The 2010 edition of OECD's periodic survey of Australia's economy. This edition includes chapters covering recovery from the crisis, fiscal policy effectiveness, meeting infrastructure needs, and enhancing labour utilisation.Click to Access:
- 14 Nov 2010
Enhancing the effectiveness of fiscal policy
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Although the budgetary outlook remains strong, Australia’s fiscal policy will be challenged by a number of efficiency issues and the expected rise in volatile mining revenues. In contrast to many OECD countries, low public debt and good growth prospects leave ample fiscal space to respond to future shocks. However, there is scope to improve efficiency of public interventions as the authorities have started implementing their fiscal exit strategy. The new mining boom is an opportunity for the Australian society, but it raises questions on sharing the rents from increased mineral wealth; on how to use the expected higher tax revenues from the exploitation of nonrenewable resources; and on how to deal with uncertainty generated by commodity price movements. Volatility can lead to biases in fiscal policy; this was the case during the mini-boom of 2000s. The second part of this chapter assesses the fiscal measures adopted and planned so far to deal with this challenge. Furthermore, although Australia has one of the lowest tax burdens in the OECD, the system includes numerous taxes with low yields and high administrative costs. Some taxes and the complex transfer system can also blunt incentives to work and thereby weaken growth. The detailed review of the system released in 2010 identified many of these problems. However, most of its recommendations are not in the pipeline for implementation. Tax reform is analysed in the last part of this chapter.