What now? A five point plan for post pandemic prosperity
Updated: May 19, 2021
Australians in every state are waiting anxiously for lockdown restrictions to ease. Businesses stand poised to flip their signs to “Open”. But despite our thoughts and prayers, Australia’s economy isn’t going to suddenly spring back to life as pasty consumers emerge from their homes blinking at bright storefront lights.
The federal government has passed a stimulus package four times the size of Kevin Rudd’s package during the GFC. While JobKeeper and JobSeeker have helped many people survive these tough economic times, social distancing rules have kept the stimulus from effectively countering the economic slowdown.
Now, the Australian people and government alike cannot afford any waste caused by inefficiency in either the tax system or the regulatory code. The Australian Taxpayers’ Alliance has released a report making five policy proposals for economic recovery in the wake of COVID-19: cut red tape; decentralise power; tax smarter, not more; boost the local economy; give Australians control of their own superannuations.
Firstly, deregulation can act as a fiscal stimulus, much like a tax cut. When companies spend less on compliance, they can spend more on their business and their employees.
During this crisis, governments at all levels have come together to protect lives and livelihoods. On the one hand, rapid-fire changes have included increased restrictions to contain the virus. On the other hand, policymakers have relaxed some regulations allowing businesses to come up with creative solutions to the new self-distancing requirements.
COVID-19 has revealed the economic costs of many regulations outweigh the intended increase in safety, equity, and sustainability. We should keep currently relaxed rules like flexible operating hours and expanded licences. Governments at all levels should re-evaluate their regulatory codes and discard outdated and overly burdensome restrictions and requirements.
Secondly, the pandemic forced the government to act quickly. But by design, democratic systems require slow deliberation. As a result, the federal ministers have taken over much of the burden of regulation. The states have relied heavily on their premiers and their police forces, setting a dangerous precedent for the future.
Even during the world wars and the Spanish Flu parliament remained fully operational, because democracy is an essential service.
Rather than leaning on influential leaders, we need to give more power back to the states and councils. Instead of letting the police act as judges, we need to reinstitute trials by jury and cling to the concept of innocence until guilt is proven.
Thirdly, we need to tax smarter. Many taxes cost the economy much more than the ATO collects. The government needs to secure the maximum revenue to pay off the large deficit, without slowing the economy or further burdening people and businesses. Some costly taxes include stamp duty which disrupts the housing market; payroll tax which punishes employers who hire more workers; and the corporate tax, which makes Australia uncompetitive globally. By cutting or reducing these taxes and making up for the losses elsewhere, the government can stimulate the economy and get Australia back on its feet sooner.
Next, COVID-19 has revealed significant gaps in Australia’s supply chain. Our local economy was weak before we faced repeated disruptions. Many people have demanded protection from foreign competitors, and policymakers have lowered the threshold for government scrutiny of foreign investments.
Instead of attacking foreign industry to help our own, policymakers should make the economic ecosystem friendlier to businesses so that Australia can be globally competitive. Our bureaucracy slows development to a near standstill. And our corporate and capital gains taxes force businesses to play catch up with the rest of the world. Australia has a 30 per cent corporate tax rate, while the median OECD nation only pays 21.4 per cent.
Lastly, part of the federal stimulus package allowed struggling individuals to pull up to $10,000 from their superannuation accounts tax-free. The new regulations also provided more flexibility for individuals collecting superannuation.
The government claims superannuation belongs to the account holders. However super is compulsory, it is taxed when it is realised, and Australians aren’t allowed to withdraw their money in an emergency. Superannuation acts just like a tax taken from workers’ wages. People deserve more autonomy over their retirements. Only individuals know when they most need their savings.
By and large, COVID-19 has decreased the freedom of the Australian people. As we emerge from self-isolation, the Australians can no longer accept the grubby fisted, long-armed reach of the government. It’s up to the Australian people, not the Australian government to jump-start our lagging economy.
This crisis has given policymakers a unique opportunity to pinpoint weaknesses in Australia’s tax and regulatory systems. They can use the momentum to push real structural reforms, now. And, let Australians prove both their resilience and creativity.
This article first appeared in the Spectator 20 May 2020.