Stabilising debt, lifting productivity, supporting SMEs through greater fiscal discipline needed, says IPA

The housing crisis, the increasing cost of living, and the current tax system are not working in favour of Australian society’s biggest losers, including younger generations and small businesses, said the IPA, which called upon the Treasury to provide a clear, growth-focused agenda for businesses in the upcoming budget.

With the government’s high dependence on income tax (51.6 per cent of the ATO’s tax revenue of $577.4 billion between 2022-23), and gross debt that has no signs of slowing, predicted to reach $1.213 trillion by 2028-29 (36.4 per cent of GDP), the IPA stressed that there has never been a more important time to rebalance the tax base, lift productivity, and to increase GDP.

To achieve this, the institute said that tax reform, including the increase of GST, is necessary, as Australia’s rate is lower than that of other nations, such as in the EU, with an average standard VAT rate of 21.9 per cent.

“We …. need a serious conversation about tax reform – the tax mix, GST, and concessions – so Australia can fund essential services without permanently ratcheting up debt,” said Andrew Conway (pictured), chief executive at the IPA.

“Intergenerational equity starts with fiscal discipline: spending decisions made now must be affordable for the next generation.”

“The Budget needs a sharper focus on cutting red tape, improving cash flow and lifting investment conditions for SMEs – not just growing government.”

Small businesses, which make up 98 per cent of all businesses in Australia, contribute 32 per cent to GDP; however, they receive little improvement in conditions, according to ASBFEO and ABS in May 2025.

“If we want higher wages and improved living standards, we need stronger productivity growth – and that means backing the businesses that create jobs and take risks every day,” Conway said.

“We can’t keep pretending this is ‘equitable’ while pushing today’s bills onto tomorrow’s taxpayers.”

“Australia needs policies that grow the economic pie – productivity, investment and a competitive tax system – not another round of divisive arguments about who gets what slice.”

With the Federal Budget just around the corner, IPA has slammed the government for relying too heavily on commodity windfalls and called for change, as previously reported by Accounting Times.

“The IPA’s message is simple: the tax mix matters as much as the tax take. Windfalls might look convenient in the forward estimates, but they are a poor substitute for a deliberate strategy to raise revenue with the least economic damage,” Conway said.

“The IPA urges the Government to prioritise measures that lift productivity growth and support SMEs, alongside credible spending restraint and a long-term plan to stabilise debt.”