A report by NAB says that in order for the Australian economy to continue to grow, the federal government must foster innovation, reduce regulation and reform the taxation system.
The new report, from NAB Group Economics, argues that Australia's next phase of growth will be facilitated by a "culture of innovation" and "reform".
"This will be a key determinant of business confidence and important in generating the productivity growth necessary to offset the impact of weaker population growth and an ageing population profile," the report said.
However, the challenge in 2016 will be for business, government and research institutions to collaborate to make the federal government's "smart economy" a reality.
In reference to NAB research, the update said there is no shortage of Australian businesses that characterise themselves as "highly innovative". However, where Australia continues to fall short is in the commercialisation of ideas.
"Access to capital and skilled people are key impediments," the report stated.
Moreover, 2016 provides a "clear opportunity" for the federal government to reform Australia's taxation system, despite the associated political complexity.
According to NAB Group Economics, reform must address multiple objectives, namely: "The need to ensure sufficient revenue is generated to address the medium-term fiscal challenge; encouraging productivity and workforce participation; ensuring Australia is an attractive place to invest; reducing regulatory burden on business; increasing the flexibility to address issues associated with multinational trade, global competition and the digital economy; and maintaining an acceptable degree of fairness."
In addition to a change in the economic dialogue to focus on innovation and reform, the update noted that 2016 will see a decline in the property sector's growth.
"This will have noticeable implications for the economy, both in terms of the direct impact on dwelling construction activity, as well as the wealth effects on household consumption," it said.
While NAB expects house price growth to be significantly subdued, the large number of construction projects currently under way will mean the sector's contribution to GDP growth will remain positive.
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