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Abbott promises $5 billion company tax cut

Opposition leader Tony Abbott will promise business a 1.5% company tax cut from July 1 2015, at a cost of $5 billion over…

Tony Abbott has promised the Coalition will cut the company tax rate. AAP/Dave Hunt

Opposition leader Tony Abbott will promise business a 1.5% company tax cut from July 1 2015, at a cost of $5 billion over the budget period.

Abbott will say the measure will further help Australian businesses compete, grow and create employment. The present company tax rate is 30%.

“This is a tax cut that will boost jobs and strengthen the economy”, he will say.

The opposition says it will offset the cut with savings. The tax relief will help meet criticism that Abbott’s expensive paid parental leave, financed by a levy on the biggest companies, will add to business costs.

The Coalition has pledged it will scrap the mining and carbon taxes from July next year, assuming it can get the measures through the Senate. The company tax cut repeats a promise the opposition made in 2010.

The Coalition’s policy document quotes former Treasury secretary Ken Henry who said in 2011, “If the company income tax were to be cut, the principal beneficiaries would be workers”.

Abbott will say: “Lowering the company tax rate is part of our plan to build a strong prosperous economy with more investment and more jobs. Our economic plan is: taxes down, productivity up, and growth up.

“Labor has talked and talked about cutting the company tax rate. We will actually do it”.

In fact Labor proposed legislation during the last parliament to cut company tax from 30% to 29%, to be financed out of mining tax revenue, but it abandoned the plan and spent the money elsewhere when the opposition and Greens would not back it.

The opposition also quotes the Henry tax review saying that cutting company tax would ensure the non-resource sectors remained an attractive place to invest. It said the reduction in company tax rate from the late 1980s to 2000 was an important element of policy reforms that had led to strong growth and further cuts “would underpin further growth”.

The Business Council of Australia in its action plan released last week said the government should commit to lower the company tax rate to 25% as a priority when fiscal circumstances permitted.

“This recognises that the growing mobility of investment and increasing sensitivity of capital flows to tax settings have important implications for Australia’s long-term growth prospects”, the BCA said.

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53 Comments sorted by

  1. David Arthur

    resistance gnome

    There could be even bigger cuts to company tax, if

    1) funding unemployment benefits was taken out of general revenue, and instead funded from a tax on business turnover (activity), that was specifically created for the purpose. The object of this tax is to specifically make unemployment an issue for businesses - if they employ more Australians, the rate of unemployment tax goes down.

    This compares to the present situation, where the announcement of layoffs is almost invariably greeted with…

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    1. David Thompson

      Marketing Research

      In reply to David Arthur

      david, good to some lateral thinking about policy, especially how important incentives are. What would do with the current payroll tax regime?

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    2. David Arthur

      resistance gnome

      In reply to David Thompson

      Present payroll taxes are state taxes, among the taxes that the GST was supposed to replace.

      The new payroll tax I propose is a specific-purpose tax that could work like this: if the cost to the public purse of a degree is $90,000, and three years of study is followed by 45 years, say, of work, then the annual payroll fee is $2,000.

      Surely the various Brains Trusts around the country could figure out something like this?

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  2. Peter Ormonde
    Peter Ormonde is a Friend of The Conversation.

    Farmer

    Thank god we haven't hit the fence like the economies of Europe with youth unemployment bouncing around 40%! Can you imagine what the responses would be from these economic illuminati....terrifying really.

    It's one thing to create a sense of economic crisis for political advantage - another thing entirely to confront a real economic collapse where the system is out of control.

    I'm sure that with sufficient enthusiasm, ignorance and commitment to handing out lollies in the midst of this fabricated panic we can manage to bring on a proper crisis all our own in a few years.

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    1. David Thompson

      Marketing Research

      In reply to Peter Ormonde

      It's even more important that we don't let pollies take us down the road that ends in the sewer of Europe.

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    2. Greg Young

      Program Director

      In reply to David Thompson

      One of the major causes of the Greek collapse was the extreme reluctance of the Greeks to pay tax. Giving people tax cuts all the time without funding your spending promises is going down the road you mention.

