The emphasis on tax reform is misplaced. We must do more than reallocate the pie
The Business Council wants to focus on the corporate tax rate.
Australia's biggest bank wants to focus less on the corporate tax rate.
State governments want to broaden the GST. Treasury wants to cut income tax.
Rio Tinto wants to reintroduce the carbon tax. The Greens want to tax Rio's excess profits.
Others are calling for reforms to everything from negative gearing, the capital gains tax discount, road user charging and trusts, through to taxes on fuel, alcohol and cigarettes, and more investment allowances and tax credits than you can poke a stick at.
And herein lies the risk. Nobody can agree on what to do. Tax reform is hard. It's politically contentious. It has clear winners and losers.
Tax debates tend to go round and round. For all the heat generated by tax debates, they rarely throw light on emerging challenges.
It's hard to see the current round of tax hypothesising as any more illuminating.
There is a risk that the Economic Reform Roundtable gets so bogged down in a tax debate that it neglects other areas that are both easier and have a bigger impact.
One such area is tech. Increasing tech adoption would not only have a big impact, it's arguably politically easier, too.
Small and medium-sized businesses represent a whopping 56 per cent of the economy and employ 66 per cent of all workers.
If we could lift their productivity by even a small amount, Australia's productivity challenge would be solved.
This isn't pie in the sky. Small and medium businesses are, on average, about one third less productive than large businesses, so there's plenty of scope for improvement.
And we're not talking about small businesses moving to the frontier on AI or inventing world-first technologies.
What we're talking about here is much simpler: it's about small and medium businesses adopting existing technologies.
Our research, for example, shows that small and medium businesses that use online platforms have revenue-per-worker that is 45 per cent higher than those that don't.
They are significantly more likely to export and have revenue that is 2.2 times larger.
The tech is there. We just need businesses to use it.
There's another key reason tech is a better bet than tax.
Tax reform primarily boosts productivity through what economists call "allocative efficiency": getting the right people in the right jobs, capital going to the right people.
Reforming these bad taxes ensures resources in the economy are allocated efficiently and effectively, boosting productivity in the process.
There's just one problem: none of this expands the frontier.
It doesn't create new possibilities. It doesn't allow us to do new things. It doesn't create new opportunities or create new capabilities.
With living standards far below where they should be, we need to do more than reallocate the pie. We need to grow it.
This is where technology comes in. In the short and medium term, we can boost productivity by allocating resources better.
But in the long run, it's the creation of new technologies and the adoption of those technologies that fundamentally grows living standards.
This isn't to say we should ignore tax reform. Far from it. If we can do it, then let's do it.
For one thing, tax reform can play a key role in creating and adopting new technologies through R&D tax credits and investment incentives.
So, what should the government do to encourage tech adoption? A lot of it is about who we should, and shouldn't, steal ideas from.
Start with who we shouldn't steal ideas from.
The EU has experimented with a bunch of new regulations that relate to technology. These include its General Data Protection Regulation (about privacy and data security) and its ex-ante competition regulations under the Digital Markets Act (about outlawing conduct without having to prove it causes harm).
Both these reforms have been disasters. There has been a 47 per cent fall in app launches in the EU, a 15 per cent fall in data processing by EU firms compared to US firms, and an 8 per cent fall in profits for start-ups.
If the first rule is "do no harm", then the government should leave the EU's ideas in the EU.
The country they should be copying is Singapore.
Singapore's "SMEs Go Digital Program" is a one-stop shop that lets small businesses search for digital solutions, grants and resources based on their business needs.
Businesses get free digital consultations and project management services tailored to their industry. Businesses are advised and taught about different technologies that are available and how they work.
The program offers pre-approved tech solutions to boost trust, and in many instances, the government will heavily subsidise the costs of these tech subscriptions, too.
Australia's best ideas are often borrowed, and we should borrow this one.
The EU's mandatory interoperability requirements on app stores, which the Australian government is considering, have damaged the user experience and compromised safety, privacy and cybersecurity.
If we can get agreement on tax reform at the Roundtable, then let's do it.
But if we want easier politics with a big impact, the Roundtable needs more tech than tax.Keeping track of the recommendations being made to the government for its Economic Reform Roundtable is getting harder.
The Business Council wants to focus on the corporate tax rate.
Australia's biggest bank wants to focus less on the corporate tax rate.
State governments want to broaden the GST. Treasury wants to cut income tax.
Rio Tinto wants to reintroduce the carbon tax. The Greens want to tax Rio's excess profits.
Others are calling for reforms to everything from negative gearing, the capital gains tax discount, road user charging and trusts, through to taxes on fuel, alcohol and cigarettes, and more investment allowances and tax credits than you can poke a stick at.
