen said.

In an interview with Sydney broadcaster Ray Hadley, Mr Morrison said he had not spoken to former PM Tony Abbott since the leadership coup a fortnight ago.

After the spill, Mr Abbott accused Mr Morrison of badly misleading the public by claiming he had alerted him a few days earlier that a challenge was imminent.

Mr Morrison said he would give Mr Abbott space before speaking to him.

“These things are very emotional events and I’m sure once the dust settles and time moves, we’ll be able to have that opportunity,” he said.

Article source: https://au.news.yahoo.com/thewest/wa/a/29660703/shackles-loosen-on-tax-reforms/

Treasurer Scott Morrison has confirmed all taxes, including those on superannuation, must be reviewed as part of hs drive for a more efficient tax mix.

“Anything that is going to help Australian’s work, save and invest, I am open to,” the Treasurer said on Monday morning.

Mr Morrison, who replaced Joe Hockey as Treasurer, has been eager to draw a line between himself and shadow counterpart Chris Bowen over tax

Mr Morrison believes he can boost revenue by curbing spending and stimulating growth through measures such as tax reform. He sees no need to increase the net tax take.

Mr Bowen said last week all three measures are required – increased revenue, spending cuts and economic reforms to stimulate growth.

In April, Labor announced a policy to trim excessive superannuation tax breaks. Once retirees had earned over $75,000 from their super, each dollar over $75.000 would be taxed at 15 per cent. This would mean someone who earned $100,000 from their super in a year would pay $3750 in tax.

Labor has also promised to increase from 15 per cent to 30 per cent to superannuation contributions tax rate for people earning over $250,000.

Once Labor announced its policy, the government ceased all work on its on proposals and announced it would never touch super taxes, this term or the next.

Mr Morrison told The Australian Financial Review on Thursday that super taxes, as well as other taxes Labor is looking at, including capital gains breaks for investors and negative gearing, should all be looked at.

On Monday, he confirmed super was on the table again as he strove to design a tax system that drove growth and productivity was the ultimate goal.

“I think it is important to keep stability and certainty in that area but there have been many issues raised in the area of retirement incomes,” he said.

“I dealt with them quite extensively in my former portfolio in the area of pensions which you and I discussed and there is an interface between these two. You have got to get all of the systems lining up.

“Your welfare system, tax system, your industrial relations – workplace relations system – they have all got to be lining up to achieve growth.”

He listed bracket creep and further measures to increase the incentive to move from welfare to work.

“If young people want to work more, then our tax system has to reward them for doing that,” Mr Morrison told

Mr Morrison said did not plan to “get locked up in an accountants’ picnic” when deliberating over tax changes.

He said the system as it stood was”not giving people who work save and invest a fair go.”

He also claimed he would not cut spending in but slow the rate of spending growth.

“It’s not about cuts, it’s about control,” Mr Morrison said.

Article source: http://www.afr.com/news/politics/scott-morrison-open-to-super-tax-changes-20150927-gjw56p

The problem with tax reform is that Australia’s tax system is fundamentally broken.

Piecemeal reform simply won’t cut it and our political leaders simply don’t have the capacity or the willingness to embrace widespread reform. As such, yesterday’s AFR Tax Reform Summit didn’t offer anything we hadn’t heard before.

Fiscal policy in Australia is a function of two concepts: tax revenues and government expenditure. Without one there is no need for the other, and therefore when we consider tax reform we must address both.

The summit provided clear insight into how limited the debate is and why so few believe genuine reform is possible.

For example, Labor treasury spokesman Chris Bowen was only too happy to embrace a cut to the company tax rate but quickly closed the door on a hike to the GST.

“I would like to see the corporate tax rate come down over time,” Bowen said. “I have previously said the nation should be aiming for a 25 per cent corporate tax rate.”

He is absolutely correct to want a lower company tax rate — it’s a horribly inefficient tax that is ultimately borne by a firm’s employees — but by limiting the available options for reform he is part of the problem. Both Abbott and Hockey showed similar limitations when they categorically shut down talk about superannuation tax concessions.

It is the same limited thinking that has let to our bastardised tax system in the first place. Years of tinkering around the edges — introducing the GST, cutting taxes on capital gains etc — has created a system that is as complex as it is poorly understood.

It’s a system that cannot be fixed via piecemeal reform. We need a sweeping revolution that strips the tax system back to its core elements, identifies how much money the state and federal governments require to provide adequate services, and then determines the most efficient avenue towards raising those funds.

As economist Saul Eslake said yesterday: “Australia’s personal income tax base is like a giant Swiss cheese, riddled with holes that allow people to pay less tax on particular types of income.”

