The Business Council of Australia (BCA) has launched a stinging attack on Labor’s opposition to a company tax cut, labelling it as a “dangerous” attack on the economy. From The Guardian:
The chief executive of the Business Council of Australia, Jennifer Westacott, says she is “gobsmacked” by Labor’s election campaign, describing it as anti-business and dangerous…
“It’s gobsmacking, it’s very dangerous … for our reputation and it’s dangerous to set us on the course that we are not going to improve our competitiveness,” Westacott told Sky News on Sunday.
Westacott said anyone who is anti-business is against the 10m people who work in business and against the ability to create jobs.
“I think people are bewildered by this attack,” she said. “How are we going to grow our economy when 80% of our economic output is dependent on business?”
Westacott conveniently fails to mention that Labor would use the savings from not cutting company taxes to spend an additional $37.4 billion on schools funding over the coming decade. And this would boost people’s skills and the future productivity of the workforce, which would also benefit business.
As correctly noted by the Kouk:
The election debate is framed as tax cuts being good for business, which of course is true. They will pay less tax on a given profit level and the cuts are simply a transfer of tax revenue to shareholders at a cost to the budget bottom line. Treasury modelling suggests GDP growth will be 0.1% higher as a result of these cuts, which means an almost zero impact on employment.
What is ignored is the business benefit of Labor’s plan to build a better educated and more highly skilled workforce. We would be less likely to see a repeat of the skills shortage that dogged the economy from 2005 to 2008 if workers had more skills and were better educated. Higher skills also equate to higher incomes and productivity. The OECD calculates that a fully educated workforce in Australia would add 2.8% to GDP over the medium term.
Suffice to say, both sides of politics realise that the private sector is vital for economic and productivity growth.
We also shouldn’t forget that a company tax cut could end up lowering national income, which is the far better measure of living standards than GDP (see below chart of modelling from Victoria University senior research fellow, Janine Dixon):
This is because cutting company taxes would primarily benefit foreign owners/shareholders at the expense of Australian taxpayers (who would receive a corresponding fall in franking credits), hence lowering national income.
By contrast, Labor’s plan to raise education spending would benefit the domestic population. The money would be spent here and would not leak offshore, which comes on top of the greater long-run benefits to growth from increased productivity.
In short, Labor’s education boost wins hands down over the Coalition’s giveaway to foreign owners/shareholders.
