Yahoo Finance Get ready for larger tax bills, slow income growth: Treasury boss
Australians should get ready for much larger tax bills and slower income growth, the outgoing head of the Treasury has said.
Dr Martin Parkinson, who will leave the Treasury job at the end of the year, believes the Federal Budget was sold wrongly and more time should have been spent talking about tax and spending reform.
"Perhaps it could have been clearer to say that everybody is going to contribute, this is the Budget dimension of it and there will be more coming with the tax white paper," Parkinson said.
Dr Parkinson was addressing the ACT Young Economists Network in Canberra when he made the comments.
Related: What Joe Hockey is not telling you
He cited the planned re-introduction of the 1¢-a-litre fuel excise as a classic example of how “the smallness of the increase was lost in the debate about Joe Hockey’s argument it would hit poorer Australians less”.
“The materiality of what was being talked about got lost in a debate about what was fair.”
Dr Parkinson also said that the end of the mining investment boom and the ageing population meant Australians will experience far lower income growth than in the past.
"If Australia gets the same productivity growth as its long-term average, then living standard growth will be about a third to a half of what the Australian public has gotten used to over the past 10 years. You can imagine that creates quite an interesting dynamic for the political process."
Abbott defends his sales job
However, Prime Minister Abbott defended his Government's sales job saying tax reform started with scrapping the carbon and mining taxes.
He pointed to the comments of the Reserve Bank governor Glenn Stevens who described the Budget as a "prudent and sensible" strategy.
Related: Hockey wanted a tougher Budget, was stopped by Abbott
"It's never easy to impose additional costs or to even marginally reduce benefits," the Prime Minister told ABC Radio in Adelaide.
A former senior Treasury official says criticism of the budget has been made worse because most of the government's focus was on spending cuts that hit those on lower-incomes rather than tax concessions that affected the more wealthy.
"If you had a more comprehensive approach to all these items, I think the government wouldn't be in the pickle that its in at the moment," Mike Callaghan told The Australian Financial Review.