He’s not wrong. According to the IMF, no other advanced economy foregoes more tax revenue, through ‘differential, or preferential, treatment of specific sectors, activities, regions or agents’, on an annual basis than Australia. These decisions — whether they be negative gearing, the capital gains discount or superannuation concessions — are largely arbitrary in nature and can rarely be justified on any sound economic basis.

In other words, there is no advanced economy in the world in greater need of tax reform than Australia. At some point, we lost sight of what is important — providing equality of opportunity, essential services such as health and education, and promoting investment and productivity — and became a refuge for rent-seekers.

The tax debate as it currently stands seems to be a battle between a lower company tax rate and a higher GST. It’s as limited as it is reactionary, and it will do nothing to address the fundamental problems in Australia’s tax system.

The reality is that Australia simply doesn’t raise enough revenue to fund the services that we demand. The existing situation will deteriorate further as the Australian population ages. Spending on healthcare and aged care services will skyrocket in the next couple of decades and both are non-negotiables. Just ask the Coalition, which thought it was a good idea to mess with Medicare.

So the fundamental task for Australian politicians is to come up with a tax reform agenda that allows the public sector to generate more revenue without raising the overall cost to Australian taxpayers. This is possible but only if they place greater emphasis on efficient revenue streams, such as the GST and land taxes, and less emphasis on the likes of income and company taxes and stamp duty.

By virtue of the fact that a GST is a regressive tax (since lower income earners spend a higher proportion of their income on consumption), any increase will need to be offset by further wealth redistribution to protect those who are most vulnerable.

Some people view this as a weakness of the GST, but in favouring a different tax mix they are almost inevitably advocating for a tax system with greater distortions that hurts employment and income growth.

State governments need to be weaned off their reliance on stamp duty, preferably before the next housing downturn makes mincemeat of their state budgets. They have a perfect replacement in a broadbased land tax that could raise the same amount of money, without both the distortions and volatility associated with stamp duty.

Meanwhile, the federal government needs to be weaned off its reliance on income taxes and embrace more efficient revenue sources.

At the same time, we need to close existing loopholes where possible and ensure our tax system creates greater incentives for employment and productive investment. We need to stop being a paradise for parasitic rent-seekers.

The current tax system is a woeful failure of both Labor and Liberal policies and ideology. It’s become a plaything for political hacks who largely ignored the wide-reaching review of the Australian tax system completed by then Treasury secretary Ken Henry back in 2010.

For the first time in two decades, Australia has a prime minister who can adequately explain the need for wide-reaching tax reform to the Australian public. Now we just need a political body that doesn’t aspire to mediocrity and then blame the other guys when it falls short.

Article source: http://www.theaustralian.com.au/business/business-spectator/broken-tax-system-needs-more-than-a-band-aid-solution/story-fng7vg0p-1227540267978

Low-income earners are the biggest losers from bracket creep and not middle Australia, one of Australia’s top economists says.

And increasing the GST would deliver billions of extra dollars in revenue while leaving enough to shield poorer households from the impact of higher prices, according to Deloitte Access Economics.

The financial consultancy group will today release a new report on “mythbusting” tax reform ahead of the Government publishing its options paper this year for an overhaul of the tax system.

Treasurer Joe Hockey has identified the need for income tax cuts to counter bracket-creep, which has workers pushed into a higher tax bracket when their wages rise.

To push his case for reform, Mr Hockey has highlighted how average full-time wage earners will soon be pushed into the second highest bracket when their income hits $80,000.

But Deloitte Access Economics partner Chris Richardson said though it was true 800,000 taxpayers earning between $70,000 to $80,000 faced their tax rate rising 4.5 percentage points, more people earning less than that would be hit with an even bigger rise.

About 1.3 million taxpayers earning between $30,000 and $37,000 would see their tax rate rise 13.5 percentage points to 32.5 per cent, while also losing government benefits.

“Although middle Australia feels this pain, the share of income lost to tax is set to rise far faster for lower income earners,” Mr Richardson said.

His report challenged claims the failure to deliver tax cuts would do much to help repair the Budget bottom line.

The Opposition has argued 80 per cent of the rise in revenue comes from bracket creep, also known as fiscal drag, but Mr Richardson said it would only contribute 10 per cent of the increase by 2018-19 because of low wage growth.

Mr Richardson said rejecting a GST rise because it would punish the poor “ignores the bleeding obvious” that welfare payments could be increased and taxes cut.

Article source:

The Reserve Bank has left interest rates on hold at their historic low of 2 per cent for the fourth consecutive month.

The lack of action was widely expected, with markets pricing in less than a 10 per cent chance of a change and a recent Bloomberg survey of 27 economists forecast no change.

The RBA cut rates to their historic low in May.

The central bank has not been swayed by recent global market volatility, holding to its stance of further monitoring the Australian economy before deciding its next move.

