Latest news with #JonathanHambur
Business Times
5 days ago
- Business
- Business Times
RBA says decline in competition costs Australians A$3,000 per person
[SYDNEY] A decline in business competition in Australia from the mid-2000s to the Covid-19 pandemic has hurt productivity and household incomes, according to new analysis by the Australia central bank. If competition had not dropped, productivity and therefore output would have been 1 to 3 per cent higher due to resources being better allocated across firms in the economy, Reserve Bank of Australia's (RBA) Jonathan Hambur and Owen Freestone said in a research paper released on Thursday (Aug 14). This equates, at the upper end, to around A$3,000 (S$2,511) per person, they said. The duo said there's 'substantial evidence' that competition slid over the 'decade or so' leading up to the pandemic. Markets became more concentrated, with dominant firms securing a larger share of sales, becoming more entrenched and harder to displace, while markups — the ratio of price to marginal cost — also rose. 'One way in which weaker competition may have led to lower productivity is by causing a misallocation of resources across firms,' they said. The RBA this week blamed weak productivity for sluggishness in the economy, assessing potential growth at around 2 per cent, down from 3 per cent two decades ago. Australia's centre-left government will convene a three-day roundtable in Canberra next week to generate ideas to boost economic efficiency. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'The past decline in competition has significantly dragged on aggregate productivity over the period,' Hambur and Freestone said. They added that according to the model they used, this shouldn't weigh on future productivity gains. 'However, if competition continues to weaken, or if weaker competition was to weigh on a firm's impetus to improve (which is not captured in the model), there still could be ongoing effects,' they said. The RBA, in its quarterly update of forecasts released on Tuesday, downgraded its productivity growth assumption to 0.7 per cent from 1 per cent. governor Michele Bullock addressed the change in a news conference that day. 'One of the reasons we've come to this position is that our forecasts were such that we were hitting our employment and our inflation forecasts, but we were overestimating our GDP and our consumption forecasts,' she said. 'So there was a tension.' BLOOMBERG
Sydney Morning Herald
5 days ago
- Business
- 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
5 days ago
- Business
- 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.'