And herein lies the risk. Nobody can agree on what to do. Tax reform is hard. It's politically contentious. It has clear winners and losers.
Tax debates tend to go round and round. For all the heat generated by tax debates, they rarely throw light on emerging challenges.
It's hard to see the current round of tax hypothesising as any more illuminating.
There is a risk that the Economic Reform Roundtable gets so bogged down in a tax debate that it neglects other areas that are both easier and have a bigger impact.
One such area is tech. Increasing tech adoption would not only have a big impact, it's arguably politically easier, too.
Small and medium-sized businesses represent a whopping 56 per cent of the economy and employ 66 per cent of all workers.
If we could lift their productivity by even a small amount, Australia's productivity challenge would be solved.
This isn't pie in the sky. Small and medium businesses are, on average, about one third less productive than large businesses, so there's plenty of scope for improvement.
And we're not talking about small businesses moving to the frontier on AI or inventing world-first technologies.
What we're talking about here is much simpler: it's about small and medium businesses adopting existing technologies.
Our research, for example, shows that small and medium businesses that use online platforms have revenue-per-worker that is 45 per cent higher than those that don't.
They are significantly more likely to export and have revenue that is 2.2 times larger.
The tech is there. We just need businesses to use it.
There's another key reason tech is a better bet than tax.
Tax reform primarily boosts productivity through what economists call "allocative efficiency": getting the right people in the right jobs, capital going to the right people.
Reforming these bad taxes ensures resources in the economy are allocated efficiently and effectively, boosting productivity in the process.
There's just one problem: none of this expands the frontier.
It doesn't create new possibilities. It doesn't allow us to do new things. It doesn't create new opportunities or create new capabilities.
With living standards far below where they should be, we need to do more than reallocate the pie. We need to grow it.
This is where technology comes in. In the short and medium term, we can boost productivity by allocating resources better.
But in the long run, it's the creation of new technologies and the adoption of those technologies that fundamentally grows living standards.
This isn't to say we should ignore tax reform. Far from it. If we can do it, then let's do it.
For one thing, tax reform can play a key role in creating and adopting new technologies through R&D tax credits and investment incentives.
So, what should the government do to encourage tech adoption? A lot of it is about who we should, and shouldn't, steal ideas from.
Start with who we shouldn't steal ideas from.
The EU has experimented with a bunch of new regulations that relate to technology. These include its General Data Protection Regulation (about privacy and data security) and its ex-ante competition regulations under the Digital Markets Act (about outlawing conduct without having to prove it causes harm).
Both these reforms have been disasters. There has been a 47 per cent fall in app launches in the EU, a 15 per cent fall in data processing by EU firms compared to US firms, and an 8 per cent fall in profits for start-ups.
If the first rule is "do no harm", then the government should leave the EU's ideas in the EU.
The country they should be copying is Singapore.
Singapore's "SMEs Go Digital Program" is a one-stop shop that lets small businesses search for digital solutions, grants and resources based on their business needs.
Businesses get free digital consultations and project management services tailored to their industry. Businesses are advised and taught about different technologies that are available and how they work.
The program offers pre-approved tech solutions to boost trust, and in many instances, the government will heavily subsidise the costs of these tech subscriptions, too.
Australia's best ideas are often borrowed, and we should borrow this one.
The EU's mandatory interoperability requirements on app stores, which the Australian government is considering, have damaged the user experience and compromised safety, privacy and cybersecurity.
If we can get agreement on tax reform at the Roundtable, then let's do it.
But if we want easier politics with a big impact, the Roundtable needs more tech than tax.Keeping track of the recommendations being made to the government for its Economic Reform Roundtable is getting harder.
The Business Council wants to focus on the corporate tax rate.
Australia's biggest bank wants to focus less on the corporate tax rate.
State governments want to broaden the GST. Treasury wants to cut income tax.
Rio Tinto wants to reintroduce the carbon tax. The Greens want to tax Rio's excess profits.
Others are calling for reforms to everything from negative gearing, the capital gains tax discount, road user charging and trusts, through to taxes on fuel, alcohol and cigarettes, and more investment allowances and tax credits than you can poke a stick at.
And herein lies the risk. Nobody can agree on what to do. Tax reform is hard. It's politically contentious. It has clear winners and losers.
Tax debates tend to go round and round. For all the heat generated by tax debates, they rarely throw light on emerging challenges.
It's hard to see the current round of tax hypothesising as any more illuminating.
There is a risk that the Economic Reform Roundtable gets so bogged down in a tax debate that it neglects other areas that are both easier and have a bigger impact.
One such area is tech. Increasing tech adoption would not only have a big impact, it's arguably politically easier, too.
