The local banks' reliance on offshore funding left them in trouble when the 2008 global financial crisis hit. Unable to refinance debt, they were bailed out by taxpayers under the former Labor Rudd government.

But this wouldn't be an option again: "The difference between our public indebtedness now and what it was [during the] global financial crisis would change our options for bailing out [the banks]," Professor Garnaut told the Melbourne Economic Forum on Wednesday.

"If there were another big disruption of global financial markets, our banks are in a weaker position now than they were then," he said.

"Why didn't our banks fall over [during the GFC]...because our government one Sunday afternoon at the end of September took a decision to guarantee all the wholesale debt of our banks, $178 billion.

"It happened, and the wholesale debt of the banks as a ratio of GDP is higher now than it was then."

The world suffers

He said the consequences of a repeat of the problems international markets faced in 2008, with the government unable to step in this time, would be that Australia would enter "the world of the countries that suffered very badly in the GFC."

Professor Garnaut said there had to be other ways for refinancing banks that didn't involve a government guarantee. "We've gone a little in the way of that direction. But not very far," he said.

Professor Garnaut's comments follows similar warnings by other prominent economists.

Chief economist for Industry Super Australia, Stephen Anthony, who previously did forecasting in both the Treasury and Department of Finance, has said the government has far less "wriggle room" to avoid a recession than it had before the onset of the global financial crisis in 2008.

But National Australia Bank chairman and former treasury boss Ken Henry this month said taxpayers will still be on the hook in a banking crisis.

Professor Garnaut, an adviser to the Gillard, Rudd and Hawke Labor governments, who designed the Rudd government's carbon trading scheme, also urged the Turnbull government to fix the budget deficit before tackling tax reform.

He said the federal government could raise more revenue by cracking down on multinational tax avoidance and winding back tax breaks, including superannuation and capital gains tax concessions.

Don't cut company tax

Janine Dixon of the Centre of Policy Studies at Victoria University argued at the conference against company tax cuts, despite repeated calls by Treasury for it.

She said that while cutting the corporate tax rate from 30 per cent may boost the economy, it wouldn't increase national income, which does more to lift living standards for all taxpayers.

Professor Dixon accepted that company tax cuts would prompt employers to hire more staff and increase real wages, but said the increase would benefit those on higher incomes rather than people living out in the suburbs doing low-income work.

Business Council of Australia chief executive Jennifer Westacott hit back in a statement saying Dr Dixon's comments reflect "a highly theoretical view of the world" rather than reality.

"The idea that we should accept an uncompetitive company tax rate suggests we ought to be happy losing out in the global battle for investment," Ms Westacott said.

Australian Chamber of Commerce and Industry spokeswoman Patricia Forsythe said "a more competitive corporate tax rate makes Australia a more attractive place to invest, which boosts incomes for workers and domestic businesses".

Budget: tweaks, but no reform

Grattan Institute chief executive John Daley told the conference it was more than likely the government would move on superannuation tax breaks in the May 3 federal budget. But other changes on areas such as negative gearing and capital gains tax concessions - were less likely to appear in the budget, although he was pleased the Labor opposition had a policy to scale them back.

Professor Daley said given 75 per cent of people own own homes changes to land tax were unlikely, and so was a GST rise as it most impacted households. The end result would be no genuine tax reform, and certainly not any changes that would make a substantial difference to the budget deficit.

Professor John Freebairn, a former adviser to the Henry tax review, said politicians on both sides were "lying bastards" given they took more than they should from individuals through high personal tax rates, and then when elections were close they would claim they were offering tax cuts, when in fact they were simply giving back what they took.

Director of the Centre for Transformative Innovation at Swinburne University, Beth Webster, told the conference the Turnbull government's innovation plan would be a "feeding frenzy for accountants and tax lawyers", following media commentary that high-income people could try and take advantage of tax breaks under the plan.