Don’t give in to tax cuts, Pauline, not unless…

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Via the AFR:

Senators Pauline Hanson and Derryn Hinch say they will support the company tax cuts if they can be assured it will lead to increased wages, boosting hopes inside government it will win Senate backing for the remainder of its package by Easter.

Senator Hinch wants a legislated or contractual guarantee on wages whereas Senator Hanson says that is unrealistic and she would be content for assurances from big business.

…With three votes already in the bag, the support of Senator Hanson’s One Nation and Senator Hinch would add another four, taking the total to seven.

The two Nick Xenophon Team senators remain opposed, meaning the government needs the support of the two Senate newcomers, independents Tim Storer and Steve Martin.

Via The Australian:

Senator Hanson and key ­adviser James Ashby met Senator Cormann on Monday to discuss the bill, raising the need for the government to fast-track gas ­development on the North West Shelf to help lower gas prices for households.

“I’m talking to the government about it. I’m actually seeing what is happening in America,” Senator Hanson told Sky News.

“In America … a lot of the companies now are actually starting to employ more people.”

Senator Hanson, who recently travelled to Western Australia to meet with Fortescue and Woodside, said she was not across the line yet but “I’m not going to do anything that will jeopardise ­investment in the country”.

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More west coast gas investment will do nothing for household gas prices. For that, we need domestic reservation on the east coast but Pauline will be told it will cost jobs in her central QLD heartland, which is balderdash of course.

Moreover, corporate tax cuts will not raise wages. Australia’s wage problems are the result of overcapacity driven by:

  • the income shock derived from the terms of trade correction which has further yet to run;
  • mass immigration into a labour glut;
  • the gig economy, and
  • weaker unions.
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Don’t give in to tax cuts, Pauline, not without extracting a promise that addresses at least one of the above points. Given you can’t do anything about the terms of trade, gig economy nor unions, demand a halving of the permanent migrant intake in return for your support on tax cuts.

That will ensure higher than otherwise wages even as business competitiveness improves.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.