By their own admission, Coalition politicians don’t bother reading reports to inform their opinion before they shoot their mouths off – Abbott with the BHP Olympic Dam report, Pyne with the original Gonski report, MacDonald with the Forgotten Children report, Kelly with the Finkel report – they have their ingrained ideological views that will not be swayed by expert analysis of the facts.
It seems they also don’t pay attention to the conclusions in their own budget statements.
The 2014-15 budget reported that investment by non‑resources businesses remained subdued despite low interest rates and high business confidence.
“This is consistent with reports from Treasury’s business liaison which suggests firms are reluctant to invest until they have a clearer sense that demand is improving.”
Moving on to the 2017-18 budget, the problem remains the same.
“the subdued recovery in non-mining business investment in Australia remains something of a puzzle, as supportive conditions have been in place for some time. Business borrowing costs are near record lows, business confidence is solid and capacity utilisation in the non-mining sector is above its long-run average.”
Even though there has been stronger growth in dwelling investment, it “is more than offset by softer than expected household consumption.”
Very slow wage growth is mentioned several times as being a drag on the economy.
“Aggregate wages growth remains low by historical standards — a phenomenon present in many advanced economies — and is anticipated to be lower in each year from 2016-17 to 2019-20 than expected at the 2016-17 MYEFO. The slowdown in wage growth has been widespread across industries and States. Wages growth is expected to improve as domestic demand strengthens but the outlook for wage growth remains subdued in the near term.”
Company profits, however, are on the rise.
“Corporate profitability is expected to improve, lifting expected receipts from company tax from 2017-18. However, aggregate wages growth is expected to be weaker, resulting in downward revisions to receipts from personal income tax.”
GST receipts have been revised down due to “lower nominal consumption” and superannuation fund tax has also been revised down “reflecting weaker aggregate wages and weaker-than-expected collections.”
The amount of tax collected each year depends on both the size and composition of national income. Most income is ultimately earned either as wages or business profits. The greater the share of income that comes from company profits compared to wages, the lower the tax revenue because wage earners generally pay a higher rate than companies. Higher wage income also results in higher consumption and superannuation contributions, which are also subject to taxation.
Overall, forecast total tax receipts have been revised up in the five months between last year’s MYEFO and this year’s budget, but only because the government who never raises taxes (if you ignore the GST which was a great big new tax which added 10% to the price of everything) is “increasing the Medicare levy by half a percentage point from 1 July 2019, introducing a major bank levy, improving the integrity of GST on property transactions and introducing a Skilling Australians Fund levy.”
It is screamingly obvious that investment is driven by demand and that consumption is driven by wages but don’t expect this government to act on that. They will continue to attack unions, attack penalty rates, push for more flexible employment (read erosion of workplace benefits and job security), freeze superannuation guarantee increases, reduce welfare payments, and do everything in their power to increase profits for business at the expense of the worker and tax revenue for the country.
Talk about shooting yourself in the foot.
