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%

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.

This paper outlines the necessary immediate climate and energy priorities for a net zero and nature positive future at both the systemic level and the community level. 

This is part two of our three-part 2025 Blueprint Budget series. Paper one of this series outlines present challenges facing the Australian economy and addresses our need for substantive, wholesale tax reform. Paper three of this series outlines reforms in education and investment sectors to revitalise Australia’s productivity and competitiveness on the world stage. 

‘Protecting our future’ outlines fiscal priorities for climate and energy. The energy transition is lagging behind and in desperate need of updated system planning and technology-agnostic economic analysis to boost investment. Clear environmental and biodiversity standards  must be factored into these analyses, as the push for nature positive to be recognised alongside net zero as national objectives continues to gain momentum. Subsidies for fossil fuels should be redeployed into energy efficiency, transport decarbonisation, community rewards for hosting renewables, and nature repair.

There’s a lot more work to do as Australia moves to a cleaner economy. Our suite of recommendations focuses on how we future-proof Australia’s policymaking, pushing past the politicisation and short-term thinking, to embed the clear-eyed collaborative problem solving required to manage the transition.

We need to act now. 

Summary of recommendations

• Rethink and implement environmental standards
  • Fund the development of clear, technology-agnostic biodiversity and environmental standards
• Align understanding and incentives 
  • Reward communities for hosting renewables
  • Fund adult education and tackle mis- and disinformation on climate
• Fund the transition to net zero
  • Update energy grid system design modelling and approach
  • Accelerate energy efficiency programs
  • Redeploy fossil fuel subsidies
  • Speed up transport decarbonisation
  • Establish a public fund for nature repair

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.

‘Invigorating our future’ outlines reforms to boost our research capacity and stimulate investment to revitalise Australia’s productivity and competitiveness on the world stage.

We need to usher in a new era of productivity, dynamism, and innovation in the Australian economy. To achieve this, we must increase expenditure in technology, labour mobility, and initiatives to spur innovation and genuine competition.

The story of Australia’s innovation and productivity growth makes for sombre reading. Our productivity is in a rut, at its lowest rate since the 1970s. This stagnation is beyond an economic problem—it's holistic, cultural, and emblematic of the complacency that now permeates our national identity. The same can be said about our diversification, and poor integration into APAC markets. Australia ranks 93rd for economic complexity, just ahead of Uganda. We punch above our weight in terms of quality of research, and innovation.

To address these deficiencies, we outline two key focus areas: research and investment. 

We see two key target areas for research funding reform: firstly, toward basic, curiosity-driven foundational research to strengthen our sovereign research capacity, and second, toward outcomes-driven translation of applied research to bear economic fruits.

Building Australia’s early-stage investment capacity—and by extension the startup and innovation ecosystem—will support diversification, long term prosperity and productivity. The investment ecosystem is fundamental to building new markets, jobs, companies, and industries. It is time to address the commercialisation bottlenecks that exist for our home-grown technologies.

Summary of recommendations

• Boost research capacity
  • Increase government spending in research and development as a percent of GDP on par with the OECD average 
  • Increase funding to develop Australia’s foundational research capacity
  • Employ an outcomes-driven approach to government research investments
  • Increase PhD stipends and exempt part-time stipends from tax
  • Fund mechanisms to retain and effectively engage talented international graduates
  • Establish an Australian Institute of Applied Ethics
• Stimulate investment
  • Invest in venture funds themselves instead of startups
  • Exempt investment in startups from the unrealised gains exemption on super balances
  • Introduce an ‘educated investor’ exemption for the proposed overhauled sophisticated investor test
  • Exempt startup acquisitions from proposed merger reforms

As a think tank that subscribes to classical liberalism, Blueprint naturally embraces meritocracy. We believe that success should be a function of hard work, talent, and free and open market-based competition. But if we are being honest, it has been a generation since Australia was a true meritocracy.

As the gap between rich and poor widens, multi-generational disadvantage becomes entrenched. This corrodes the very foundations of liberal democracy, and threatens the capacity of government to provide equality of opportunity. Equality of opportunity is one of the foundations of classical liberalism. Indeed, without it, expressions of public policy that claim it as a philosophical base are ontologically bankrupt. A paradigm shift in how we conceive macroeconomic policy is needed. To be clear, we are not arguing for equality of outcomes. Whilst attractive to those subscribing to more collectivist intellectual traditions, the reality is that true meritocracy and equality of outcomes are mutually exclusive. Rather, this Blueprint short paper proposes a number of reform ideas that seek to ‘level the starting grid’—arguing that there is a direct link between equality of opportunity and productivity. 

It should be obvious that there is a minimum standard of living and access to resources needed to have a fair opportunity to achieve success. Too many in mainstream parties of government have become numb to the existence of a permanent underclass in Australia. Drunk on populist rhetoric from ideologically confuse commentators, they rationalise that the socio-economic status of this underclass correlates to a lack of competence and skill. Real liberals should reject this narrative.

We argue that the system we currently live under can instead better be characterised as a ‘naive meritocracy.’ Naive meritocracies rely on the false assumption that extremely unequal wealth distributions primarily reflect differences in innate talent. In a naive meritocracy, extreme inequality is a fair and optimal outcome that merely demonstrates the existence of an elite class who perform and excel at orders of magnitude greater than the average person.

