"A more comprehensive tax reform has the potential to increase efficiency of the tax system, increase investment and labor demand, and reduce inequality." The IMF said tax reform could raise real Gross Domestic Product by 1.3 per cent. Mr Morrison welcomed the report stating it "reinforced the need to maintain our international competitiveness," but has yet to outline what taxes could be increased to pay for the full $65 billion company tax cuts and keep the budget in balance. Christine Barron, the IMF’s alternate executive director, and senior advisors Gemma Preston and Anna Park said the US company income tax package only increased the need for Australia to address its relatively uncompetitive company tax. "Sustained structural policy efforts in promoting innovation and competition, upgrading labor force skills and reducing gender gaps, and advancing broad tax reform would complement these positive effects," the trio said.

The push comes as Prime Minister Malcolm Turnbull lands in Washington on Thursday, where he will meet with President Donald Trump and up to 50 state governors on a pro-tax cut, pro-trade agenda. Treasurer Scott Morrison Credit:Alex Ellinghausen But in a review that otherwise "commended" Australia's economic management through the transition out of the mining boom, the IMF put itself on a collision course with Mr Morrison over housing policy. It rejected Mr Morrison's argument that Labor's policies to reform negative gearing and capital gains tax would "smash" the housing market. Capital gains is tax payable on the profits of any asset you sell and is pegged to your income. Negative gearing allows investors to offset losses from maintaining a property through tax.

The IMF's metrics indicated that the policies have contributed to a house price over-valuation of between 5 to 15 per cent at the national level. "Lower capital gains discounts and limits to negative gearing for investors and limits to capital gains tax exemptions of owner-occupiers as desirable," the report said. "A housing boom has supported the Australian economy’s adjustment to the end of the [mining] boom, but has led to housing market imbalances and household vulnerabilities."

Shadow treasurer Chris Bowen said the Coaltion's resistance to Labor’s housing affordability reforms had "become an international embarrassment," despite Labor only limiting its reforms to investors, stopping short of the IMF's recommendations of limiting capital gains tax benefits for owner occupiers. The IMF executive board, which includes 24 directors representing 20 groups of countries, said replacing stamp duties with broader land taxes should be a priority.

Shadow treasurer Chris Bowen Credit:Alex Ellinghausen "Stamp duties tax real estate transactions and discourage alternative uses of urban land at a time of adjustment to higher relative prices in the eastern capitals [and] may also hamper labor mobility," the IMF found. State governments have been addicted to billions of dollars in stamp duty to deliver budget surpluses, but the restrictive tax stops people from selling as it imposes a one-off fee of up to $40,000 in Sydney and $55,000 in Melbourne, discouraging home-owners from downsizing and reducing the amount of supply in the market. Research from the Grattan Institute shows replacing stamp duty with a land tax by implementing an annual tax of $1 per every $1000 of a home's value would cost the median Sydney household $845 a year in tax and the median Melbourne home $623 a year, while delivering billions of dollars to state budgets. The IMF said the strategy to return the budget to balance by 2020-21 was appropriate and encouraged further public infrastructure spending as the key driver of employment across the country.

It did not expect the Reserve Bank to raise interest rates in the near future as wage growth remained so low. The IMF said conditions were in place for a pickup in economic growth and further declines in economic slack - leading to increased wage growth eventually. Figures released by the Australian Bureau of Statistics on Wednesday showed wages were showing signs of life after hitting 2.1 per cent, marginally above inflation at 1.9 per cent - the second quarter in a row of positive wage growth numbers.