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    3. Judith Olney

      Ms

      In reply to Peter Ormonde

      If you are unemployed Peter, you are already in crisis. As unemployment rises in this country, this crisis will grow.

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    4. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Judith Olney

      You bet Ms O ... didn't mean to suggest that the 5-6% currently acting as a dampner on wages pressure (the unemployed) are not in a personal crisis... this is a failure of the system ...but even this personal crisis is still a long way from the actual economic collapse that sees whole towns and whole generations condemned to life on the economic and social fringes as is happening in Europe and I should add in parts of rural Australia.

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    5. Judith Olney

      Ms

      In reply to Peter Ormonde

      I wonder how long it will be before we see the economic collapse in Australia, I don't think we dodged a bullet with the GFC in this country, I think there has simply been a delay, and no politician is going to be able to stop what's coming, no matter how much they are trying to deny reality.

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    6. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Judith Olney

      Oh no Ms O ... somehow we've managed to put the GFC on tick... put it on hire purchase or layby somewhere ... but somewhere out there sloshing around in the world economy in the banks and super funds and investment houses - is a several trillion dollop of indigestible, worthless bad debt - the propped-up values of our CDOs and sub-prime lending and the towering financial arrangements built on them. No one's exactly sure how much there is,who holds it or how it is to be absorbed. The US Government has started buying it.... thank you taxpayers.

      Here's an article you might like - particularly the stuff towards the end about jobless recoveries and the inevitability of financial speculative bubbles and fraud. http://www.levyinstitute.org/pubs/wp_681.pdf Tops really.

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    7. Judith Olney

      Ms

      In reply to Peter Ormonde

      Excellent link, thanks Peter.

      <"somehow we've managed to put the GFC on tick... put it on hire purchase or layby somewhere"> hhmmm, dunno about that, why aren't lower interest rates working? why aren't people ssspppeeennndinggg? Why is manufacturing faultering? Why aren't people leaping into the bloated property market? Why if we have one of the strongest economies in the world, are all these things NOT happening? Why is everyone I speak to soooo scared?

      I'm no economist, not by a long shot, but I do know how to read a 'vibe', and the 'vibe' ain't good.

      Some may put this down to pollies trash talking the economy, then offering their stupid 'solutions', which of course I mean the Abbott and Hockey austerity measures, coupled with wads of cash given to their mates. Not me, there is more in the ether of substance on this issue than anything emanating from the orifices of flatulent politicians.

      I'm going to read your link again, and pass it on, beats funny cat videos.

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    8. Judith Olney

      Ms

      In reply to Peter Ormonde

      Peter, the "Job Guarantee" proposal outlined in the paper you linked to, is BRILLIANT!

      What are the chances of government doing anything as sensible as this proposal in Australia?

      tick tick tick tick tick..........................................

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    9. John Armour

      logged in via email @bigpond.com

      In reply to Judith Olney

      I have to thank Peter for that link too.

      It was a good roundup of the causes of the GFC. Lest we forget.

      The "Job Guarantee" is a no-brainer isn't it.

      An important aspect of the "JG" that's often overshadowed by its immediate appeal however is it's potential role in providing a buffer stock against inflation: currently we have the opposite arrangement where central banks use the unemployed as tools in the fight against inflation.

      Long forgotten is the central bank's credo of the maintenance…

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    10. John Armour

      logged in via email @bigpond.com

      In reply to Peter Ormonde

      A further comment on that Levy Institute paper Peter Ormonde provided a link to...

      http://www.levyinstitute.org/pubs/wp_681.pdf

      Tucked away towards the end of that paper is this comment:

      “Only government can employ without regard to profitability considerations—which is why an ELR program must be funded by government. While I do not want to address the issue here, most proponents of the JG/ELR proposal also adopt the “modern
      money theory” (which can be found in Minsky’s work) that…

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    11. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Judith Olney

      Thought that might be of interest Ms O.... but as to any government of any stripe actually doing so I won't be holding my breath.

      Not while we regard unemployment as an individual rather than a systemic problem - an issue which can be "fixed" by subsistence welfare payments and making individuals more skillful, marketable or mobile.