Small and medium-sized businesses represent a whopping 56 per cent of the economy and employ 66 per cent of all workers.
If we could lift their productivity by even a small amount, Australia's productivity challenge would be solved.
This isn't pie in the sky. Small and medium businesses are, on average, about one third less productive than large businesses, so there's plenty of scope for improvement.
And we're not talking about small businesses moving to the frontier on AI or inventing world-first technologies.
What we're talking about here is much simpler: it's about small and medium businesses adopting existing technologies.
Our research, for example, shows that small and medium businesses that use online platforms have revenue-per-worker that is 45 per cent higher than those that don't.
They are significantly more likely to export and have revenue that is 2.2 times larger.
The tech is there. We just need businesses to use it.
There's another key reason tech is a better bet than tax.
Tax reform primarily boosts productivity through what economists call "allocative efficiency": getting the right people in the right jobs, capital going to the right people.
Reforming these bad taxes ensures resources in the economy are allocated efficiently and effectively, boosting productivity in the process.
There's just one problem: none of this expands the frontier.
It doesn't create new possibilities. It doesn't allow us to do new things. It doesn't create new opportunities or create new capabilities.
With living standards far below where they should be, we need to do more than reallocate the pie. We need to grow it.
This is where technology comes in. In the short and medium term, we can boost productivity by allocating resources better.
But in the long run, it's the creation of new technologies and the adoption of those technologies that fundamentally grows living standards.
This isn't to say we should ignore tax reform. Far from it. If we can do it, then let's do it.
For one thing, tax reform can play a key role in creating and adopting new technologies through R&D tax credits and investment incentives.
So, what should the government do to encourage tech adoption? A lot of it is about who we should, and shouldn't, steal ideas from.
Start with who we shouldn't steal ideas from.
The EU has experimented with a bunch of new regulations that relate to technology. These include its General Data Protection Regulation (about privacy and data security) and its ex-ante competition regulations under the Digital Markets Act (about outlawing conduct without having to prove it causes harm).
Both these reforms have been disasters. There has been a 47 per cent fall in app launches in the EU, a 15 per cent fall in data processing by EU firms compared to US firms, and an 8 per cent fall in profits for start-ups.
If the first rule is "do no harm", then the government should leave the EU's ideas in the EU.
The country they should be copying is Singapore.
Singapore's "SMEs Go Digital Program" is a one-stop shop that lets small businesses search for digital solutions, grants and resources based on their business needs.
Businesses get free digital consultations and project management services tailored to their industry. Businesses are advised and taught about different technologies that are available and how they work.
The program offers pre-approved tech solutions to boost trust, and in many instances, the government will heavily subsidise the costs of these tech subscriptions, too.
Australia's best ideas are often borrowed, and we should borrow this one.
The EU's mandatory interoperability requirements on app stores, which the Australian government is considering, have damaged the user experience and compromised safety, privacy and cybersecurity.
If we can get agreement on tax reform at the Roundtable, then let's do it.
But if we want easier politics with a big impact, the Roundtable needs more tech than tax.Keeping track of the recommendations being made to the government for its Economic Reform Roundtable is getting harder.
The Business Council wants to focus on the corporate tax rate.
Australia's biggest bank wants to focus less on the corporate tax rate.
State governments want to broaden the GST. Treasury wants to cut income tax.
Rio Tinto wants to reintroduce the carbon tax. The Greens want to tax Rio's excess profits.
Others are calling for reforms to everything from negative gearing, the capital gains tax discount, road user charging and trusts, through to taxes on fuel, alcohol and cigarettes, and more investment allowances and tax credits than you can poke a stick at.
And herein lies the risk. Nobody can agree on what to do. Tax reform is hard. It's politically contentious. It has clear winners and losers.
Tax debates tend to go round and round. For all the heat generated by tax debates, they rarely throw light on emerging challenges.
It's hard to see the current round of tax hypothesising as any more illuminating.
There is a risk that the Economic Reform Roundtable gets so bogged down in a tax debate that it neglects other areas that are both easier and have a bigger impact.
One such area is tech. Increasing tech adoption would not only have a big impact, it's arguably politically easier, too.
Small and medium-sized businesses represent a whopping 56 per cent of the economy and employ 66 per cent of all workers.
If we could lift their productivity by even a small amount, Australia's productivity challenge would be solved.
This isn't pie in the sky. Small and medium businesses are, on average, about one third less productive than large businesses, so there's plenty of scope for improvement.
And we're not talking about small businesses moving to the frontier on AI or inventing world-first technologies.
What we're talking about here is much simpler: it's about small and medium businesses adopting existing technologies.
