Cognitive dissonance clearly runs riot inside RBA Governor, Phil Lowe’s, head. In his speech last night to global investors attending the A50 Australian Economic Forum in Sydney, Lowe told the audience that Australia has to lower corporate taxes to attract more foreign investment while simultaneously striving to balance the Budget:
The final issue that I will mention this evening is that of ensuring that our public finances are on the right track. Australia has a good historical record here. Net government debt, as a share of GDP, is still low…
Looking forward, we need to make sure that we continue to have this insurance. We can do this by rebuilding our fiscal buffers…
A related complication is that simultaneously we need to make sure that that our tax system is internationally competitive. One example of this complication is in the area of corporate tax, where there is a form of international tax competition going on in an effort to attract foreign investment…
In the same speech, Lowe called on the federal government to boost infrastructure spending to avoid being choked by mass immigration:
A third issue is the task of providing adequate high-quality infrastructure to help our citizens be as productive as they can and enjoy a high quality of life. As I said earlier, our population is growing strongly which is a source of dynamism for our economy. But this growth can put strains on our infrastructure, including on transport infrastructure. These strains can reduce public support for a growing population. They can also impair our ability to compete and to be as productive as we can be. Good transport infrastructure, for example, opens up opportunities for people and opens markets. It also improves communities. Investment in transportation infrastructure can also play an important role in addressing housing affordability, which is an increasingly important issue.
Note to Phil: the Budget is a balancing act. You cannot expect to follow through with the Turnbull Government’s company tax cut plan, costing an estimated $8.2 billion per year, while simultaneously boosting infrastructure spending and balancing the Budget.
Treasurer Scott Morrison has already refused to take advantage of record low interest rates and boost infrastructure spending precisely because the federal budget supposedly cannot afford it. At the same time he has committed to slashing company taxes at huge cost to the Budget.
As a result, the federal government is falling well short on infrastructure spending, which is threatening growth, jobs and living standards.
Given that the Treasury’s own modelling has forecast minimal benefits to either jobs and growth from slashing company taxes, surely the prudent thing to do is to junk the company tax cuts and instead redirect the money that would have been spent into well-targeted infrastructure projects?
Taxpayer money is scarce, Phil, and must be directed into programs that are likely to yield the greatest benefits to the resident population and economy. So why on earth would you support the Coalition’s company tax cut plan which necessarily requires diverting funding from other more worthwhile initiatives?
