A strengthening Australian economy gives the federal government scope to tackle much-needed tax reform, a tax expert says.
Treasurer Josh Frydenberg is expected to hand down his mid-year budget review on Thursday, which is likely to contain an improved fiscal bottom line and an upgrade to economic forecasts.
Economists expect the budget deficit for 2020/21 will show a modest improvement to around $200 billion, compared with the record $214 billion shortfall announced in the delayed October budget.
This comes against the backdrop of improved revenues from a strengthening economy as it emerges from recession, posting its strongest quarter of growth since 1976.
Tax revenues are also expected to be buoyed by a soaring iron ore price of around $US150 per tonne, compared with just $US55 assumed in the budget.
BDO tax partner Mark Molesworth said combined with a wind-down of stimulus measures such as JobKeeper, this should put a spring in the treasurer’s step.
“If this carries over into the New Year then we hope that the treasurer looks at serious, productivity-enhancing tax reform to continue the economic momentum,” Mr Molesworth told AAP.
Australian Chamber of Commerce and Industry chief executive James Pearson agrees that for a sustainable recovery, the government needs to tackle tax reform to “reward aspiration and incentivise investment and entrepreneurism”.
But shadow treasurer Jim Chalmers says if the economy was strong, there wouldn’t still be a million people unemployed.
“Josh Frydenberg is pretending that the recovery is so strong that he can prematurely cut JobKeeper and other supports,” Dr Chalmers told AAP.
“If this week’s mid-year update doesn’t present a comprehensive plan for unemployment and underemployment it will just be another marketing exercise.”