Economic gloom for Australia?

Taxes are very sophisticated, starting with local government rates, goods and services taxes (GST), company taxes, and personal income taxes. The cost of compliance with taxes is very high, where extremely detailed records are mandatory, and onsite inspections made by tax officers on a regular basis.

One of the major tasks facing successive governments over the past decades is fiscal management, with many demands upon public money from education to healthcare, to infrastructure development and maintenance, to defense, and social security. The strain of spending during the 2008 recession, military spending, and other fiscal responsibilities has maintained the budget in deficit for the last decade.

It is therefore inevitable that the tax base must be widened and taxes increased if the government is to continue meeting its commitments. There are calls this week to raise the GST to 15 percent to fund healthcare expenditure. This will be one of the predominant political/social issues facing the present and future governments. This prevents governments from governing with a vision. They are now financial managers rather than designers of the future.

A major influence upon Australia's cost of living is the burden of regulation. Australia has more than 130 national regulatory agencies, a federal and eight state and territory legislatures, and around 500 local government jurisdictions, making up three levels of government. There is much duplication. Each year more and more laws, regulations, and orders are put into effect. This regulatory burden puts Australia at a competitive disadvantage.

Although the intention of regulators is to provide a safe and healthy environment, the costs of compliance are enormous. Many simple building and renovation jobs require massive protective structures with safety officers which inflate the costs of the activity many-fold. Regulation effects production, storage, transport, labeling, food safety, competition and fair trading, and occupational health and safety.

The costs of starting up a business are now horrendous. Even setting up a small restaurant can cost up to A$500,000 to satisfy food safety, OHS regulations, zoning and so forth. The dream of starting one's own business and being one's own boss is quickly disappearing. According to the Global Entrepreneurship Monitor (GEM) 2014 Global Report, the new venture start-up rate in Australia is in the bottom 40 percent in the world. Retail, warehouse, and factory rents are extremely high and require long-term commitments. Business failures keep people in debt for the rest of their lives.

The Australian Industry Group 2014 National CEO Survey reports that small business owners complained that regulatory compliance costs are expensive and time consuming. These include payroll taxes, OSH compliance, GST records, waste and storage regulations, and labor laws covering union right of entry to premises, unfair dismissal, long service leave, and holiday loadings.

According to a World Bank Doing Business Efficiently Report 2015, urban zoning certificates are required in Australia, but not required in Finland, France, New Zealand, or Singapore. New Zealand's regulations are streamlined in implementation, where enforcement is predictable. In Australia they are not. International trade procedures are cumbersome, ranking Australia only 49th in terms of efficiency. In the same report, Australia's tax compliance procedures rank 39th in the world in terms of efficiency.

The cost of living has been built by high debt levels. According to a Barclays Bank survey, Australian households are the most indebted in the world. Australians have taken mortgages and personal loans, use credit cards heavily and rely heavily on overdrafts to get by. Current household debt is over 130 percent of GDP.

Demand for housing facilitated through easy mortgages has played a role in increasing urban housing prices. The concept of negative gearing has encouraged speculation in housing which has been fueling the housing market. Negative gearing has also been a source of high rental charges for properties, as most of the rent paid covers mortgage repayments. High debt rates make consumers susceptible to changes in interest rates and any future economic downturns.

The demise of great Australian icons like Fletcher Jones, Ansett Airlines, Surfboard manufacturers, Darrell Lea, Ernest Hillier, Borders, and Angus & Robertson, are signs of what could come. Unlike Greece, Australia has no party to bail it out.

However the solutions to lowering Australia's cost of living and making Australia more competitive would take measures that very few would ever agree to.