Amid the intensifying race for Australia’s failed economic prognosticators to get out in front of a weakening economy, Ken Henry can hold his head up. From the AFR:
Former Treasury secretary Ken Henry has warned Australia is vulnerable to the downturn in the mining boom because it failed to continue with the economic reform agenda of the 1980s and 1990s.
In a rare criticism of the failure of political leadership over the economy, Dr Henry said company and personal tax rates needed to be cut and more tax revenue should come from consumption, which suggests he wants the 10 per cent GST raised.
Australia’s infrastructure was a “disgrace”, he said, and compared it unfavourably with China.
Australia survived the 1998 Asian financial crisis and US dotcom collapse in 2000 without a recession because of earlier deregulation of the economy.
Asked about the fading of the latest resources boom, he said that commodity prices would not return to their pre-boom lows but suggested the transition could be challenging.
“You would feel more confident about the Australian economy’s ability to be resilient to these negative external shocks if you thought we had done everything we could in respect to domestic economic reform,” he told the Australian Chamber of Commerce .
“Clearly we haven’t, there is a massive productivity agenda there that needs to be prosecuted.”
Most of the recommendations of Dr Henry’s landmark review of the taxation system in 2010 were ignored by the Labor government, which is likely to be stung by his suggestion it missed an opportunity to make the economy more efficient when coal, iron ore and gas prices were higher.
Most, yes, but not all. A resource rent tax would have helped materially in resisting our current economic hollowing out, by cutting taxes on suppressed sectors as well as providing greater resources for post-boom reconstruction. Ironically, it was resisted tooth and nail by this same newspaper and its staff (excepting Alan Mitchell).
