So close to a breakthrough Australia needs to prosper

March 23, 2018

That is the title of an editorial piece in today’s The Australian newspaper which insists the passage of the federal government's  $35.6 billion company tax cuts must succeed — to stimulate wages growth, maintain jobs growth and strengthen GDP.

Australian Conservatives leader and South Australian Senator Cory Bernardi is an ardent supporter of the bill because, among other things, profitable companies make for prosperous workers and prosperous mum-and-dad shareholders and superannuants.

In his sterling efforts to coax sceptical crossbench senators across the line, Finance Minister Mathias Cormann has emerged as the Coalition’s most effective and patient negotiator. In his third or fourth language, he makes complex economic concepts clearer to the public and crossbenchers than his colleagues.

Crossbenchers Fraser Anning, David Leyonhjelm, Steve Martin and Pauline Hanson’s three-member team are seeing sense, supporting a measure that would stand the economy in good stead for decades.

The government is now close to passing the bill, held up by Derryn Hinch’s moronic insistence the big four banks be excluded from the tax cut. That absurd idea shows how little Senator Hinch understands about the economy.

The banks have already been hit with a levy, introduced by the government last year, to raise $6 billion over four years. In 2017, the industry paid nearly $14 billion in tax.

Strong banks, owned by shareholders, are vital to the backbone of a strong economy, a bulwark for the nation in crises such as the GFC.

For the good of workers, shareholders, retirees and future generations, and his own credibility, Senator Hinch must rethink.

However capricious, the crossbenchers, encouraged by Senator Cormann, have shown greater economic responsibility than the reprobate opposition and the Greens.

Bill Shorten, egged on by his union overlords such as ACTU secretary Sally McManus, would force Australian companies to compete at a big disadvantage against overseas companies already paying lower taxes than the new rates to be introduced here.

Over 10 years, these would cut company tax from 30 to 25 per cent.

After sometimes being too reticent in economic debates, Australia’s biggest employers, such as Wesfarmers, Woolworths, Qantas and BHP, have put a strong case through the Business Council of Australia. Business leaders have done well to lobby senators directly. Senator Hanson, for example, found the assurances of Fortescue Metals chairman Andrew Forrest, that he would reinvest every dollar saved from tax cuts in job creation and expanding his operations, most helpful.

Assuming the legislation is passed, the opposition, in a shameless act that almost defies credulity, is considering going to the next election pledging to tear up the tax cuts for big business.

This would amount to a treasonous attack on Australian business that would benefit businesses in competing nations, to the detriment of investment, jobs and wages growth here. The revenue saved, earmarked to fund even more runaway social spending, would ultimately undermine Australians’ best interests, reinforcing a cradle-to-grave dependency on government.

The battlelines are drawn. The next election is shaping as a contest between a responsible economic growth agenda — still with a vast and generous social security net — and Labor’s commitment to dead-handed redistribution and centralisation.

This was exemplified on Wednesday by Ms McManus’s demands for the overhaul of what she now calls the “unfair’’ Fair Work Commission (created by Labor) and sweeping changes to enterprise bargaining.

The commission, she told the National Press Club, was “stacked’’ with pro-business people and “wage theft’’ was rife. Labor is dancing to the ACTU’s tune, with employment spokesman Brendan O’Connor promising “fairness” by redressing workers’ “declining bargaining power’’ and “insecure work’’.

Ms McManus claimed, erroneously, that the new jobs being created are “almost entirely part-time or casual’’.

BS labour market figures tell a different story. In February, full-time jobs surged by 65,000. Of 403,000 jobs created last year, three-quarters were full-time.

As Judith Sloan, a former productivity commissioner, wrote yesterday, casual employment makes up a fifth of total employment and the proportion has not changed in 20 years.

Casual workers are paid a 25 per cent premium to compensate for lack of paid leave, a bonus almost unknown overseas. Nor, as Sloan wrote, are big businesses, which offer higher wages and conditions, the enemy of trade unions.

That is especially true of major retailers that have reached mutually beneficial agreements with unions, and mining companies dealing with unions such as the Australian Workers Union.

Fuzzy notions of redistribution will not help workers, Labor’s traditional base. Company tax cuts will. Higher wages come from higher productivity, capital investment and better profits.

The long overdue tax cuts will lead to a bigger pie. As Milton Friedman wrote decades ago, a bigger economic pie means “more for the worker ... more for the employer, the investor, the consumer, and even the tax collector’’.

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