Our research, for example, shows that small and medium businesses that use online platforms have revenue-per-worker that is 45 per cent higher than those that don't.
They are significantly more likely to export and have revenue that is 2.2 times larger.
The tech is there. We just need businesses to use it.
There's another key reason tech is a better bet than tax.
Tax reform primarily boosts productivity through what economists call "allocative efficiency": getting the right people in the right jobs, capital going to the right people.
Reforming these bad taxes ensures resources in the economy are allocated efficiently and effectively, boosting productivity in the process.
There's just one problem: none of this expands the frontier.
It doesn't create new possibilities. It doesn't allow us to do new things. It doesn't create new opportunities or create new capabilities.
With living standards far below where they should be, we need to do more than reallocate the pie. We need to grow it.
This is where technology comes in. In the short and medium term, we can boost productivity by allocating resources better.
But in the long run, it's the creation of new technologies and the adoption of those technologies that fundamentally grows living standards.
This isn't to say we should ignore tax reform. Far from it. If we can do it, then let's do it.
For one thing, tax reform can play a key role in creating and adopting new technologies through R&D tax credits and investment incentives.
So, what should the government do to encourage tech adoption? A lot of it is about who we should, and shouldn't, steal ideas from.
Start with who we shouldn't steal ideas from.
The EU has experimented with a bunch of new regulations that relate to technology. These include its General Data Protection Regulation (about privacy and data security) and its ex-ante competition regulations under the Digital Markets Act (about outlawing conduct without having to prove it causes harm).
Both these reforms have been disasters. There has been a 47 per cent fall in app launches in the EU, a 15 per cent fall in data processing by EU firms compared to US firms, and an 8 per cent fall in profits for start-ups.
If the first rule is "do no harm", then the government should leave the EU's ideas in the EU.
The country they should be copying is Singapore.
Singapore's "SMEs Go Digital Program" is a one-stop shop that lets small businesses search for digital solutions, grants and resources based on their business needs.
Businesses get free digital consultations and project management services tailored to their industry. Businesses are advised and taught about different technologies that are available and how they work.
The program offers pre-approved tech solutions to boost trust, and in many instances, the government will heavily subsidise the costs of these tech subscriptions, too.
Australia's best ideas are often borrowed, and we should borrow this one.
The EU's mandatory interoperability requirements on app stores, which the Australian government is considering, have damaged the user experience and compromised safety, privacy and cybersecurity.
If we can get agreement on tax reform at the Roundtable, then let's do it.
But if we want easier politics with a big impact, the Roundtable needs more tech than tax.
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Sky News AU
8 hours ago
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Sydney Morning Herald
11 hours ago
- Sydney Morning Herald
ASX set to retreat, Wall Street drifts as Fed makes no move on interest rates; $A slumps
US stock indexes are drifting lower after the Federal Reserve decided to keep interest rates where they are, a move that could upset President Donald Trump but was one that Wall Street was widely expecting. The S&P 500 was edging down by 0.1 per cent in afternoon trading, coming off its first loss after setting all-time highs for six successive days. The Dow Jones swung to a loss of 310 points, or 0.7 per cent, in mid-afternoon trade, and the Nasdaq composite was down 0.2 per cent. The Australian sharemarket is set to slide, with futures at 4.53am AEST pointing to a loss of 30 points, or 0.3 per cent, at the open. The ASX added 0.6 per cent on Wednesday. The Australian dollar fell sharply. It was 1.2 per cent lower to 64.30 US cents at 5.07am. In the bond market, Treasury yields gave back some of their gains from the morning, when a report suggested the US economy's growth was much stronger during the spring than economists expected. It grew at a 3 per cent annual rate, according to an advance estimate, a full percentage point more than forecast. But underlying trends beneath the surface may be more discouraging. 'Cutting through the noise of the swings in imports, the economy is still chugging along, but it is showing signs of sputtering,' said Brian Jacobsen, chief economist at Annex Wealth Management. The data reinforced the dilemma facing Fed officials as they voted Wednesday on what to do with interest rates. They could have lowered rates, which would give a boost to the economy as Trump has so been angrily calling for. But lower rates could also give inflation more fuel when Trump's tariffs may be set to increase prices for US households. Loading Trump on Wednesday announced a 25 per cent tariff on imports coming from India, along with an additional tax because of India's purchases of Russian oil, beginning on Aug. 1. That's when stiff tariffs Trump has proposed for many other countries are also scheduled to kick in, unless they reach trade deals that lower the rates. Fed Chair Jerome Powell has been insisting that he wants to see more data about how tariffs are affecting inflation and the economy before the central bank makes its next move, and he will speak shortly to offer more details about the decision.
