Date claimers, and Bill Shorten’s budget for travel agents
Dear ,
Before making some brief comments on Bill Shorten’s Budget Reply Speech, which you can read on our site by clicking here, I just want to let you know of a few dates.
First is June 9, when we will be hosting a function with Hon Mark Latham as the guest speaker. Details to be advised shortly, but this will be a Friday evening function with finger food and drink included, and a price tag for non-members around $60, with member and student discounts.
If you’re in Sydney on Wednesday May 24 you might like to attend the Quadrant Constitutional Convention and Dinner, which stars AIP Associate Executive Director, Gary Johns. Starts at 6:00 pm at the Union, University and Schools Club. For details, click here.
This Wednesday, you may care to come along to the Brisbane Powerhouse at 6:00 pm where I will be on a panel discussing the pros and cons of the Universal Basic Income. Other panellists include Professors Gregory Marston and John Quiggin from UQ, Rachel Watson from Wesley Mission Brisbane and Dominque Lamb from the National Retail Association. The discussion will be broadcast by Radio National at a later date. It’s convened by the New Farm Community Centre, and others, and is free. Details are on Facebook.
And now to the Budget Reply Speech.
The first thing I notice is how deeply dishonest it is. And that is not an accusation I make lightly. Bill Shorten continually refers to government cuts to various services, such as education, and repeats the Mediscare claim, even though Labor operatives admit it was manufactured. No journalist should allow him to get away with this at any media conference.
On Planet Shorten a “cut” is the difference between what he promises to spend, and what the government has budgeted to spend. On Planet Earth, this government hasn’t cut anything, and has increased spending on almost everything in real terms – that is the problem.
Which leads to the second thing. Labor has no apparent plan for how it is going to fund the additional money it is promising.
All we know about taxation is that it wants to retain the Budget Repair Levy, and only apply the additional 0.5% Medicare Levy to those earning more than $80,000.
And there is a vague policy to clamp down on tax avoidance by individuals and multi-nationals. As the government has just passed the Diverted Profits Tax package, designed to crack down on multi-national tax avoidance, and predicted to raise just $100 million, it is unclear why Labor thinks this will solve their funding problems.
They also claim that changes to negative gearing will raise money, and make houses more affordable. But we know from our own modelling that these gains are overstated. And they will have a negative effect on the housing market, and negligible effect on housing affordability.
But where the Opposition Leader really pulls up short is in this part of his speech:
The budget fails the test of the fairness, but it fails the future too. Bob Hawke and Paul Keating changed Australia from industrial museum to a modern, outward looking, competitive economy. Australia cannot live off their legacy forever.
And he’s right, but his own speech fails that test even more. Not only is he trashing their legacy (don’t just take my word for it, check out Paul Keating’s own view), but Australia exists in a competitive and mobile world. Capital and workers move to where they get the best after-tax returns. By opposing the government’s company tax cuts and proposing to increase taxes on the moderately well-off even more, he is repelling both capital and workers.
Company tax is a tax on national savings. Companies don’t lavish money on themselves. When they pay less tax they will do one or more of three things: invest more, pay higher dividends, or pay higher wages. And the larger companies are the basis for most of our retirement planning, through superannuation funds. So lower company taxes are good for the companies and those of us (all of us) who rely on them for national wealth. We'll earn more through higher wages or dividends, on an expanded capital base, and pay more gross tax, but at the same rate in the dollar, because the pie will be larger.
Lower company taxes will also make Australia more attractive as a destination to do business, particularly for those companies whose business model involves growth.
With overseas countries lowering their company taxes, we can’t afford to be going in the opposite direction. Home grown high growth companies will base themselves outside Australia where they can retain more of their profits for investment. And overseas companies will have less interest in establishing subsidiaries here.
As for wage earners, the top rate cuts in at $180,000. These are the very workers that create and work for high growth companies. But if they can move to countries with a less punitive personal tax structure, some of them will. Particularly as some of these countries, like the USA, have more excitement and opportunity than Australia.
Although I guess, from Bill’s point of view, if you keep taxing the upper-middle class to bribe less well-off voters, the upper-middle will take all the competition and excitement out of the country, making it poorer, and encouraging less well-off voters even more to vote for someone promising to pay their costs with someone else’s income.
We need to be growing the pudding, not “coming and cutting again”, believing it will just magically grow back.
So, in summary, the major beneficiaries of Bill’s policies are likely to be travel agents, arranging for the best and the brightest to find somewhere more salubrious to work. The rest of us can look forward to a less dynamic, less exciting, poorer future if this budget reply speech was ever to find its way into legislation.
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Regards
Graham Young Executive Director Australian Institute for Progress
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