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Perth Now
6 hours ago
- Perth Now
Reason Aussies are $3k worse off
Australians are $3000 a person worse off as a lack of competition among businesses adds to the country's productivity woes. That's the view of the Reserve Bank's latest research paper, which shows everyday Aussies are paying the price for the nation's lack of competition. The paper argues a core problem in Australia in the lead-up to the Covid-19 pandemic was the domination of big business, which led to higher prices. A lack of competition among businesses is costing households. NewsWire / Simon Bullard. Credit: News Corp Australia This in turn had negative impacts on productivity, incomes and the welfare of Australians as well as a misallocation of resources between firms. The RBA estimates that by 2017, this misallocation reduced productivity between 1 to 3 per cent, with the upper end of this range equating to every Australian being $3000 worse off today. 'Declining competition and productivity may be linked,' the RBA's report said. 'A decline in the degree of competition has the potential to weigh on productivity through a number of channels. 'It can blunt firms' incentives and ability to invest, innovate, improve and adopt new technologies.' The fall in productivity was not uniform across the economy. According to the paper, much of the falls were in 'upstream' industries, including manufacturing, wholesale trade and professional services. The RBA suggests the flow-on impacts could have reduced the goods and services businesses produce by as much as 40 per cent and households' quality of life by 20 to 30 per cent. Australia's Cash Rate 2022 The RBA's paper came out just days after the central bank's latest statement on monetary policy, which estimates productivity will continue to fall to just 0.7 per cent. According to the Australian Bureau of Statistics, Australia's long-term productivity has slumped. In 2003-2004, productivity grew at 1.8 per cent a year; in 2022-2023, it was down to just 0.9 per cent a year. The ABS graph shows Australia's falling productivity: Picture ABS Credit: Supplied To put a dollar figure on it, the Productivity Commission estimated that full-time workers would be $14,000 a year worse off by 2035 if Australia couldn't rediscover its previous growth and continued on its current trend. RBA governor Michele Bullock explained why the central bank cannot solve the productivity issue. Christian Gilles / NewsWire Credit: News Corp Australia When asked about productivity at a press conference, RBA governor Michele Bullock repeatedly pointed out it wasn't the central bank's issue. 'Businesses are looking at what they can do to take themselves out of the productivity slump,' she said 'There's nothing the Reserve Bank can do. 'All the Reserve Bank can do is make sure we have low and stable inflation, and if we have full employment, both of those things are very stable environments for businesses to think about how they might improve productivity, how they might produce more for the same amount of labour and capital input.' Australian politicians, industry experts and economists will soon meet in Canberra for a three-day forum aimed at lifting productivity. The roundtable has a focus on regulation, taxes, AI and even the amount of hours Australians should be working.
Sydney Morning Herald
6 hours ago
- Sydney Morning Herald
The end of negative gearing as we know it? Spender calls for new income tax system
Spender's plan would mean property losses could only be used to offset taxable income on other capital investments, or carried forward to tax paid on capital gains when they are sold. She said the current tax system acted as an incentive for people to sink money into property, but was a disincentive for someone who wanted to boost their skills or work. Moving to a dual-income system would limit the attractiveness of negative gearing and trusts. 'You should be rewarded for investing in yourself, not for expanding your property portfolio,' she said. 'We're taxing young people when they aren't getting high pay, and they're facing high costs such as buying a home or childcare. It's actively working against young people.' In the 2022-23 financial year, 1.1 million people made a net loss on their property investment, with a similar number either breaking even or recording a profit. The number of negatively geared investors is expected to grow due to the rise in mortgage interest rates that began in 2023. Spender said any change would require a transition period to enable people to adapt to the new system. She said her proposal would be budget neutral, as extra tax collected on property investors would be used to either cut personal income tax rates or lift the thresholds at which tax rates change. She said the current tax system was using bracket creep as a 'silent driver' of budget repair, while her proposal would encourage people into the workforce and reward those who depend on wage income. 'We're not incentivising people to be the best that they can be, but how much they can put into property. We can't keep doing that,' she said. Her proposal emerged as the Reserve Bank released research showing that a fall in competition across the economy since the early 2000s had directly contributed to Australia's slowdown in productivity that is costing every person up to $3000. Loading RBA economists Jonathan Hambur and Owen Freestone found that if competition were around the level it was at the turn of the century, overall productivity would be 1 to 3 per cent higher, and the economy up to $80 billion larger due to a better allocation of business resources. 'This shows that declining competition has been a significant drag on productivity, and therefore GDP and incomes,' they found. 'These are important findings. They suggest that declining competition in the Australian economy can account for a significant portion of the slowdown in productivity growth, and therefore growth in incomes and living standards.'
The Age
6 hours ago
- The Age
The end of negative gearing as we know it? Spender calls for new income tax system
Spender's plan would mean property losses could only be used to offset taxable income on other capital investments, or carried forward to tax paid on capital gains when they are sold. She said the current tax system acted as an incentive for people to sink money into property, but was a disincentive for someone who wanted to boost their skills or work. Moving to a dual-income system would limit the attractiveness of negative gearing and trusts. 'You should be rewarded for investing in yourself, not for expanding your property portfolio,' she said. 'We're taxing young people when they aren't getting high pay, and they're facing high costs such as buying a home or childcare. It's actively working against young people.' In the 2022-23 financial year, 1.1 million people made a net loss on their property investment, with a similar number either breaking even or recording a profit. The number of negatively geared investors is expected to grow due to the rise in mortgage interest rates that began in 2023. Spender said any change would require a transition period to enable people to adapt to the new system. She said her proposal would be budget neutral, as extra tax collected on property investors would be used to either cut personal income tax rates or lift the thresholds at which tax rates change. She said the current tax system was using bracket creep as a 'silent driver' of budget repair, while her proposal would encourage people into the workforce and reward those who depend on wage income. 'We're not incentivising people to be the best that they can be, but how much they can put into property. We can't keep doing that,' she said. Her proposal emerged as the Reserve Bank released research showing that a fall in competition across the economy since the early 2000s had directly contributed to Australia's slowdown in productivity that is costing every person up to $3000. Loading RBA economists Jonathan Hambur and Owen Freestone found that if competition were around the level it was at the turn of the century, overall productivity would be 1 to 3 per cent higher, and the economy up to $80 billion larger due to a better allocation of business resources. 'This shows that declining competition has been a significant drag on productivity, and therefore GDP and incomes,' they found. 'These are important findings. They suggest that declining competition in the Australian economy can account for a significant portion of the slowdown in productivity growth, and therefore growth in incomes and living standards.'
