Latest news with #AustralianEconomy
News.com.au
a day ago
- Business
- News.com.au
Deloitte suggests increasing GST to stop living standards from dropping as Australia tipped to recover from anaemic growth
Major reforms to the tax system are needed to stop living standards from falling, one leading economic firm has argued, amid forecasts Australia is tipped to recover from its anaemic growth over the past 12 months. While Australia's economic growth will pick up from 1.3 to 2.1 per cent, fresh forecasts from Deloitte Access Economics suggest increasing and broadening the GST in a bid to compensate lower income household and flatten personal income taxes. The current GST system is complex, with a number of exemptions already in place for things like basic foods, education courses, some medical health and care products and precious metals, among others. Deloitte Access Economics partner and co-author Cathryn Lee said these changes would importantly help the federal budget while growing the economy. 'That is, modelling demonstrates that tax reform can be positive for the economy, positive for the budget, and positive for Australian people,' she said. 'That is why the Treasurer's promise to approach reform ideas from a 'practical, pragmatic and problemâ€'solving middle ground' has the potential to be so significant.' Ms Lee said it has been encouraging that the government has used various speeches so far to discuss the importance of boosting productivity and changing tax reforms. CPA Australia chief of policy Elinor Kasapidis agrees as she previously told NewsWire Australia needs to modernise its tax system through lifting the rate on consumption. Otherwise, the country would a severe problem down the track. 'We have a lot of GST-free goods and exemptions which makes things tricky and complicated and then you need to look at raising the rate,' she said. 'Of course you also have to look at who would be impacted, such as lower income households and pensioners, to make sure they are compensated during the transition.' Deloitte Access Economics partner and report co-author Stephen Smith said Australia's last major tax reform was over a quarter of a century ago. 'Since then, the Australian economy has lost its dynamism and competitive edge,' Mr Smith said. 'Major sectors in the economy – such as banking, insurance, supermarkets, airlines, and communication services – are dominated by a very small number of very large firms, supported by an economic system that keeps barriers to entry high.' Mr Smith argues the results of this have seen slow productivity growth and real wages falling. 'In this context, it is no surprise that the proverbial pet shop galah is talking about the need for reform,' he said. Despite the pessimistic backdrop, Deloitte says the government's recent drubbing at the election, where the Labor Party won a record equalling 94 of the 150 House of Representatives seats, is paving way for significant reform. 'The Treasurer's speech at the National Press Club made clear that 'consensus support' for a policy change will be required,' Ms Lee said. 'Given almost every meaningful reform would inevitably create both winners and losers, achieving a consensus may prove an impossibly high bar. 'That would be a deep disappointment after the government has stoked anticipation for change.' Despite calling for tax reforms, Deloitte forecasts the economy will pick up, albeit from a relatively low base. GDP is tipped to come in at 1.3 per cent this financial year, before jumping to 2.1 per cent over the next 12-months. 'An important combination of lower inflation, declining interest rates, rising real wages, solid government spending growth and a robust labour market is expected to provide the basis for a gradual improvement in domestic economic fortunes in the near term,' Ms Lee said.
Bloomberg
a day ago
- Business
- Bloomberg
‘Revenge Tax' Shift Revives US Appeal for Australia Mega Funds
Australia's A$4.1 trillion ($2.7 trillion) pension industry signaled relief over US plans to scrap the so-called 'revenge tax,' which would have increased levies on income from assets of foreign investors. The proposal to lift taxes on US income of non-US businesses could have had a far-reaching impact on Australian pension funds, which have about $450 billion invested in the world's largest economy across infrastructure, equities, bonds, and other assets, according to industry data.
The Guardian
3 days ago
- Business
- The Guardian
Falling inflation rate boosts chances of RBA interest rate cut and relief for mortgage holders
Australia's inflation rate has eased again, bolstering expectations the Reserve Bank will lower the cash rate next month and bring further reprieve for mortgage holders. The headline inflation rate was 2.1% in the 12 months to May, down sharply on the previous month's figure of 2.4%, according to consumer price index figures released on Wednesday. KPMG chief economist Brendan Rynne said there was a 'continued pattern of deflation across the Australian economy'. 'This could provide comfort to the Reserve Bank at its next meeting, knowing that any cut to the cash rate will occur in a stable inflationary environment,' Rynne said. Sign up for Guardian Australia's breaking news email Krishna Bhimavarapu, economist at State Street Global Advisors, said: 'We are convinced that the RBA needs to cut in July to safeguard growth as inflation is clearly out of their way now.' While the monthly result can be volatile and is viewed as less authoritative than quarterly figures, the steep fall has pushed inflation towards the bottom of the RBA's 2-3% target range. The RBA's preferred CPI measure, the 'trimmed mean' or underlying inflation rate that strips out volatile items and various government subsidies, decreased to 2.4% from 2.8%. Markets upped their bets on a rate cut after the data was released, with markets now indicating near consensus support for a quarter point cut on 8 July. In total, traders expect three more rate cuts this year. While further rate cuts will be welcomed by mortgage holders, any further reduction in borrowing rates is expected to fuel another surge in property prices, making homes more unaffordable for prospective buyers. Economists at the major banks still believe the RBA will wait until August to cut. ANZ economist Madeline Dunk said the July meeting would be a 'close call'. 'It's going to be a pretty tough decision and it really depends on how concerned the RBA is about what's been happening globally,' Dunk said. She said the disruption caused by the initial US tariff announcements had faded, giving economic activity a chance to stabilise.
