Blueprint for Growth: government progress and missed opportunities

The 2017 Blueprint for Growth called for urgent action on a number of national reforms. The AICD’s Elizabeth Proust AO FAICD and Stephen Walters MAICD discuss recent government progress on these areas and missed opportunities in this year’s Federal Budget.

Housing affordability

Housing affordability has emerged this year at the centre of the policy debate on tax arrangements in Australia. The issue featured as a key action area for government in the AICD’s reform agenda, the Blueprint for Growth, and was also revealed as an area of concern for directors in the first Director Sentiment Index of 2017.

In the lead up to the 2017 Federal Budget, Australia’s directors listed tighter controls on home purchases by foreign buyers (44 per cent), a boost to housing supply through streamlined approvals (38 per cent) and reform to negative gearing arrangements (36 per cent) as the top three measures the Government should take to address the issue.

However, despite early hints from Treasurer Scott Morrison that housing affordability would be a centrepiece of the government’s budget, the reality was that the issue faded into the background.

“It was largely a missed opportunity by the Government to deal with housing affordability,” AICD Chairman Elizabeth Proust AO FAICD said. “It is one of the key issues facing all Australians today … and we’ve seen our directors respond to the lack of initiatives in the Budget as one of the missed opportunities.”

In a post-Budget survey, 10.8 per cent of respondents nominated housing affordability as the biggest disappointment of the 2017 Federal Budget, ranking the issue as fourth of 11 missed opportunities by the Government.

Infrastructure investment

Infrastructure has consistently rated as one of the top three issues for the Federal Government to address – both in the short-term and the long-term – in the Director Sentiment Index.

The issue of infrastructure investment was also a key part of the AICD’s national reform agenda. The Blueprint for Growth recommended the following government action on infrastructure:

• COAG to lead a 15-year infrastructure investment plan based on national priorities;
  
• An increase in ‘good’ government borrowing for productive infrastructure investment;
• Support for innovative funding options, such as infrastructure bonds; and
• A boost to private sector investment through asset-recycling programs.

“Infrastructure was one of the more welcome measures in this year’s Budget and the headline number was very large at $75 billion worth of spending, with some of those high-profile projects including the Sydney airport, inland rail and Snowy Hydro 2.0,” AICD Chief Economist Stephen Walters MAICD said.

In the post-Budget survey of AICD members, almost 60 per cent of respondents rated infrastructure investment as the most positive aspect of the 2017 Budget.

“It is encouraging … but we are still waiting to see the detail on how much is ‘new money’, the cost benefit analysis of some of those projects and whether the latest rhetoric on ‘good debt’ and ‘bad debt’ is realised,” Proust said. “With low interest rates, this is the time for investment in productive infrastructure and I think that’s what we’re all still waiting to see.”

Tax reform

The debate on comprehensive tax reform came to a head in 2016 and continues to be a main feature of the AICD’s national reform agenda. In the 2017 Blueprint for Growth, the AICD called for comprehensive tax reform to deliver a more efficient, fair and growth-focused tax system. Reform of the GST, personal income tax rates, the capital gains discount, negative gearing and corporate tax rates were proposed, with incentives for reform of inefficient state taxes also recommended.

This call for government action is echoed in the sentiment of Australia’s director community. Respondents to this year’s Director Sentiment Index listed tax as one of the issues the Government should address in the short- and long-term, and 29 per cent of respondents listed it as the main challenge facing the Australian economy.

However, the issue was once again largely overlooked by the Government in this year’s Budget.

“I thought the Government’s effectively flying the white flag on it and has been doing that for quite some time, not just in the Budget,” Proust explained. “Yes, we have got some corporate tax reform, but [the Government] has missed out on anything to do with the GST and personal income tax, and this is a missed opportunity. [Also], I think that there is still an appetite in the community for sensible expenditure savings.”

Tax reform was listed as the number one missed opportunity in this year’s Budget by AICD’s members. Thirty per cent of respondents to the post-Budget survey listed it as the biggest disappointment – well ahead of budget repair, spending restraint and housing affordability measures.