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August 06th 2018 print

Peter Smith

No Hope in a Land of No-hopers

Bill Shorten and his economy-sapping policies are in the wings. The Coalition's leftist-inclined leader is a dud surrounded by wets. The corporate world's chieftains think their job is to promote fashionable social causes rather than profits. Yes, we've got troubles with worse ahead

failure II“Giving business a $65 billion-dollar tax cut means billions of dollars less for services like schools and hospitals.” This is from far-left think tank The Australian Institute. It could equally be from Bill Shorten or from GetUp! or the Greens or parroted by the ABC or Fairfax Media. It’s complete tripe of course. But when your whole politically philosophy is delusional it is not surprising that you spew tripe. In fact, it’s hard to see how you could spew anything else.

Leftists are preoccupied with the stock of material wealth that they see around them. They do not understand the flow which built the stock or the flow which will grow the stock. They are cargo cultists. They think material wealth will magically appear to fund schools and hospitals. If you think like this, cuts to company taxes are a give-away to the “big end of town.” Ignoring the silliness of mislabelling millions of mum and dad shareholders as the big end of town, the catchcry is flawed at its core

The proposition is simple enough. Simple enough that the Labor Party saw sense in it only a few short years ago. “Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages,” Mr Shorten told Parliament in August, 2011. He was right then and is wrong now. Then Shorten applied economics and common sense. Now he is applying sophistry and opportunism, whatever the cost to the nation, to get himself and his party into power.

In today’s interconnected world companies choose where they do business. The choice isn’t unconstrained of course. Coal can’t be mined unless it’s in the ground. However, there is a wide menu of choice facing global companies. Hence the worldwide competitive trend to lower company taxes. There is nothing mysterious here. It’s not quantum mechanics. At the margin, lower taxes attract capital investment. Higher taxes deter investment.

This isn’t a case where you employ simplistic computer models to try to guess how much investment lower company taxes will generate. Or how much lost taxation revenue will eventually be made up as a result of increased economic activity. Leave that forlorn exercise to Treasury boffins. There is only one option. It is simply not safe to sit and do nothing while America and others bring their company taxation rates well below ours.

Enter Tony Abbot from stage left. He thinks that the government should back off cuts to company taxes. He argues that voters appreciate the direct benefits of personal tax cut as against the indirect benefits of reductions in business taxes. For me this could be a tipping point in my support for Abbott. It took me a while to get over his first budget. The Medicare charge and the policy to reduce the standard of living of aged pensioners by altering indexation arrangements were unconscionable and politically inept beyond words.

Nevertheless, being on the backbench seemed salutary. His revised thinking on climate change and on immigration provides the key to the only formula likely to get the Coalition back into office. Imagine, if you will, the Coalition fighting the next election on policies of issuing tenders to build several new ‘clean’ efficient coal-power stations and of embracing ‘clean’ nuclear power. And of cutting Australia’s immigration intake in half to bring it back to Howard-era levels. Now you have to really use your imagination. Imagine the Coalition had a leader who could sell it. Potentially Abbot could. But the policy has to be all about power prices, and jobs and wages for Australian workers. Lower company taxes are all about jobs and wages. Abbott squibs it at the finally hurdle.

“Coal, nuclear, lower immigration and lower company taxes = lower power prices, more jobs and higher wages.” That works for me as a slogan and would work, I suggest, for those conservative voters who have deserted the Coalition. A necessary adjunct would be to put Scott Morrison and Simon Birmingham in positions where they could do less damage. Maybe the Liberals need a ring-in from the corporate world to head them up, à la Trump, to put Australia first. He could be drafted into the safe seat of North Sydney; my electorate. I am sure Trent Zimmerman could be persuaded to step aside with the advantage of being no loss to any conservative party.

Of course, this is all fanciful, if for no other reason that it would be hard these days to find a business leader with conservative credentials worth squat – think Gonsky. I saw Wesfarmers chief executive in the paper the other day backing the current level of immigration. I can only assume that Mr Scott has a model in his study which spews out the ideal level of immigration, which just coincidentally matches the current experience. Wouldn’t you think, if you were heading a company which recently made a disastrous foray into the UK – which blind Freddy could have seen wouldn’t work – and has got itself into a plastic-bag imbroglio, that you would stick to your knitting. Ditto for BHP and bank executives and others who have presided over corporate stuff-ups in recent years.