ABC News
20-06-2025
- Business
- ABC News
AI threatens entry-level jobs as university grads struggle to get hired
Australian workers are facing a major upheaval as artificial intelligence (AI) becomes a cheaper alternative to employing humans. While the full impact of AI is yet to be reflected in job ads or official employment statistics, both employers and employees warn the technology is already reshaping the nation's labour market. It took recent data science graduate Tien Hung Nguyen 30 applications and an internship to land his first full-time job. "I feel privileged to have secured this position. I'm going to give everything I've got," he says. Most of his friends are still looking for work — and he says artificial intelligence is a big reason why. "Since AI appeared, for example, a team might have needed three or four juniors and a senior. Now, it's one junior and AI," Mr Nguyen explains. In countries where AI is more advanced, such as the United States, lay-offs are speeding up. Amazon is the latest big employer to warn of looming job losses. There are also reports Microsoft is shaping up to clean out more staff whose tasks can be completed by AI. There are also worrying signs for young workers in the US, as the unemployment rate for recent college graduates nears 6 per cent. In Australia, the unemployment rate is holding steady at 4.1 per cent. However, the jobless rate for young people — which is typically higher than the overall rate — has risen slightly to 9.2 per cent. Economist Leonora Risse says youth unemployment is a key indicator. "Young people tend to be the group that experience the greatest volatility in the labour market," she warns. Mr Nguyen now works at an AI start-up, where much of the low-level admin work has already been handed over to machines. His employer, Julian Fayed, says the shift is accelerating. "Our technology is advancing, and our AI implementations are advancing at a rate that means that our headcount isn't really growing anymore," he says. "A lot of the lower-level tasks our team didn't enjoy doing, AI can now do 24 hours a day, seven days a week. "No sick days. That's the slightly dark joke." Beyond small tech start-ups, some of the country's biggest employers are also preparing for a leaner future. Telstra CEO Vicky Brady has been up-front at several public events about how advances in AI will result in job cuts. "We know that work is going to look very different in 2030 — and so will we," Ms Brady told a recent investor briefing. CBA boss Matt Comyn made similar comments when he appeared at the Australian Financial Review's AI summit in Sydney this month. "It's hard to make predictions," Mr Comyn said. "But I think in some areas, it's reasonable to say the workforce will be smaller." Dario Amodei — CEO of US-based AI company Anthropic — has warned that up to 50 per cent of entry-level white-collar jobs could disappear within five years. Aaron Matrljan from recruitment agency Aura agrees junior positions will be among the first to go. "Things that we would get juniors to be trained on — that would usually be a learning exercise for them — can now be done so much more cheaply and effectively by AI in a matter of seconds," he explains. Mr Matrljan says his professional services clients are all talking about AI. Mr Matrljan expects to see job cuts because of AI becoming more common within the next two years, and believes slower economic conditions will only speed up the take-up of technology. "The next intake of graduates is going to be really interesting, and firms are going to have to work out where they're gaining those efficiencies, where they're gaining the cost savings, and how many grads do we need, how many trainees do we need to do the tasks that AI can do now so much quicker." Businesses that don't adopt AI risk being left behind, particularly as the technology promises major productivity gains. The optimistic view of AI is that the technology won't replace human workers but instead allow them to take on higher-level tasks. "Productivity is about shifting our time away from the lowest value activities and the lowest value tasks that can be done by automation or AI or computers, and reallocating our time towards the most valuable uses, the most purposeful and meaningful uses," Dr Risse argues. Dr Risse said AI can be of huge benefit to workers if the transition is managed equitably. "If you have higher labour productivity, you have a case for a higher wage," she explains. Some jobs will inevitably be replaced by AI, particularly routine roles that are easier to automate because they follow predictable, repetitive patterns. The reality is, as Dr Risse says, some workers will need to find new jobs in new industries. "The care and community sector is growing, particularly as a result of the aging nation. We need humans. We need people in those sectors," she argues. "But for some people in areas like banking or finance, that can feel like a big leap." As AI advances, the question is no longer if it will dramatically change the workforce, but how quickly, and whether Australia's job market can adapt in time. Mr Fayed believes there'll always be white-collar jobs for the right candidate. However, landing a position is likely to become more competitive. His advice to students is blunt. "For anyone thinking about what to study — you absolutely should be considering whether your future role is at risk from AI," Mr Fayed said. "I do think this is going to be very, very disruptive." There's also a risk for companies that cut too deep — they could lose the pipeline of workers who would eventually move into mid-level and senior roles. "Firms are going to have to … work out where they're gaining those efficiencies, where they're gaining the cost savings … how many grads do we need, how many trainees do we need to do the tasks that AI can do now so much quicker," Mr Matrljan says. "What that's going lead to is the next two to four years it's going be really interesting to see, because there's not as many juniors coming through the ranks … have we lost a lot of knowledge at that level?"
