Tax reform, including an increase in the GST, would boost investment markets and the Australian economy, argues AMP Capital chief economist Shane Oliver.
Mr Oliver said an increase in the GST to 15 per cent would likely mirror the experience when the tax was introduced in 2000: spending would be brought forward, and the economy would receive a boost.
He said markets would react positively to a full reform package including a hike in the GST, reduction in income tax and other reforms around capital gains tax.
“If Malcolm Turnbull can continue to do a reasonable job in terms of selling the case for reform, then it could have a positive impact on the Australian economy because we really need to reinvigorate the economic reform process if we’re going to get real incomes rising,” Mr Oliver said.
Mr Oliver argued that the debate around reform has also turned positive, indicating that things aren’t being ruled out before the conversation has begun.
AMP Capital head of dynamic asset allocation Nader Naeimi reiterated the need and benefit of tax reform.
“I think the market would take it positively because for the first time in many years something is actually being done. It’s taken a long time to put in any kind of reform.”
Speaking on monetary policy, Mr Oliver argued that recent increases in mortgage rates have undone some of the easing over the last year.
“A quarter of the easing of this year has been undone by the banks,” he said.
Mr Oliver said there is a risk that as people start seeing higher rates come through, starting on 13 November and continuing to 20 November 2015, there could be a slowdown in consumer spending.
Mr Oliver said the Australian economy is running below its potential, indicating that the RBA should have cut rates earlier in the month.
“It’s hard to see that changing anytime soon because there are a whole lot of structural factors that are constraining economic growth.”
Former CEO of ING Direct Vaughn Richtor will assume the role of chairman at MyState following the retirement of Miles Hampton, the compan...