      Unemployment is more than a welfare issue... it is an economic symptom that something is seriously wrong... that we are failing to bring everyone with us... that…

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    12. Judith Olney

      Ms

      In reply to John Armour

      Exactly John, a no brainer, just goes to show that our current crop of hot air producers lack a brain.

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    13. Judith Olney

      Ms

      In reply to John Armour

      As a sovereign nation we can afford this scheme, there simply is no political will to change anything, and the "living within our means" rubbish is designed purely for those that do not understand how the system works, and can only relate to a household or shopkeepers budgetary limitations.

      I also think this is the reason why this type of basic economics is not taught in high schools, pollies don't want people to know that there is a better way.

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    14. Judith Olney

      Ms

      In reply to Peter Ormonde

      Totally agree with your post Peter, <"The current system creates it, maintains it, depends on it.">

      Exactly, with those with little knowledge and even less understanding, believing the twaddle fed to them by the pollies through the media, then get out the pitchforks and torches, to beat down those filthy, lazy unemployed yet again.

      I wonder if the silence will continue, or will it be a dog whistle frenzy during the campaign?

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    15. Pat Moore

      gardener

      In reply to Peter Ormonde

      Thanks for that link to Randal Wray. Interesting he uses the slang "Uncle Sam"(uel) in a scholarly paper, a moniker leeched in from the banished radical margins of impotent, long-railing opposition; the old nickname for the US government, but more importantly for the corporate back structure behind its 'world's greatest democracy' window dressing and its wider empire which operates under this ideological economic system and its political hegemony.

      "No need to make the accusation of conspiracy…

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  3. Greg Young

    Program Director

    This story could so easily have been "Abbott's Paid Parental Leave Scheme Now Unfunded". You have to wonder why this massive retreat from his earlier position is left hidden behind a sugar coating.

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    1. N Wilson

      Biologist

      In reply to Greg Young

      But it wasn't so entitled... Yes, this is to 'cover' the parental leave cost, but who really believes that the big banks, big supermarkets etc will not still pass on the costs of the parental leave scheme and pocket the tax cut. They will try to...

      Elsewhere we can be reminded that Abbott opposed a cut to company tax recently and has been spouting discredited voodoo stuff that cutting the tax rate can increase tax revenue. So business as usual...big business benefit, hypocrisy and blatantly false statements.

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  4. James Hill

    Industrial Designer

    Promises, promises, who do you trust?
    "Totally Not Tony"!
    "Anyone But Abbott"!
    "Absolutely Not Anthony!"
    "Tony T'Aint!"
    Slogans which finally get it right.

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  5. Comment removed by moderator.

  6. Judith Olney

    Ms

    Tax cuts to business do not create more jobs, they simply put more money in the pockets of the owners and shareholders.

    Unemployment is rising, but instead of actually increasing the Newstart payment, (something that would actually help the unemployed in finding employment, or at least avoid homelessness, and be able to actually eat everyday), all Abbott wants to do is put more money into the pockets of the profit seekers. And its not just Abbott.

    Trickle down economics has failed utterly and completely as a theory and practice, why wont our thick headed, ignorant, and greedy politicians realise this? Or perhaps they do, and they just don't give a sh*t.

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    1. David Arthur

      resistance gnome

      In reply to Judith Olney

      There's a downward trickle all right, but it's neither money nor jobs, nor water.

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    2. Judith Olney

      Ms

      In reply to David Arthur

      I think that you have a great idea there David, with specific purpose tax. For too long industry and employers have been able to socialise the cost of training and education, which directly benefits them, your proposed tax would be something I support.

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    3. Mike Swinbourne

      logged in via Facebook

      In reply to Judith Olney

      Exactly right Judith.

      There is one reason and one reason only why businesses will create new jobs - demand for their product or services. And the way to create demand is not to give more money to people who already have plenty, it is to give it to people who don't currently have very much.

      If that sounds like a formula to increase welfare, then I will plead guilty, because the evidence is overwhelming. Supply side economics does not and never has worked - but demand side economics has been shown to work time and time and time again.

      But then, economics and economists have always worked in the world of ideology rather than evidence - just look at the diametrically opposed 'expert' opinions on something as simple as increasing the tobacco excise.