The outlook is bleak. Armed with economy-sapping policies, Bill Shorten is in the wings and in the ascendant. The Coalition is led by a feeble, uninspiring, leftist-inclined leader surrounded by a large coterie of wets. The corporate world is dominated by globalists-cum-post-modernists, who think their job is to promote fashionable social causes rather than earn profits. OK, that is the problem laid out. Or at least part of it. I haven’t even mentioned trade unions turning into job-killing greenies or the likelihood of the boat trade starting up again once Labor is ensconced in government. Now to the solution?!?!?!?

Peter Smith, a frequent Quadrant Online contributor, is the author of Bad Economics

Comments [6]

  1. pgang says:

    “The corporate world is dominated by globalists-cum-post-modernists, who think their job is to promote fashionable social causes rather than earn profits.”

    Not quite accurate. Profit is still very important to corporations, but to be successful in a corporation means that you have to be of a corporate disposition. That means being willing and able to engage in the cognitive dissonance required to ‘champion’ whatever corporate meme is thrown at you in any given situation. People who climb the ladder are those who can smile and nod and insist that black is white, if that’s what they are told to say. The rest fall away in despair, sooner or later. Thus our corporate leaders are steeped in, swimming in, drowning in, soaking in a world of PC against which they have developed no defence whatsoever, and are incapable of disseminating logically.

    I don’t know why Trump is an exception, but there is nothing like his type on this island.

  2. Eeyore says:

    I don’t see a solution short of accepting electricity Bill for a term, what a disaster that would be. The Philippines as a remote work location looks promising.
    During my test phase, I met any number of people and families who have opted out of AU.
    They are not blue-collar workers or unemployed making these decisions by and large but people shutting up shop here and moving elsewhere, they are “the productive”, the ones taxed and taxed again.
    All the while listening to the Marxists tell them they are greedy grasping for a better life thru hard work and investment.

    • Jody says:

      I’m terribly worried about 2 things; open borders (read Douglas Murray) and inability to get Franking Credits for super fund. We will be $15,000pa worse off with retirement income (that includes the cost of auditing super fund which currently comes out of dividend imputation credits). Otherwise, I don’t care about the ruined economy and energy – there will be energy rich/energy poor and massive taxpayer subsidization. I’ll be dead and buried when these chickens come home to roost. Oh, and we’ll get indigenous parallel government. People are asleep at the wheel and just don’t care. They will wake up when interest rates explode and they cannot afford power bills. Watch out for the screaming and outrage!!

  3. talldad says:

    His [Tony Abbott's] revised thinking on climate change and on immigration provides the key to the only formula likely to get the Coalition back into office.

    I suggest “revised” should read “revived” on climate change and “realised” or similar on immigration. Mr Abbott was previously sceptical about the “climate change” boondoggle until his wet colleagues dissuaded him therefrom.

    His successful policy to stop the boats was only partly thought through: he had reached the point of saying “Australia will decide who gets to come here” but had not applied that to the rest of the legitimate migration program/s.

    Sadly, the present PM and Deputy PM have not a clue about what you are presenting here.

  4. Bran Dee says:

    There are several problems with taking the company tax cuts to an election again. The senate has not endorsed them and may continue in obstinacy. Also the cuts do not apply for a number of years so why lose skin now rather than later at a more propitious time.

    Finally, the counter attack during an election would be effectively mounted by a cunning and dishonest opposition and the weak bumbling salespeople for the government would not prevail to carry public opinion.

  5. LBLoveday says:

    The Medicare charge …. were unconscionable …”.

    I and everyone, admittedly not many, I discussed it with thought that $7 per visit, capped at $70 per year, which relatively few would incur, was a good idea, not just for the relatively piddling amount of money it would cost individual citizens (max of $1.35 per week!) but the more substantial amount it would save taxpayers as a whole (ok, theoretically – the government would likely find something to waste it on rather than pay down the debt) by cutting back on excessive servicing – by making people think before going to a doctor to have a splinter removed, because they’ve felt a little off-colour or have a sniffle, or for no good reason at all; friends reckon a visit to the doctor is like a social occasion for some, particularly elderly, people.