“Equity markets have been considerably more volatile of late, associated with developments in China, though other financial markets have been relatively stable,” RBA governor Glenn Stevens said in a prepared statement.

Mr Stevens said the economy should continue its modest expansion.

“While growth has been somewhat below longer-term averages for some time, it has been accompanied with somewhat stronger growth of employment and a steady rate of unemployment over the past year,” he said.

The RBA appears to be becoming more sanguine about exchange rates, noting: “The Australian dollar is adjusting to the significant declines in key commodity prices.”

RBC chief economist Su-Lin Ong said there was “nothing in today’s statement that hinted of any shift closer towards further easing, although markets are fully priced for another 25-basis-point cut before year end”.

“As we suspected, however, the RBA largely stated the facts and offered little opinion or assessment of risk especially with regards to China,” she said.

“While the RBA may be camped on the sidelines with a reluctant [easing] bias we are less sure how comfortable they are behind closed doors.

“A step up in policy action from China recently underscores the underwhelming state of the economy, the commodity complex remains under pressure, and the latest capital expenditure [capex] survey showed few convincing signs of a sustained pick up in non-mining investment while resource capex plans have weakened further.”

The Australian dollar remained largely unmoved, trading a 0.7127 cents against the US dollar at 3:45 pm (AEDT).

Article source: http://www.abc.net.au/news/2015-09-01/reserve-bank-leaves-rates-on-hold/6740564

Finance Minister Mathias Cormann has revealed the Coalition’s promised personal income tax cuts will hinge on reducing spending as well as finding alternative revenue sources, raising the spectre of increasing the GST.

Senator Cormann confirmed the government planned to take a tax reform package to the next election, saying it had been candid with Australians that “our tax system relies too heavily on income taxes’’ that were too high by international standards. Asked how tax cuts would be funded, he said the government was focused on getting spending growth under control, which “gives us some room’’.

“Beyond that … if we want to raise less revenue in order to ­improve our competitiveness from one tax source then obviously that’s got to be made up in other areas, and that is the conversation that we’re having,’’ he told Sky News’s Australian Agenda.

Labor Treasury spokesman Chris Bowen labelled Senator Cormann’s comments an admission that “any income tax cuts needed to be paid by increases in other taxes, like the GST’’.

Mr Bowen’s attack was part of Labor’s multi-pronged assault on the government, with families spokes­woman Jenny Macklin also hitting out at Joe Hockey after he appealed for women to return to the workforce “for the sake of the future of the Australian economy’’. Ms Macklin said his comments ignored the government’s plans to cut family tax benefits, including removing families from Family Tax Benefit Part B when their youngest child turns six, changes to childcare and ending the practice of double-dipping of paid parental leave. “Mr Hockey is treating women like fools,’’ Ms Macklin said.

The government wants to tackle the challenge of bracket creep, where increased wages lift workers into higher tax brackets, which acts as a disincentive to ­increasing working hours.

The government is using its tax white paper process to look at both the top end of the income scale — where high tax rates are choking entrepreneurialism and work incentives — and at the ­interaction of taxes and welfare benefits lower down the income scale, which can impact on women’s workforce participation.

Senator Cormann said the ­government wanted to improve the tax system to facilitate growth and job creation, and that meant improving the tax mix. “The overall objective is to raise the necessary revenue for government in the most efficient way possible, in the least distorting way in the economy possible, and in a way that doesn’t undermine our capacity to grow the economy,’’ he said.

Asked whether the government was looking at changes to the GST, Senator Cormann said: “There is a conversation to be had, and we’ve always said in relation to the GST that we would want to see a broad community consensus and a broad political consensus in the context of any such reform. But certainly the conversation so far has been ­encouraging.’’

NSW Premier Mike Baird welcomed Senator Cormann’s comments. “They reflect the NSW position that an increase in GST, with targeted tax cuts to quarantine the majority of families from the effect, is the best way to secure the future of our health services. This solution addresses the cumulative deficits looming for the Commonwealth and the states, while improving the overall competitiveness of the economy.”

Article source: http://www.theaustralian.com.au/national-affairs/treasury/income-tax-cut-raises-threat-of-gst-hike/story-fn59nsif-1227505191759?sv=179a9b24f79ca712f853879861b8600c

Tony Abbott has promised to outline detailed plans for “have-a-go” income tax cuts to address bracket creep in coming months that he will take to the next election.

The Prime Minister has endorsed the case for tax relief outlined by Treasurer Joe Hockey earlier this week, declaring the personal income tax system is putting “a handbrake on economic growth”.

He is set to press the case for tax relief in at least two more appearance in Western Australia before the Canning by election on September 19.

Behind in the national polls, Mr Abbott needs the Coalition to retain the seat to shore up confidence in his leadership among Coalition MPs.

