Productivity Commission Releases Interim Report: Creating a More Dynamic and Resilient Economy
- 海边的茨威格
- Aug 8
- 3 min read
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The Productivity Commission of Australia has recently released an interim report titled Creating a more dynamic and resilient economy, inviting further public consultation and feedback. The final report will be published once these processes are completed.
About the Productivity Commission
As the Australian Government’s independent research and advisory body, the Productivity Commission is dedicated to analysing a range of economic, social, and environmental issues affecting the wellbeing of Australians.
The Commission’s core responsibility is to assist governments in developing policies that serve the country’s long-term interests.
Deadline for Submissions
The public is invited to submit written feedback (preferably in electronic format) to the Productivity Commission by 15 September 2025.
The final report will be released following the collection of feedback and further discussions with stakeholders.
Report Focus: Enhancing Economic Dynamism and Resilience
A dynamic economy allows businesses and individuals to better invest, learn, and innovate. Government can help drive this goal through taxation, spending, and regulation.
This inquiry focuses on:
Reforming the company tax system
Improving government regulation
The goal is to encourage greater investment and drive sustained productivity growth.
Recommendations on Company Tax Reform
Over the past decade, business investment in Australia has declined significantly—one of the main reasons for weak productivity performance. The company tax system is one of the most powerful policy tools to drive investment and productivity growth.
Reform Objectives
Reduce reliance on the current inefficient corporate tax system
Transition to a new tax framework that better incentivises investment
Recommendation 1: Adjust the Company Tax Structure
Revise the company tax system to include:
A lower corporate income tax rate
Introduction of a new Net Cash Flow Tax
Recommendation 2: Reduce Most Business Tax Rates to 20%
For businesses with annual turnover below AUD 1 billion:
Tax rate reduced to 20%
This would increase retained earnings, attract foreign investment, and improve returns on investment
For businesses with annual turnover above AUD 1 billion:
Tax rate remains at 30%
The government is also advised to assess the outcomes of the initial reforms and consider expanding tax relief accordingly.
Recommendation 3: Introduce a 5% Net Cash Flow Tax
The reform should remain fiscally neutral in the medium term, funded within the existing company tax system. Therefore, a 5% net cash flow tax on corporate profits is proposed.
Businesses would be allowed to immediately deduct the full amount of capital expenditure from profits in the year the spending occurs.
This tax system is expected to:
Encourage businesses to invest in capital, building a more dynamic and resilient economy
Increase the tax burden on businesses with revenues exceeding AUD 1 billion
Reform Impact Modelling
Modelling analysis conducted as part of this inquiry indicates significant positive effects:
AUD 7.4 billion increase in investment (up 1.6%)
AUD 14.6 billion increase in GDP (up 0.5%)
0.4% increase in labour productivity
Recommendations on Regulatory Reform
An increasingly burdensome regulatory environment is another key barrier to productivity growth.
Background Issues
Businesses widely report significantly increased compliance time
Australia’s rankings on various international regulatory indicators have declined
While regulation aims to improve safety and wellbeing, excessive regulation is stifling economic dynamism
Recommendation 1: Establish a Clear Regulatory Reform Agenda
The federal government should issue a whole-of-government statement committing to new regulatory principles and processes that support economic dynamism.
The statement should include:
Immediately actionable burden reduction measures
Measurable targets for reducing regulatory burden
The government should also publish regular appendices updating targets and new burden reduction initiatives.
Recommendation 2: Strengthen High-Level Regulatory Review Mechanisms
The government should give greater attention to how regulation affects economic dynamism. Specific measures include:
Strengthening Cabinet oversight of regulatory proposals, using a review method similar to budget proposals
Appointing an independent statutory commissioner to lead the Office of Impact Analysis and improve regulatory impact assessment standards
Expanding the powers of the federal parliamentary scrutiny committee to more effectively review new regulatory measures
More extensive use of external industry assessments to reduce cumulative regulatory burden
Recommendation 3: Improve Regulatory Practices to Support Growth, Competition, and Innovation
The government should raise expectations of public servants to:
Promote growth and innovation through regulation
Clearly define tolerable levels of risk
Implementation methods:
Ministerial expectation statements
Guidance and capability-building support
Key performance indicators and compliance cost assessment mechanisms
Conclusion
Major reforms to Australia’s corporate tax and regulatory systems have the potential to boost national productivity. The interim report, now released, outlines the proposed reforms and their expected impacts. Submissions are welcome until 15 September 2025 to help shape the final policy. If you would like to understand how these reforms may affect your business, feel free to contact us for expert advice.
Source:
Creating a More Dynamic and Resilient Economy, Productivity Commission website.
