When the GFC sent most of the world into an economic tailspin, Wayne Swan broke from the international pack to follow Treasury’s advice to go hard and fast with stimulus. This has been recognised throughout the world as an exemplary move that largely saved Australia from the troubles felt elsewhere. This was effective leadership which has been petulantly and unfairly tarnished by the Coalition.
As we face uncertain times again, our current Treasurer shows no such leadership, no such understanding. Instead, he has a bad case of follow the leader, and I don’t mean Turnbull.
The US and UK are reducing company taxes so we must. Apparently we must do this to “remain competitive”.
Funny – I used to think competition meant the best deal for the consumer but now it means who will give investors the best deal. We compete to make them more profit.
And by investors, I mean foreign investors because, due to our unique imputed dividends system in Australia, cutting company tax will not advantage Australian shareholders, who will have to pay more income tax as a result, but it will send greater profits to foreign shareholders who do not pay tax here.
The theory is that those foreign shareholders will reinvest that greater profit in Australia which will create jobs and growth.
Except, even making that questionable assumption, the modelling shows a paltry return for huge cost.
Treasury’s modelling finds that the cut in company tax would cause real GDP to be 1 per cent higher than otherwise in the “long term” (taken to be about 20 years).
But the level of real GNI (Gross National Income) would be only 0.6 per cent higher than otherwise due to the benefit going largely offshore.
As budget papers routinely predict GNI to rise by about 1.5% a year, this is hardly a blip on the radar.
We are told by Morrison that most of this miniscule increase would go to wage earners. Modelling shows that, after 20 or 25 or 30 years, the level of real after-tax wages will be 0.4 per cent higher than otherwise.
As for job creation, the Treasury modelling finds that the level of employment in 20 or 30 years’ time will be just 0.1 per cent higher than otherwise.
And the price of this me-tooism?
The phase-in will have a cumulative cost to the budget of $48.2 billion over the next decade and, when completed, an ongoing annual cost of $8.3 billion (according to modelling by Independent Economics).
That shortfall in revenue will be paid by those of us who are not companies by cuts in services and welfare payments and bracket creep on our income taxes. The government will cry that funding increases every year – it just doesn’t increase to what was promised in signed agreements with the states to address needs-based funding in education and under-resourced public hospitals. Compensating for inflation and population growth does not equate to increased funding.
And never forget that they are planning on spending $400 billion over the next twenty years on war machinery.
We really need to get rid of this amateur who knows nothing about economics, who cares nothing for long term results, who is totally disinterested in truth, but does a great “Hallelujah Brother Trump – whither thou goest we shall follow,” ably (?) backed up, or perhaps shoved, by Kate Carnelll’s doo wop chorus line.
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