The federal government is being urged to make tax reform a central plank of the nation's strategy to reignite growth when the coronavirus threat recedes and social distancing restrictions are lifted.
As planning gets underway on how to reopen the economy without risking a resurgence of COVID-19 infections, Reserve Bank of Australia governor Philip Lowe has fueled debate by nominating tax reform as a key element of the agenda.
In a frank assessment of the economic outlook, Dr Lowe said in the first half of the year the country would suffer the biggest hit to output and income since the 1930s, saddling it with job losses, business closures and debts that are likely to crimp activity for a considerable period.
"Whatever the timing of the recovery, when it does come, we should not be expecting that we will return quickly to business as usual," the RBA governor said. "Rather, the twin health and economic emergencies that we are experiencing now will cast a shadow over our economy for some time to come."
The Reserve Bank governor said the "best way" of dealing with these consequences was to reinvigorate the growth and productivity agenda, and nominated tax reform, along with improvements in infrastructure, training, regulation and industrial relations as key areas to be addressed.
In particular, he said "we should be looking again at the way we tax income generation, consumption and land in this country".
As the federal government contemplates a massive debt blow-out to pay for the more than $200 billion of measures undertaken to limit the hit to the economy, some have called for it to delay around $300 billion of income and company tax cuts slated to come into effect in coming years.
Melbourne University economist Jeff Borland said it was hard to see how the government could continue to justify and afford a planned cut in the tax rate for small and medium business to 25 per cent given the scale of business assistance it has provided in response to the COVID-19 crisis.
But Treasurer Josh Frydenberg signaled on Wednesday that the government is determined to stick to its tax cut schedule, which it considered to be part of enhancing productivity.
Mr Frydenberg said the $300 billion of tax cuts, including reducing the income tax for 94 per cent of wage earners to 30 per cent, were aimed at "flattening and simplifying" the tax system and making Australia's tax regime internationally competitive.
But the government appears set against any increase in the rate and scope of consumption tax, despite the likelihood that revenues will plunge for much of this year as unemployment surges and incomes tumble.
Mr Frydenberg told RN Breakfast that "we have got no plans to lift the GST".
Instead, the treasurer said the government's aim was for the country to grow its way out of its accumulated debt.
"We are going to have a higher debt burden as a result of this crisis and the spending that we have had to undertake, and the way to manage that higher debt burden is not through higher taxes but through growing the economy," he said.
Former Treasury secretary Ken Henry, who released a tax system review in 2010, backed the government's decision to stick with personal and company income tax cuts.