All sides of politics have conceded for years that Australia’s long-term slowdown in productivity growth is a serious problem. Improving our standard of living and maintaining our status as a wealthy country ultimately depends on reversing that trend—a trend that has persisted since well before the pandemic. This Blueprint short paper is by no means meant to be a comprehensive list of detailed economic policies. As part of our ‘Short Paper’ series, it is instead meant to stimulate debate by putting forth often subversive ideas and recommendations that encourage thought leadership amongst decision makers. We thus present a liberal perspective of Australia’s productivity slowdown that recognises productivity growth is dependent also on equality of opportunity.

Since Federation, Australia has grown from a colonial outpost to a leading global economy on the back of a series of commodities booms. Successive generations have benefitted from continually improving living standards. But by inheriting lucrative, plentiful natural resources like coal and iron ore, our development has not cultivated the diversification necessary to thrive in an interconnected 21st-century economy—an economy that will be defined by a shift away from the fossil fuel resources that have powered the globe since the industrial revolution.

Our historical good fortune has bred complacency within the public policy community. A ‘she’ll be right mate’ attitude permeates public policy decision making ranks on both sides of the political divide. Seduced by the simplicity of reactive policy making, we are sleepwalking into a future that will be defined by long-term, existential threats to our prosperity and way of life. Put simply, decades of geopolitical, economic, and social stability have dulled Australia’s understanding of risk—and its willingness to proactively confront it.

It is tempting to write off the Black Summer bushfires and the COVID-19 pandemic as isolated, anomalous events. But these events have revealed that Australia is disconcertingly reliant on global supply lines that are ill-equipped to deal with disruptions and disasters. As we write, the world is coming to terms with the security and economic implications of Russia’s invasion of Ukraine, while floodwaters imperil whole communities. Australia is not immune.

A new virus or a conflict in Ukraine carries consequences that ripple far beyond national borders. Our vulnerability to global events is unprecedented. We can no longer use our geographic isolation to shield us from the trials and tribulations of our peers. Our Budget Blueprint sets out three key priorities:

1. As we emerge from the pandemic, our first priority must be to improve our nation’s capacity to respond to, and withstand sudden catastrophic disturbances like pandemics, climate events, and regional conflicts. If we can better anticipate and address these crises, we can soften or even avoid the need for impromptu interventions that are both inefficient and inflict unintended, second-order harm. To achieve this, we recommend policies to future-proof our supply chains, establishing an institution to oversee our preparedness and responsiveness to crises, and ensuring that we have adequate labour supply to withstand future shocks.

While improving our capacity to address crises is important, we must also recognise that a series of worsening structural deficiencies in our economy imperil our future resilience and prosperity. We highlight two structural reform priorities: productivity and equality of opportunity.

2. Reigniting productivity growth—which has been almost static for more than a decade—is critical because it determines the long term trajectory of wages and living standards. A more productive society is better equipped to prepare for an uncertain future. To boost productivity, we must reform the way we fund basic research, and get the incentives right to foster productivity enhancing investments from businesses. To that end, our policy recommendations would raise innovative R&D funding, increase the productivity of our research universities, and deliver reform to our creaking tax system.

3. The resilience of our nation depends not only on economic arithmetic, but also the social bonds that tie us together. Yet the resurgence of populism is straining these bonds of trust as never before. Politicians of all ideologies are increasingly exploiting people’s mounting cynicism with the government for political gain—appealing to the frayed emotions of the electorate by disregarding factual accuracy and simply telling people what they want to hear. Worse, when countering these falsehoods, teachers, scientists, academics, and other individuals with deep area knowledge are now derided as ‘out of touch’ or ‘not living in the real world.’ Such scorn for vaguely defined ‘elites’ has its roots in the increasing divide between rich and poor. An economic system that rewards the richest without offering equality of opportunity has the potential to cause long-term damage to the foundations of liberal democracy.

We know that pervasive inequality corrodes our social fabric—if people believe they are unfairly excluded from opportunity, they are less likely to embrace policies advocating for the common good. Closing equity gaps must therefore be at the heart of every federal budget.

Our policy recommendations to boost equality of opportunity and ensure everyone has a ‘fair go’ include action on housing affordability, measures to improve access to vocational education for young people who choose non-academic pathways, and true unemployment insurance to give people the security they need to pursue the best job for them.

This Budget should herald the beginning of a new period of reform—much like the major reforms of the 1980s and early 1990s—to set the stage for tomorrow’s Australia. If we get it right, we can be sure of a secure society in an uncertain future, and set up our economy for generations of growth.

This Blueprint shows how.

Each year the Federal Budget lays out the Government's vision for the nation and its priorities for reform. We do the same.  Our Budget Blueprint's provide a roadmap for the policy needed to drive the next economic boom and lay the foundations for the roaring 20’s.

Australia is at a critical juncture. The COVID-19 crisis has cut short three decades of uninterrupted economic growth. We must support the economy while demand remains weak, but we must also give targeted support to the most vulnerable. The combination of welcome discretionary actions and automatic stabilisers have ballooned net debt, and this pressure will only increase in coming years as our needs in areas like health and aged care grow. To pay down this debt, we will need a much more efficient tax base and much faster growth. This will require wide-reaching reforms that were necessary before the crisis, and are now more critical than ever before. We must achieve this growth in an environmentally sustainable way, and investments in clean energy can themselves help power the next boom.