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    4. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Mike Swinbourne

      Simple increase in the tobacco excise Mike!!!?

      It may have escaped you but there is a vast industry now reliant on diagnosing and treating cancer. And here we have the iron heel of the Rudd government trampling in with its bleeding heart good intentions and throwing this booming stable industry into doubt and crisis.

      Rates of cancer will always be higher under a coalition government. That's why we take money from Philip Morris.

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    5. Mike Swinbourne

      logged in via Facebook

      In reply to Peter Ormonde

      My bad! Thanks for point that out Peter.

      I guess its just another example of Rudd jeopardising the jobs of the hard working oncologist.

      A new campaign slogan for Abbott perhaps?

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    6. Judith Olney

      Ms

      In reply to Mike Swinbourne

      Exactly Mike, this is why giving people the $900 to spend worked to save jobs and businesses, I saw this as an object lesson in my own town, (many businesses were literally saved by this measure because people spent their money locally).

      Increasing the Newstart payment would be a boon to local business, and the local economy, because the same rule would apply. People on Newstart will spend this money, no hoard it.

      I wonder at the stupidity of politicians, giving people enough money to be able to take care of their basic needs, and look for work, will indeed see many more succeed in finding work, and then go on to pay taxes, a bonus to the government. Having the payment so low that it has become a barrier to people being able to look for work, is a self defeating policy. Stupid, stupid, stupid.

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    7. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Judith Olney

      No no no yet again Ms O - you fail to capture the brilliance underlying Hockeynomics ... the creation of a more deserving poor. Think of it as value-adding of a sort.

      The great downside of modern mass production is the decline in quality. Sure the TV's are cheap - but heck you'll need a bigger one in three months! Same with the unemployed and the poor.

      Time was they stood out ... ragged lines of saggy cheeked cloth-capped men in ex-army coats standing outside soup kitchens - scrambling for…

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    8. John Armour

      logged in via email @bigpond.com

      In reply to David Arthur

      'If you feed the horse enough oats, some will pass through to the road for the sparrows.'"

      John Kenneth Galbraith on supply-side economics

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  7. Lee Emmett

    Guest House Manager

    Tony Abbott said, “Labor has talked and talked about cutting the company tax rate. We will actually do it” ... In fact Labor proposed legislation during the last parliament to cut company tax from 30% to 29%, to be financed out of mining tax revenue, but it abandoned the plan and spent the money elsewhere when the opposition and Greens would not back it.

    Now we can see how much time and effort Tony Abbott wasted during six years in opposition, shouting down every Labor initiative. Now it seems…

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    1. Judith Olney

      Ms

      In reply to Lee Emmett

      Hi Lee, have a look at the link in Peter O's post above. A government in Australia could afford to employ people itself, with the Job Guarantee scheme outlined in the paper, I'll put the link here, because it wont hurt to repeat it.

      http://www.levyinstitute.org/pubs/wp_681.pdf

      Also a succinct view on the creation of the GFC and what lessons should have been learnt, but weren't.

      Both sides blather on about job creation, Abbott still thinks that giving rich people more money creates jobs, it doesn't, and Labor, well they just aren't that much different to the Libs. I haven't noticed the level of Newstart mentioned at all since Rudd became PM again, why is that?

      Is throwing money at punishing asylum seekers to placate the bigots and racists of this country, so much more important than supporting the most disadvantaged that live here?

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    2. Christopher Seymour

      Business owner at Location

      In reply to Judith Olney

      Judith,
      A cut in corporate tax doesn't mean giving rich people more money because individual taxes remain the same and to the extent corporate income is distributed to shareholders (including your "rich people" - but also including many pensioners and superannuation holders) any corporate tax paid is a tax deduction via the franking credit.
      Capitalism actually does work, and if you don't believe it ask almost anyone who grew up in Eastern Europe.

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    3. Judith Olney

      Ms

      In reply to Christopher Seymour

      Rubbish Christopher, Company and corporate owners will indeed save money, money not spent on tax is money that goes into the pockets of owners, CEO's, and share holders. The fact that some of these share holders may be pensioners etc, is not the point. The point is that the tax cut will not lead to job creation, which is the lie that the politicians want us to believe. Trickle down economics has failed utterly.

