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Act now to address low productivity: IPA

Adam Zuchetti
Adam Zuchetti
12 February 2019 2 minute readShare
Andrew Conway

Urgent measures are needed in the upcoming federal budget to address Australia’s sluggish rates of productivity if SMEs are to remain viable and the nation globally competitive, the Institute of Public Accountants has cautioned.

In its pre-budget submission to the government, the Institute of Public Accountants (IPA) called for a serious look at tax reform as a means of spurring the economy.

“Unless Australia can stem the tide of the flagging productivity levels, our economy will continue to decline and our current living standards will suffer accordingly,” its CEO, Andrew Conway (pictured), said.


“Taxation is just one area that can stimulate economic growth if done correctly.”

Mr Conway lamented that both major parties seem to be political point-scoring rather than collaborating to achieve a desirable outcome for the nation when it comes to tax.


“Currently, we are seeing tax policy proposals from the government and the opposition which are quite disparate and we need all parties to be at least roughly on the same page if true and bold tax reform is to take place,” he said.

According to Mr Conway, such reform needs to be holistic rather than simply tinkering around the edges of Australia’s complex tax framework.

“A piecemeal approach is sub-optimal and may even prove harmful to long-term reform,” he said.

The IPA’s submission draws heavily on the findings of its Australian Small Business White Paper, developed last year in conjunction with Deakin University.



It is pushing for 10 core reforms, including an increase in the rate and scope of the GST, cutting direct taxes, standardising the company tax rate at 25 per cent and a commitment for an incoming federal government to hold a small business summit within its first six months in order to drive meaningful policy and reform.

Red tape and regulatory burden are also a major hindrance to business productivity, it said.

According to the IPA’s submission, Australian businesses are facing problems of returns-to-scale, with growth alone not enough to drive profitability, productivity or job creation.

“Many parts of the Australian economy are characterised by firms with decreasing (or, at best, constant) returns-to-scale. This means scaling up may not impact productivity in any meaningful way, or indeed may reduce productivity,” it said.

“In turn, this would imply that typical businesses need to focus on being smarter at their current levels of operation rather than seeking to expand.”

The submission is also seeking government action on reducing the amount of capital tied up in so-called “zombie companies”, to free it up for investment in high-growth businesses with strong productive output.

“Loss-making businesses account for around one-third of the total business stock, and these firms may benefit from growth due to their underutilisation of current resources. Alternatively, the wider economy may benefit from reallocating the unproductive resources held in these businesses.”

The budget is due to be delivered by the government on 2 April. However, it is unlikely that budget measures will receive parliamentary approval straight away, if at all, with an election likely to be held the following month — particularly in light of the delays to implementing last year’s measures which saw the small business instant asset write-off temporarily revert back to its $1,000 threshold due to parliamentary delays in approving the required legislation.

Act now to address low productivity: IPA
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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