Declaring Australia "overly complacent" and warning that his remarks could cause trouble, the head of the treasury has called for a fresh wave of industrial relations reform, for spending cuts deep enough to slash income tax and for land tax as a replacement for stamp duty.
Commemorating six months in the job by speaking to the Australian Conference of Economists in Brisbane, treasury secretary John Fraser said neither China nor Greece posed a significant threat to Australia's outlook.
The financial crisis in Greece would be resolved "probably earlier rather than later". The collapse in the Shanghai stock market wasn't unusual by recent standards.
"We have seen many such flurries over the past 10 years or so," he told the conference. "And we tend to forget the Shanghai market remains well above the levels of a year ago."
"We are monitoring these developments closely, but you need to keep it in perspective. I am not stepping away from my longer term belief in China."
While he stood by the budget forecasts – for this year – he believed Australians were "overly complacent" about the long-term outlook, especially "in a region that's pushing ahead at a remarkable rate of knots and may leave us behind".
Since export prices peaked in September 2011, Australia's real per capita income had slipped 1.6 per cent.
Speaking out was a risk. "You always speak publicly with some trepidation because you don't want to have some things ruled out," he said. When he spoke out earlier this year about the need for a review of retirement incomes the prime minister Tony Abbott shut down discussion by saying that he would never change the tax treatment of superannuation, whatever the outcome of an inquiry.
Mr Fraser said that despite a widespread view that Australia's industrial relations system worked well, other countries were leaping ahead.
Even Spain was freeing up its labour market.
"Recently, we had a visiting international delegation out here looking at the Australian economy, Mr Fraser said. "I was struck that when we talked about economic reform they said our labour market conditions were really good. And then I realised that their point of comparison was Europe!"
John Fraser is a former treasury official who returned to the department in December at the request of the prime minister after two decades in financial markets, much of it as head of UBS Global Asset Management in London.
"In the 1980s there was a sense of urgency about economic reform. It was far easier to say things are crook," he told the conference. Now Australians seemed to believe the path to sustainable growth involved ever-increasing government spending, he said.
"Unashamedly, I believe we are better placed as a lower-taxing country than a higher-taxing one," he said. "If society chooses to go down the high-taxing, high-spending route then that's fine but the consequence will, I believe, be lower growth."
"The top income earners already make a large contribution to Australia's tax take. Currently, the top 1 per cent of taxpayers who pay the top marginal rate contribute 17 per cent of all personal income tax. And the top 10 per cent contribute 46 per cent of all personal income tax."
So high were the rates that Australia had developed a "world-leading" tax-planning industry.
"Surely something is fundamentally wrong with our tax system when the community at large responds by spending so much time and money on working out how to game the system," he said.
Many Australians moved overseas rather than pay high rates of tax. Others decided not to return to full time work after having children.
Replacing stamp duty with land tax was a treasury priority.
Although stamp duties were "one of the most inefficient and distorting taxes", climbing house prices had pushed reliance on them to a long-term high of 26 per cent of state income.
A switch from stamp duty to land tax was a "live debate" between the heads of state treasuries, Mr Fraser said.
