Academic Cautions Australian Government Against Further Tax Cuts

by Mary Swire, Tax-News.com, Hong Kong

08 April 2005

Economist and board member of the Reserve Bank of Australia, Warwick McKibbin has advised the government of John Howard against using its healthy budget surplus to provide further cuts in taxation during its mandate.

In an interview with Bloomberg, Mr McKibbin argued that the government could put the surplus to more productive use elsewhere in the Australian economy.

“Tax cuts, per se, are not the biggest issue and you could argue tax cuts right across the board might not be productive at this point," McKibbin, Professor of International Economics at the Canberra-based Australian National University, observed.

He went on to state that the government’s A$6.2 billion (US$4.7 billion) surplus would be better utilised if invested in areas that will enhance prospects for economic growth.

“I would be investing the surplus not just in physical infrastructure, but on intellectual infrastructure as well," he noted.

However, he told Bloomberg that there is a strong case for simplification of the tax system.

“I'd also like to see a significant amount of tax reform that simplifies the tax system.” McKibbin commented.

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