Authors: Ann Kayis-Kumar, Trevor Rose & Robert Breunig

Australia is facing a crisis in business investment. Even prior to the COVID-19 pandemic, Australia was experiencing capital shallowing—the ratio of capital to labour has fallen. Weak investment contributes to low productivity growth and the low wage growth that this engenders. Weak investment jeopardises Australia’s future economic growth and prosperity. This is a serious concern for Australia. In this paper we discuss adoption of an Allowance for Corporate Equity (ACE) in Australia. We begin by briefly discussing problems with the current corporate tax system. We provide background about the ACE and why it might be a desirable direction for reform.

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