IMF BACKS TAX REFORMS; ENERGY BOOST

IMF targets tax reforms to strengthen economy, budget

Australia has been urged to consider a raft of tax reforms in a bid to lift economic productivity, lower the cost of capital, and increase incentives for investment and work. In its annual review of the nation’s economy, the International Monetary Fund said a comprehensive tax reform package would help to strengthen Australia’s resilience to future shocks. It canvassed an increase in indirect taxation, the reintroduction of a resource revenue tax and removal of income tax exemptions to offset lower corporate and labour taxes. The IMF also supported ongoing expenditure reforms to target efficiency savings in growing cost areas, such as the National Disability Insurance Scheme and aged care, to protect productive infrastructure investment.

Energy exports rise as domestic usage falls

Australia’s net physical energy use rose by 1.6 per cent in 2023-24, but a 3.1 per cent increase in energy exports was offset by a decline in industrial and household energy use. Estimates by the Australian Bureau of Statistics show that energy exports climbed to 17,927 petajoules, outstripping energy use by industry (4,711 PJ) and households (980 PJ). In the same year, total renewable energy extraction – hydro, solar, and wind energy – rose by almost five per cent to 341 PJ. Solar energy production was up by 16 per cent, but wind and hydro output both fell. The main sources of domestic energy production from natural sources were black coal, of which 89 per cent was exported, and natural gas, of which 78 per cent was exported as liquefied natural gas (LNG).

Canberra leads national economic growth rates

The Australian Capital Territory has topped annual economic growth among the eight states and territories, recording 3.5 per cent growth in gross state product (GSP) in 2024-25. ABS figures show that services industries – including health care and social assistance, financial services, and public administration – drove economic growth last financial year. Weaker mining and manufacturing output affected growth in New South Wales, Victoria and Western Australia. NSW recorded the lowest rate of GSP increase, at 0.9 per cent. On a population basis, however, NSW, Victoria, South Australia, WA, and Northern Territory all recorded a fall in GSP per capita.  During 2024-25, the Australian economy grew at 1.4 per cent, the same national growth rate as in the previous year.

PM pushes free trade case with European Union

Prime Minister Anthony Albanese has used his visit to South Africa for the G20 leaders’ meeting to advance talks on Australia’s proposed free trade deal with the European Union. Mr Albanese met with EU leaders as well as with German Chancellor Friedrich Merz in a bid to finalise the trade deal in the first quarter of 2026. He said a “lot of the issues” with the deal had been resolved, but a range of issues relating to agriculture (including beef quotas) remained during negotiations. In addition, the PM sidestepped questions that Australia’s luxury car tax – which applied to most European vehicles – was a sticking point in talks. Mr Albanese said Australia “got close” to an EU free trade deal in the last term of government, but ultimately it was not in Australia’s interests at the time. He said the free trade agreement struck with the United Kingdom had brought great benefit to Australia, while a trade agreement with the United Arab Emirates had opened up Middle East markets.

Farrell digs in on geographic-based product names

Meanwhile, Trade Minister Don Farrell says the Federal Government is pushing back “very hard” against EU demands that Australia drop the use of European geographic names for agricultural products. Senator Farrell said Europeans had raised the issue of so-called geographic indicator product names (such as feta cheese and prosecco) during free trade negotiations. He said Europeans who came to Australia after World War 2 wanted to keep links with their country via their restaurants, food and wine. Senator Farrell said it would not be fair to these families who had built up businesses in Australia to stop them from using European geographic names.

Gas crucial to large-scale manufacturing, says Ayres

Federal Industry and Innovation Minister Tim Ayres has affirmed his support for large-scale manufacturers to maintain their access to gas production during the energy transition. Senator Ayres told a media interview that he was focused on big industrial gas users whose shift to gas production, or gas as a feedstock, was fundamental to their future competitiveness. He said a supply of gas for future industry was crucial to the Future Made in Australia program. Senator Ayres said the National Reconstruction Fund’s $5 billion net zero fund would support small to medium manufacturing businesses to move from expensive gas to lower-cost green electricity.