Scott Morrison’s belief that he will be able to produce a surplus budget by 2020/21 is either a pipe dream or a con-trick. It is simply not achievable.
And, to our collective relief, it is ignorance rather than good management, that will ensure it doesn’t happen. Notwithstanding the fact that a surplus budget is the last thing our economy needs now or then, it is government policy that will stop it from happening.
Morrison thinks giving tax cuts to the private sector will create jobs. It’s called ‘trickle-down theory,’ but like all theories, it will only become fact when proven so. There is a weak link in his theory and it is a vital one. He has no control over what happens to that extra money kept by the private business sector.
Morrison et al, are constantly boasting that they have created a jobs boom when in fact, the jobs created are simply proportionate to the increase in population. They occur naturally.
If there was a real jobs boom, there would not be 700,000 unemployed today, which as it happens, is the same number that were unemployed in September 2013 when this government came to office.
They haven’t created anything, but they will happily take credit for what occurs naturally through immigration.
In the meantime, they are more than happy to maintain a pool of 5% unemployed, which some OECD countries regard as full employment, to keep wages stagnant. But low wage growth restricts a nation’s capacity to grow. It limits workers’ capacity to spend.
So, the question should be asked: why would companies use a tax cut to invest when low wage growth inhibits workers ability to purchase more goods and services? Such investment would be counter-productive. Which begs the next question: what would corporate Australia do with the extra cash?
It might be used to invest and expand, or it might be used for share buy-backs, or just bigger executive bonuses. History, however, tells us that it is bonuses and share buy-backs that usually win out, but history also tells us that one in five companies don’t pay tax.
So, a tax cut offers nothing for them, no reason to invest, no reason to hire. So, the projected surplus in 2020/21 is a myth. Without wage growth which produces higher tax revenues and the promise of higher sales volumes and bigger profits, the only way Morrison could achieve a surplus in 2020/21 is to reduce government spending further.
That too, is counter-productive. When government spends less, one of two things happens. People spend less, or they take on more debt. We are already one of the top three privately indebted countries in the OECD.
The likely outcome is contracted growth, leading to recession. We have been on this path now for five years. It has been delayed because of our large immigration intake including 457 visa holders. It’s not rocket science.
So, when we hear Scott Morrison and Malcolm Turnbull spruiking tax cuts for business, we know it’s not designed for jobs and growth.
Is it possible that they have other reasons for wanting to give business breaks they don’t deserve?