Budget Blueprint 2024: Financing our Future

Our 2024–25 Budget Blueprint paper focuses on three areas critical for Australia’s long term success—system-wide tax reform, picking up the pace and impact of the climate and energy transition, and boosting Australia’s innovation and productivity.

Despite the enormous looming challenges of climate change, an ageing population, mounting public debt, time-limited foreign demand for our key exports as the global economy shifts away from fossil fuels, and a generation becoming more and more indebted— incrementalism prevails as the political status quo. The specter of election cycles render long-termism unappealing for our politicians.

Both major parties have shied away from brave reforms, leaving those to the crossbench. Inertia reigns supreme in Parliament House. These indicators signal the need to progress beyond the jaded narratives of Australian mercantilism and secure future economic prosperity with meaningful reform. Substantive, ambitious policy reform is overdue.

In a per capita recession with mortgage stress on the rise, the cost of living remains at the forefront of the electorate’s mind. We are just emerging from a sustained period of inflationary pressures, and persistent services inflation suggests that pain may continue. We rang in the new year with an all-too-familiar song and dance about income tax—where bracket creep has become the most convenient can to kick down the road. Although Labor adjustment to the Stage 3 tax cuts are intended to reflect cost-of-living pressures, ambition to advance wholesale tax reform is still found wanting.

That is why comprehensive, wholesale tax reform is first on our Budget agenda. Making

improvements to our taxation system’s efficiency, complexity, and equity will be a crucial lever to quell voter dissatisfaction. Fairer taxes will stem the populist urges of the electorate, and will be key to raising enough revenue to fund critical investments into clean energy, education, and innovation. We need to rely less on personal income—and more on consumption, land, resources, and rents.

Our priorities for tax reform are simple. First, we must address the growing intergenerational equity chasm that threatens our social compact. Second, we need to promote simplicity and clarity in our bloated tax system to increase compliance and better identify inefficiencies. We need to raise more revenue to fund critical investments in our long term prosperity, and for budget repair—all whilst attempting to minimise distortionary effects on the economy. And finally, we need to incentivise business investment and boost productivity.

Our taxation system must reduce its dependence on labour and the normal return on capital, and much more on consumption, land, windfall gains, and economic rents. Our tax system must encourage, not penalise, economic activity, innovation, and productivity, to reverse our long-term economic decline.

Key recommendations

• Financing our future: a new, fairer tax bill for Australians 

• Broaden the tax base
  • Introduce a broad-based annual tax on the unimproved value of land
  • Establish a natural-resource based sovereign wealth fund for renewable energy investments
  • Broaden the base of the GST and raise it to 15%
• Reduce the complexity of the tax system
  • Reverse and repeal the new GST distribution regime
  • Abolish state payroll taxes
  • True indexation of income tax brackets
• Address intergenerational equity
  • Index HECS to real wage growth and implement a 3% indexation ceiling
  • Revert to indexation of capital gains
  • Remove negative gearing deductions on investment properties
  • Abolish stamp duty on residential, commercial, and industrial property purchases
• Boost productivity
  • Reduce the corporate tax rate to 25%