Labor has warned the government against using the Covid-19 crisis to bring in “ideological” economic reforms, such as a company tax cut, which it says are not based in evidence and won’t lead to economic growth.
Scott Morrison and his finance team, including Josh Frydenberg and Mathias Cormann, have laid out an “everything is on the table” approach, outside of tax increases, with Morrison declaring “fresh eyes” will be needed to weather the incoming economic storms.
That has placed the abandoned company tax cuts back on the agenda, with many in the Coalition hopeful the government will now have the support needed to enact a key policy it was forced to abandon after failing to win over the Senate crossbench.
Speaking to the ABC on Sunday, Labor’s Kristina Keneally maintained opposition to company tax cuts, reiterating there was no evidence a lower tax rate for big business would lead to economic growth.
She said Labor’s position was not based on ideology.
“It’s based on economics, on evidence and on the cost of the thing. If there was evidence that cutting the company tax rate in any country in the world has led to economic growth, you can be sure the government would have been trumpeting it from the rooftops last year when they were trying to get it through the Senate.
“We know that a company tax rate is more likely to see the benefits go overseas in the form of share buybacks, increased dividends and executive salaries. There are better ways to support business, such as an investment allowance, and we encourage the government to look at that.”
A recent survey by The Australia Institute found a majority of Australians believe the company tax rate should remain where it is, or increase.
The poll, which questioned 1,020 people across Australia on 23 April, and carries a margin of error of 3.1%, found 59% of respondents believed the company tax, which for big businesses sits at 30%, should remain the same.
The institute’s executive director, Ben Oquist, said the wider economic benefits of dropping the tax rate for large companies were scarce, with businesses traditionally preferring to put any savings into dividends, rather than increased workforces.
“At a time when the economy will need aggregate demand support, company tax cuts for big business will deliver little more than windfall gains for already profitable enterprises,” he said.
“In fact, Australia’s dividend imputation regime means Australia’s effective company tax rate is already much lower than 30%.”
Last week, the governor of the Reserve Bank of Australia, Philip Lowe, estimated Australia’s jobless rate would double to 10% by June, and could expect to hover above 6% for the foreseeable future.
The International Monetary Fund also predicted a shrinking job market for Australia, as the “Great Lockdown” ushered in one of the greatest threats to economies across the globe since the 1930s.
The grim predictions have dimmed government declarations of an economic “snap back” in six months time, when many of the $230bn worth of measures it has put in place to keep the economy afloat, including wage subsidies and increased social security payments, are set to expire.
Keneally said Labor would be pushing for the government to “come to the table, not with ideological positions but with an open mind”.
“With solutions that fit the unprecedented challenges that we are facing,” she said, adding that the opposition would view any option put forward with the same open mind.
However, industrial relations reform would be a stumbling block, with Labor already warning the government against using the Covid-19 crisis as an opportunity to usher in industrial reforms it had previously failed to achieve.
“When it comes to industrial relations, let’s remember that the Australian economy was not a great place for the Australian worker prior to Covid-19,” Keneally said.
“There was rampant wage theft, there was stagnant wages, there was increasing casualisation and gig work, there were rising prices.
“The Australian government should not come into this reform process with old ideological anti-worker, anti-union agendas. They should see the unions, they should see working people, as their partners, as they did with jobkeeper. We’ve got that direct wage subsidy for many workers now, because the government, rightly, did not view the unions as their enemy but rather their collaborator and their partner.”
Parliament will resume sitting on 12 May.