The Guardian
19-06-2025
- Business
- The Guardian
A three-day working week or higher pay: what a more productive economy could buy Australians
Australians would have a three-day working week if we had collectively decided in 1980 to spend all the productivity gains of the following decades on leisure time instead of buying more stuff, according to the Productivity Commission. Jim Chalmers has kickstarted a national conversation about reforming the economy to make Australia more productive to underpin the next generation of prosperity. There are plenty of disagreements about how this can be done, but there is general consensus that we should try. But another question has been left unasked: if we are successful in lifting productivity, what should we do with the dividends of our success? Or more simply: do we want to work less and spend the same, or do we want to work more and spend more? Looking at history, the answer has been a combination of the two, according to Rusha Das, a research economist at the Productivity Commission. In a new paper, Das calculated that Australians used only 23% of the productivity 'dividend' from the past 40-plus years to work less, while we banked the remaining 77% as higher income. 'Rather than spending our productivity dividend on more spare time, we have largely traded it for higher incomes, and more and better stuff,' Das said. This choice of how to spend the fruits of higher productivity is rarely presented to us in such simple terms. A typical employer doesn't ask if their staff want to work 5% less or have a 5% pay rise, for example. Sign up for Guardian Australia's breaking news email 'Instead, the effects of productivity gains are more subtly embedded in our lives, granting us more agency over how we live and work,' Das said. 'It may be taking a half-day each fortnight, investing time in professional development rather than taking on additional clients, or deciding to expand the number of cattle on a dairy farm. 'All these are choices that reflect the underlying freedom that productivity growth makes possible.' The economist John Maynard Keynes in 1930 famously predicted that technological advances meant his grandchildren would be working just 15 hours a week without being any worse off materially. Das said that prediction was not necessarily wrong, it's just that we have made different choices. 'With the growth in labour productivity Australia has enjoyed since 1980, Australians could have reduced their average hours worked by 15 hours per week without lowering consumption levels,' she said. Or we could have used all of the productivity dividend on working more and spending more – in which case GDP per capita would be 11% higher now than in 1980. Das said the choice between leisure and consumption can be influenced by a number of factors. Sign up to Breaking News Australia Get the most important news as it breaks after newsletter promotion If we feel like the changes that are making us more productive are short term, then we'll work more to take advantage of it while we can, and vice versa. Government policy plays a part – whether it's higher tax rates that disincentivise working that extra hour, or workplace rules that allow people more flexibility. Cultural values also have a hand, Das said. In France there is a strong tendency to choose more leisure time, while in the US it is the opposite, her research showed. 'For example, there is a saying that in the UK the last one to leave the office is seen as the hardest working, whereas in Germany the last one to leave is seen as the least efficient.' And these values change through time. Next year will mark a century of working five days a week, after carmaker Henry Ford reduced it to five days from six. As we approach this milestone, more companies are implementing or trialling four-day working weeks, while the Greens before the May election launched a four-day work week policy. Das said keeping up our high levels of work 'could be a good thing if it reflects greater voluntary participation in the workforce': workers choosing to improve their living standards, or it's the result of removing historical barriers that have held some segments of society back. 'But it is concerning if Australians have been working more out of sheer necessity, sacrificing study, rest or time with loved ones just to maintain their standard of living. 'For example, people may need to work more just to keep up with rising house prices, which has outpaced wage growth over a long period of time.'
