A wide ranging assessment by the Organisation for Economic Cooperation and Development (OECD) of the Australian economy reinforces the government's determination to build on its successes, Treasurer Wayne Swan says.
But key areas of government policy such as the National Broadband Network, or NBN, were questioned for cost-effectiveness.
Releasing its Economic Survey of Australia on Sunday, the Paris-based institution said the Australian economy has been one of the most resilient in the OECD during the global financial crisis.
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It says the country's future growth prospects remain bright "with potential growth among the strongest in the OECD".
"One of the key factors behind the Australian success story was that while we were putting in place our response to the global crisis, we were also planning the recovery and charting the path back to surplus," Mr Swan said in a statement.
But the survey also questions aspects of the government's policies, including its capability of keeping to its strict spending discipline to return the budget back to surplus, the
make-up of its planned mining tax and the cost effectiveness of its National Broadband Network (NBN).
The government has pledged to cap spending growth to two per cent of gross domestic product to get the budget back into surplus in three years time, and possibly continuing this strategy out to 2015/16.
NBN financially uncertain: OECD
It says that while the NBN promises large benefits, it may not be the most cost-effective strategy.
It says $43 billion project entails "substantial financial uncertainties".
Part of the plan is to shut down Telstra's existing copper network and the country's main cable network.
"While establishing a monopoly in this way would protect the viability of the government's investment project, it may not be optimal for cost efficiency and innovation," the OECD says.
It says research has stressed the value of competition between technological platforms for the providing broadband services.
"It would therefore be preferable to maintain competition between technologies in the broadband sector and, within each technology, between internet service providers," it says.
Spending limits could be 'tougher'
While the OECD says spending limits are appropriate and should be carried out, it believes they may be tougher to enforce once the effects stimulus spending measures fades.
As such, it recommends cutting support programs, especially those for the agricultural and automotive industry.
"Rationalising such programmes, which would be beneficial in itself, would make the spending limit easier to obtain," the OECD said.
Mining tax should be broader
On the government's planned mining tax, it says while such action is "justified" and is set to finance a number of welcome initiatives, should commodity prices fall faster than expected
"this policy could lead to a structural deterioration of the budget".
"Spending decisions should be disconnected from resource tax revenues," it says.
"One option would be to park resource revenues in a reserve fund."
It also recommends broadening the minerals resource rent tax (MRRT) to take in other commodities other than just coal and iron ore, and eliminating state royalties, as suggested in the Henry Tax Review.
Under the MRRT scheme, state royalties are still paid by mining companies, but refunded by the federal government.
Like the International Monetary Fund, the OECD believes the base of the GST should also be broadened and the rate increased as part of much needed tax reform.
This would allow for income tax to be lowered, notably the high effective marginal tax rates affecting low-income households.
