Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Monday, 12 February 2018
Our economic mission is to secure more jobs and higher wages so that families around Australia today and in the future have the best possible opportunity to get ahead.
Jobs and higher wages don’t grow on trees. They are created and paid for by successful profitable businesses.
About nine out of ten working Australians work for a private sector business.
Their future job security, career prospects and wage increases depend on the future success and profitability of the businesses that employ them.
That is why the Turnbull Government is so focused on making sure that our public policy settings help business be more successful – so they can hire more Australians and pay them better wages.
That is also why we are so committed to press ahead with the next phase of our plan to reduce the tax rate for all Australian businesses to 25 per cent.
Australia is an open trading economy successfully competing with the rest of the world. The foundation for our more than 26 years of continued growth are the economic reforms of the Hawke, Keating and Howard governments, as well as the further reforms we have pursued in more recent years.
All these reforms have one broad thing in common - to open up our economy to the world, while making sure we are and can remain genuinely globally competitive.
This has made us stronger and more resilient, lifted our living standards and improved our capacity to sustainably fund the level of social, health and other public services we have come to expect and want to preserve for our children and grandchildren.
Our ambitious free trade agenda for example is all about helping our exporting businesses sell more Australian products and services around the world. Selling more products and services means those businesses can hire more Australians and pay better wages. It also helps ensure Australian consumers can benefit from access to valued products and services from around the world at globally competitive prices.
Opening up our economy to global competition, while it can be uncomfortable at times, has been a key driver of a substantial lift in our prosperity, living standards and opportunity for decades.
Periods of lower global growth as experienced in recent years or periods of rapid innovation, force us to adapt quickly to remain competitive in a global market. The alternative is to be left behind.
Being engaged in global competition also means that our business tax policy settings need to constantly remain under review.
Our business tax rate used to be globally competitive. Not anymore. At 30 per cent, our business tax rate is now one of the highest in the world. Nearly all of the countries we directly compete with have substantially lower business tax rates. The US has locked in a rate of 21 per cent with an immediate and dramatic effect to boost investment, growth and wages in the US. The UK already reduced their business tax rate to 19 per cent and is moving down further to 17 per cent by 2020. Even France, under President Macron, is moving to reduce their business tax rate from 33 per cent to 25 per cent by 2022. Macron was the Minister for the Economy in the most recent socialist administration of France. He is hardly a right wing ‘trickle-down-economics’ ideologue.
Reducing our business tax rate is even more important now than it was at the last election. Back then our business tax rate was still lower than in the US. At the next election, if we didn’t reduce our business tax rate, it would be 9 per cent higher.
If we don’t reduce our business tax rate for all businesses, not just some, to 25 per cent, we will lose investment to other parts of the world. We will miss out on growth. Our businesses will be less successful, which means they will necessarily hire fewer Australians and only pay them lower wages.
More successful businesses creating more jobs are what we want, because it also means stronger competition for Australian workers, forcing business to pay more to secure their services.
Global growth is picking up, partly because of the Trump tax cuts legislated by the US Congress. We need Australian business to be able to keep up with their competition around the world.
We already legislated tax cuts to 25 per cent for small and medium sized businesses (with a turnover of up to $50 million). This implemented the first three years of our 10 year enterprise tax plan to 30 June 2019.
We can’t stop here. All our businesses need to be able to be competitive. Holding bigger businesses back is bad not just for their employees, but also those working for smaller and medium sized businesses selling their products and services to those businesses or their workers. It would also be economically damaging to effectively entrench a tax incentive for business to be smaller by limiting lower taxes to them rather than to encourage businesses to keep growing.
4,500 Australian businesses have a turnover above $50 million a year, employing about 4 million people. Legislating the remaining 7 years of our enterprise tax plan now would give those bigger businesses the certainty they need to make investment decisions for the future now, in the knowledge that they will benefit from a lower business tax rate down the track.
Bill Shorten knows that a more competitive business tax rate for all businesses is important. He has made that argument many times before. He is not opposing business tax cuts because he believes they are bad policy. He is opposing them because he has made a cynical judgement that holding Australia back is in his own political interest. He would rather have fewer jobs and lower wages now to help him coast into office on what he hopes will be the wave of public discontent it would generate. It is a highly reckless, irresponsible and self-serving choice, which is yet another demonstration that he lacks the character and integrity to be Prime Minister of Australia.
The Turnbull government wants to deliver more jobs and higher wages. In opposing business tax cuts, Bill Shorten is deliberately standing in the way.
This is an opinion piece published in The Australian on 12 February 2018.
Karen Wu - 0428 350 139