Former Treasury head Ken Henry has joined calls for the federal government to face up to the fiscal hurdles posed by the nation’s growing welfare and health budgets.
Dr Henry, who led a tax review under the former Labor government, warns Australia is facing an “imminent crisis” in its taxation system unless there was “comprehensive” reform.
The 2010 review of the taxation system identified a number of medium term challenges, such as welfare payments and an ageing population, but Labor didn’t act on these, or his recommendation for a widespread overhaul.
“It said there was no urgent case for moving at that time,” Dr Henry told a forum in Canberra on Tuesday, according to reports.
“We’re getting much closer to that point at which we should acknowledge that … there is an imminent crisis ahead for the tax and transfer system and therefore there is a strong case for developing a comprehensive tax and transfer reform package.”
Dr Henry pointed to spiralling welfare costs related to the disability support pension.
“That problem’s been known for many, many years,” he said.
“The problem is just getting bigger and bigger as each year goes by, so at some point it’s going to have to be looked at.”
With the coalition government is facing a massive challenge to rein in the budget deficit, Dr Henry recommended it take another look at his 2010 taxation review.
Prime Minister Tony Abbott has promised to deliver a tax reform white paper within this term of government.
Any major changes will be taken to the next election.
Dr Henry believes a future increase in the rate of the GST is inevitable.