You’ve gotta wonder about the intellect of Australia’s real estate Treasurer, Scott Morrison.
For more than a year, Morrison has warned about Australia’s budget emergency, which has recently placed at risk Australia’s AAA sovereign rating. His key response to this threat: to push the Government’s $48.7 billion company tax cut, which would see the corporate tax rate fall from 30% to 25% by 2026-27.
Yesterday, Australia’s Q3 GDP fell by 0.5% and what was Scott Morrison’s response: to cut company taxes. From The AFR:
Treasurer Scott Morrison said the fall was “not just a reminder, not just a wake-up call or a warning about being complacent when it comes to economic growth and the need to boost incentives to investment, such as through corporate tax cuts.
“It is a demand to support economic policies that drive the investment needed to support job security, the hours and wages that hard-working Australians need to deal with rising costs of living, especially on electricity costs, and that businesses need to survive in a tough and competitive environment,” Mr Morrison told reporters in Canberra.
“We’re looking for partners in this parliament who want to go on that journey with us so we can set up the next 25 years of growth, and today’s data says it’s time to join the national economic plan for jobs and growth.”
I have explained numerous times why the Coalition’s company tax cut policy is plain stupid, namely:
- most of the benefits would flow offshore;
- national income would be reduced;
- the Budget would lose revenue, resulting in tax rises or expenditure cuts elsewhere (lowering jobs and growth); and
- Treasury’s own modelling showed almost no benefits to jobs and growth.
Sadly, while Morrison focuses all of his effort in pushing the company tax cut, many worthy reforms continue to go begging.
Let’s recall that Morrison has categorically ruled-out reforms to negative gearing and capital gains taxes, despite the fact that these would actually raise Budget revenue, reduce growth in household debt and land/house prices, lower the dollar, as well as lower the nation’s over-investment in non-productive housing.
Morrison has also ruled-out providing incentive payments to the states to encourage them to undertake competition reforms as identified under the Harper competition policy review. Why? because the Federal Budget cannot afford it, even though it can somehow afford tens-of-billions of dollars of company tax cuts.
Morrison also supports the states swapping stamp duties for a land tax on residential property, noting that it would improve efficiency and housing affordability. But yet again, Morrison has refused to provide the states with incentive payments to ensure that reform gets done.
Let’s also recall that Scott Morrison is also a strong supporter of mass immigration, which has lead to strong inflows of new residents into Australia’s cities (especially Sydney and Melbourne), causing all kinds of problems such as productivity-sapping congestion. And yet the federal government – which receives the bulk of Australian tax revenues – refuses to provide the states with the necessary funding to cope with said growth.
To a hammer like Morrison, everything looks like a nail. And that nail is the company tax cut, which is Morrison’s one and only “big” reform initiative. In the word’s of Peter Costello:
“…whoopee do. Good luck to you. What else is there?..
This has got to be funded. It has got to be balanced. It has got to be part of an overall sweep. You can’t just say, ‘Oh, I’ll do that,’ and that’s sufficient”.
If only Morrison would take his blinkers off, he would see that there’s a world of potential reform possibilities out there that would deliver far bigger economic and social returns at lower cost than his daft plan to cut company taxes.
