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2006 OECD Economic Surveys: Australia 2006

image of OECD Economic Surveys: Australia 2006

This 2006 edition of OECD's periodic survey of the Australian economy finds that reforms have raised both economic performance and resilience, but that some challenges stil remain, including closing the productivity gap and raising labour utilisation.  Individual chapters look at fiscal relations across levels of government, further reforming infrastructure services, providing greater flexibility in workplace conditions, and improving incentives to work, especially for olders workers and women with families.

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Improving Incentives to Work

Raising labour force participation is of major importance for sustaining vigorous growth, especially in the face of population ageing. The major challenge is to increase participation among women with families and lone parents, disability benefit recipients and older workers over 55. While participation decisions reflect personal choices, these are influenced by policy settings. Despite improvements in “inactivity traps”, Australia ranks high internationally in terms of “low wage traps” for lone parents and one earner households. Tackling such “low wage traps” either by addressing allowance and parenting payment income tests or by reducing the lowest income tax rate or raising the threshold at which income tax is first paid, should be a priority.

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