Incentive-based funding reforms the right approach
Infrastructure Australia’s recommendations for incentive-based funding to stimulate productivity-boosting economic reform are welcome and demand serious consideration by all levels of government.
‘Australia needs to regain its appetite for nation-building reform if we are to manage the challenges of a rapidly growing population and make the right infrastructure investments that will support our future prosperity,’ said Ken Morrison, Chief Executive of the Property Council of Australia.
‘Infrastructure Australia’s proposals for incentives have worked before through National Competition Policy and Asset Recycling, and they can work again if we are prepared to step up to the opportunities and challenges outlined in the report,’ Mr Morrison said.
Incentives can also be a powerful tool to drive reform in housing markets which must be an area of focus given the importance of housing affordability in most Australian cities, in addition to their infrastructure requirement.
Analysis undertaken for the Property Council in 2016 by Professor Ian Harper and Deloitte Access Economics showed that using financial incentives to tackle housing supply would have big benefits for the economy in the order of $3b boost to GDP every year.
These principles have been previously incorporated into Government and Opposition policy in relation to federal funding agreements for housing, and are also reflected in the Commonwealth Government’s Western Sydney City Deal.
Mr Morrison said IA was correct to highlight scope for reform of stamp duty in its report.
‘Stamp duty is undisputedly a bad tax, but poorly designed reform could lead to even worse outcomes so it needs to be handled carefully.’
‘There is no quick fix given the sheer size of stamp duty revenues and their importance to state and territory governments. More work needs to be done on this reform model,’ Mr Morrison said.
Mr Morrison noted the gains attributed to stamp duty reform in the IA report differ from the findings of previous work commissioned by the Property Council (The Economic Impact of Stamp Duty: Three Reform Options, December 2015).
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