Why Australia’s Economic Reform Round Table Must Focus on AI, Robots and Jobs, Not Just Tax

The Economic Reform Round Table Must Focus on AI and Robotics, Not Just Tax and Productivity

The upcoming economic reform round table scheduled for August risks becoming another drawn-out debate on tax reform. History shows that consensus on whether to achieve a sustainable budget through spending cuts or tax increases is elusive. Instead, the assembly of 25 citizens should prioritize developing policies addressing artificial intelligence (AI) and robotics.

A useful starting point would be reviewing the AI Action Plan announced by U.S. President Donald Trump on July 23, alongside China's eight-year-old strategy aimed at becoming the global AI leader by 2030. These international moves highlight the urgency for Australia to align its policies with emerging AI trends.

Opening the Tax Debate at the Productivity Round Table

Treasurer Jim Chalmers has signaled a willingness to broaden discussions to include tax reform at the economic summit. This comes amid the Productivity Commission's reports on productivity pillars and over 450 ideas submitted by the public since December. Injecting a sense of urgency can be achieved by considering global AI investments—Meta Platforms Inc., for example, is reportedly offering up to $150 million in sign-on bonuses to AI engineers working on OpenAI’s ChatGPT, with Meta’s CEO Mark Zuckerberg aiming to develop AI that surpasses human intelligence.

The combined market value of the five leading AI companies—Meta, Alphabet, Microsoft, Amazon, and Nvidia—stands at $20 trillion. This is nearly double the value of all residential properties in Australia. The rationale behind this massive valuation is that AI and robotics will generate greater profits than any prior technological breakthrough, primarily by replacing human labor and boosting productivity for those still employed.

How Businesses Will Apply AI

Businesses typically implement AI in two ways: top-down and bottom-up. Top-down involves executives deciding to replace human roles with AI—such as automating software coding, data entry, customer service calls, or content creation. Bottom-up refers to employees using AI tools to enhance their own work performance.

Mastering the art of crafting effective AI prompts is becoming a critical workplace skill. For example, Fourday, an AI consultancy, is building a "prompt library" and has developed a tool called Prompt Cowboy that transforms simple, plain-language prompts into detailed queries that yield better AI responses. According to Fourday’s founder, productivity gains of 30-40% are possible when AI is used correctly, but many businesses see little benefit because they fail to ask the right questions.

Two Essential Tasks for the Round Table

• Develop a national system to help small and medium enterprises (SMEs) and employees improve AI prompt writing skills. This will ensure businesses can leverage AI effectively and responsibly.
• Modernize the welfare safety net to reduce fear and insecurity among workers facing AI-driven job displacement. This means rethinking unemployment benefits, as the current JobSeeker system is ill-suited for a future where job scarcity may be more permanent. The system’s requirements, such as applying for multiple jobs monthly, become meaningless if jobs simply aren’t available.

Preparing the workforce and social systems for AI's impact is crucial. While AI hasn’t yet caused mass unemployment, its disruptive potential is significant in certain sectors. A well-designed safety net will help society adapt. This implies the need for increased tax revenue to fund welfare and public housing, raising the question of whether Australia should introduce a new wealth or inheritance tax or increase the Goods and Services Tax (GST).

Tax Reform: Lessons from History and New Solutions

Australia’s previous major tax reforms coincided with revenue shortfalls: capital gains and fringe benefits taxes in 1985, and GST in 2000. Today’s fiscal pressures arise from an aging population, the National Disability Insurance Scheme (NDIS), and increased defense spending.

Proposals to reduce tax breaks on very large superannuation balances met strong resistance, making new wealth or inheritance taxes politically difficult. Increasing the GST rate closer to the global average of 15-20% appears more feasible, though GST is regressive and disproportionately affects lower-income households.

An innovative solution comes from UNSW Professors Richard Holden and Rosalind Dixon. In their book From Free to Fair Markets, they propose raising GST to 15% applied to all spending above a $12,000 annual threshold. To balance this, each taxpayer would receive a 15% rebate on the first $12,000 spent, equivalent to an $1,800 annual refund, ideally paid in two installments. This approach would double GST revenue from $90 billion to $180 billion while returning half of it to taxpayers, resulting in $45 billion of net new revenue. These funds could support income tax cuts and help eliminate the budget deficit.

Debate about the precise GST-free threshold is warranted, but this concept deserves serious attention during the round table discussions. Once tax reform ideas are on the table, the assembly can focus on crafting policies for AI and robotics.

Conclusion

The economic reform round table must shift from repetitive tax debates to tackling the AI and robotics challenge head-on. Equipping businesses and workers with AI skills, updating social safety nets, and exploring fair tax reforms will create a foundation for sustainable productivity growth. This focus will better prepare Australia’s economy and workforce for the technological changes already underway.

For government professionals interested in AI skills development, exploring resources like Complete AI Training’s latest courses can provide practical tools to stay ahead in this evolving landscape.