Mr Abbott told Fairfax Media that too many Australians were being discouraged from working more, earning more and investing more by the harmful effects of bracket creep and high marginal tax rates.

“We will have more to say about keeping taxes low in the lead-up to the election, but bracket creep is a problem and that is why Joe was absolutely right to put it on the agenda on Monday,” Mr Abbott said.

“We want to help hard-working Australians. It’s in our DNA.”

Mr Abbott has been in almost daily contact with the Treasurer during his week in remote Indigenous communities in Torres Strait and near the tip of Cape York.

Addressing reporters, he played down Mr Hockey’s involvement in a parliamentary group supporting a republic, saying: “Joe is leading a push to make Australia a stronger and more competitive economy. I am proud of the work he’s done. I’m proud of the work he’s doing.

“Lower taxes, less regulation, higher productivity, that’s what we are on about every single day and that obviously is Joe’s overwhelming focus.”

Mr Abbott told Fairfax that in the next two years, without action, about 300,000 Australians will move into the second highest tax bracket.

“And in 10 years, without tax reform, almost half of all taxpayers will be in the top two tax brackets, a jump from 27 per cent to 43 per cent,” he said.

“Australia needs a tax system that rewards hard work and sends a simple message: “Have a go!’ We will be laying out more details on our plan for Australia’s tax system over the coming months.”

Shadow treasurer Chris Bowen has said Mr Hockey’s tax cut plans are”all talk” and questioned how the Coalition would fund them. “That’s exactly what was promised prior to the 2013 election,” Mr Bowen said.

Mr Hockey said earlier this week that the forthcoming options paper on tax reform — which the government plans to present to voters before the election — will “include options for personal income tax cuts”.

But Mr Abbott’s comments go further, suggesting the government will give detail of tax relief by early next year.

Tax reform of the kind Australia needs should not be done in bits and pieces. Any move towards the necessary reform requires considered analysis of how the imposition of taxes can dampen activity or influence spending in certain areas of the economy. It should consider tax rates, tax thresholds and taxation structures, as well as equity and federal-state splits.

In short, tax reform cannot be achieved by twiddling one lever and generating a benefit for some, as politically attractive as that might be. The entirety of Australia’s tax system needs overhaul, which is why the government, rightly, commissioned a white paper and called for submissions. The report is due this year.

To that end, Treasurer Joe Hockey’s indication (for that is all it is) that the Coalition may eventually reduce personal income tax thresholds is yet another disappointing nothingness in a long line of such disappointments from the government. Mr Hockey dressed up his one-line wish-list with a blast of airy rhetoric and a barrow load of secondary school economics in a speech this week. But he provided no details, not even outlines of proposals about likely new thresholds.

Nor did he indicate how the government might recoup the billions of dollars of income it would forego if it made such an adjustment. Mr Hockey suggested the lost income would be overcome because the threshold changes would encourage people to “have a go”– to strive for promotions that would lift them into a higher pay grade.

Which all sounds serendipitous, except his argument is founded on misconceptions about bracket-creep. We suggest Mr Hockey should lay off the treacly rhetoric, wait for the tax white paper before tossing out politically driven short-term ideas, and focus instead on the serious issues threatening Australia’s economy.

For while Australia has one of the fastest growing economies in the world, and other major industrialised economies are starting to pick up the pace after eight years of recession or low growth, there are worrying signs abroad. The volatility in world share markets in the past few weeks, driven by the slide in China’s benchmark Shanghai composite index and its recent devaluations of the yuan, should have jolted our government and focused Mr Hockey’s attention on how Australia’s fortunes are forged with those of China.

As The Age’s Malcolm Maiden points out today, the ructions in China’s share markets may be symptomatic of profound problems in the world’s second-biggest economy. The debt burdens carried by China’s provincial governments and some of its biggest corporations, for example, are hefty.

As for Australia, commodity prices have slumped dramatically in the past year amid constant wind-downs of China’s economic growth rate. That jeopardises the profitability of Australia’s iron ore, coal and base metals mines, and of its oil and liquefied natural gas operations. It puts thousands of jobs at risk – those of miners and engineers, contractors and service providers in regional centres – and it threatens the royalty streams received by state governments.

All this is occurring as the manufacturing sector encounters headwinds of its own. The car manufacturing industry, for example, is preparing to close down, and manufacturers and importers have had to adjust to big movements in the currency in the past year.

Australia’s economy, generally, is in sound shape and growing. But the fear is that China’s powerhouse economy is entering a highly uncertain period. Managing that nation’s economy through this uncertainty will require a skill set of the first tier. Managing the ramifications at this end will require a similar match of skills.

Article source: http://www.theage.com.au/comment/the-age-editorial/hockey-cannot-twiddle-the-tax-levers-for-some-without-affecting-the-rest-20150825-gj7cau.html