Yesterday, Australia’s fake Treasurer, Scott Morrison, told us to ignore modelling on the company tax cut and instead go with ‘the vibe’:
Federal Treasurer Scott Morrison has declined to detail the economic modelling of his Government’s company tax cuts because he says it does not matter to people in the pub…
“If you go down to the pub and talk to small business people, they’re not talking about econometric models,” he said.
“The Government doesn’t need to be convinced about the need to give small and medium-sized businesses a tax cut.
“The Turnbull Government knows how business works, we focus on the things we know make a difference because of our life experience and our background in business”…
Now, preliminary estimates from the Grattan Institute have revealed that the “$24 billion” package passed by the Senate – which will grant tax relief to companies with turnovers of $50 million or less – could raise GDP and national income by a mere 0.2% over the next decade. From The Brisbane Times:
The Grattan Institute’s productivity growth program director, Jim Minifie, told Fairfax Media that according to his preliminary analysis “it is reasonable to expect that GDP and national income would rise by 0.2 per cent over the next decade or so as a result of this package.
“That translates into an increase of up to $3 billion in national income each year by the time the full effect has come in over the next decade. And unlike in the case of the full business tax cut package, more of these benefits are returned to Australians rather than in part going to foreign shareholders”…
Victoria University economist Janine Dixon said the total impact of the revised cuts would be “pretty small”.
“The majority of what you think of as typically small business – your local accountants, solicitor, grocery store – they pay at their personal tax rate,” she said.
Dr Dixon said the company tax cuts are only going to make a difference to people who actually pay company tax, mostly foreign investors and people whose personal tax rate is above the company tax rate.
Let’s think about this for a second. According to the national accounts published by the ABS, Australia’s quarterly growth in real GDP has averaged 0.9% since 1959. Thus, the centre piece of the Turnbull Government’s ‘growth and jobs’ agenda – cutting company taxes – would deliver the equivalent of 20 days of average GDP growth in a decade’s time! That’s a rounding error rather than genuine reform.
No wonder Fairfax’s Ross Gittins laments that Australia is in the era of “fake government” – where politicians care only about giving the impression of reform, rather than actually doing anything.
