A business group is urging the Abbott government to scrap car industry subsidies and broaden the GST.
Committee for Economic Development of Australia (CEDA) chief executive Stephen Martin, a former federal Labor MP, says taxpayers shouldn't be propping up inefficient industries.
"Industry subsidies should be one of the first areas looked at ... because we cannot keep propping up industries that will not be sustainable in the long term," Professor Martin said as he launched CEDA's latest policy report.
The Commonwealth gives the car industry about $500 million a year, but the federal government has ordered the Productivity Commission to review the viability of these payments.
Prof Martin described the review as "a step in the right direction".
But CEDA wants a Commonwealth National Productivity Policy set up to recommend ways of phasing out industry assistance.
It advocates subsidies being replaced by low interest loans to small and medium-sized enterprises to fund innovation.
"Rather than hang onto the past, now is the time to identify and focus on the industries that will provide our future prosperity and appropriately skill people to work in these industries," Prof Martin said.
Ford is set to cease local car making in 2016, while General Motors is reportedly considering the fate of its Holden operations in Australia.
The possible closure of Holden could lead to the withdrawal of Toyota, which is set to make a decision on local manufacturing in the year ahead.
Professor Martin also called for the GST to be broadened.
"Tax reform should focus on broadening the GST which would allow for middle class and business welfare tax breaks to be removed and the company tax rate to be reduced to an internationally competitive level," he said.
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