      A society is made up of people, human beings, not units of labour, and money.

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    4. Judith Olney

      Ms

      In reply to Christopher Seymour

      Read the link in Peter O's post, that has also been re-posted by myself and others, it may give you a greater understanding. People are waking up, maybe not quick enough to avoid what is coming to this country, but at least we will know what and who caused it.

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    5. Brett Bailey

      Self Employed

      In reply to Judith Olney

      Rubbish you say? UNless I am very much mistaken - the Henry Review suggested 25% corporate tax. Abbott's 1.5% lowers tax for a huge mumber of businesses in Australia. With very few exceptions most businesses are about growing and investing resources - so a small tax reduction gives greater opportunity to grow the business. Your jaundiced view suggests anyone who has an interest in a business is about taking money out and lining their pockets - THAT is rubbish. Ceratinly shareholders benefit from corporate performance as do superannuation funds - and who are the benificiaries? Surprise surprise mostly Australian everyday people. Approximately 40% of adults are involved in the share market. and most of that via supernnuation.

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    6. Brett Bailey

      Self Employed

      In reply to Judith Olney

      You said above that society is indeed made of people - they need to be fed watered housed clothed educated be able to move about get medical care - now just where do you think the money comes from to provide all of our needs? Businesses who pay taxes and the individuals who are employed by those businesses also paying taxes. What businesses do want to to retain their skill base and the PPL scheme enables that to happen in that the 1.5% levy will fund women who have a baby to take time off at no cost…

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    7. John Armour

      logged in via email @bigpond.com

      In reply to Brett Bailey

      Brett, the distributional effects of a cut in the corporate tax rate are hard to predict, just like the drop in the cash rate.

      If the cuts lead to an increase in retained profits and subsequent increase in the share price there are capital gains issues that benefit mainly the wealthy.

      I'm a shareholder and I find executive remuneration deeply offensive. I regard it as theft. I do not expect that will change with a lower corporate rate.

      Re Keynes: anybody who's actually read Keynes, would…

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    8. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to John Armour

      Cruel but true John.

      I'd have a hunch that even if it works to stimulate capital accumulation and investment a cut in the corporate tax rate simply speeds up the pre-existing trends rather than sees a reversal.

      Tax cuts do not create markets, rarely lower prices unless policed, do not improve productivity, don't alter your terms of trade or much else really. Buys votes.

      Come July 1 2015 there will be a range of investment options available - there may even be the theoretical model firm which uses the windfall to build their business and get out from under the banks - but the overwhelming majority of gifted capital will go where the majority of capital is going. And that is not towards creating stable well-paid employment.

      Pity really - this profit motive seems hell-bent on self-destruction... blissfully unaware of its limitations and structural weaknesses. Their fate - and ours - is sealed now that our betters regard Keynes as some sort of socialist antichrist.

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    9. Judith Olney

      Ms

      In reply to Brett Bailey

      The Henry Review suggested a lot of things Brett, many of which were ignored by the government, like an immediate rise in the Newstart payment, followed by Newstart payments being indexed the same way as pensions are, what happened to that suggestion?

      You are doing what the government does, (and the opposition), you are cherry picking the Henry Review to suit your ideology.

      I don't have a jaundiced view of business Brett, I have a realistic view based on experience and observation.

      Read a Adam Smith, and the link that Peter O has provided, it will help you see past the spin and blather of the political right.

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    10. Judith Olney

      Ms

      In reply to Brett Bailey

      Same old right wing conservative nonsense Brett, You really do need to read a little more widely.

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    11. John Armour

      logged in via email @bigpond.com

      In reply to Peter Ormonde

      "Their fate - and ours - is sealed now that our betters regard Keynes as some sort of socialist antichrist."

      It seems so Peter if today's Nielsen is a portent.

      The Flat Earthers with their quaint ideas about government debt will take us all to a place far less hospitable than their imaginary edge "where dragons be".

      With most of the Opposition's policies largely blunted by events and backflips, the only card up their sleeve now is the Debt/Deficit deception.

      And Labor's let them get away with it by not having the guts to call bullshit, aided and abetted of course by a hostile media, economically illiterate financial journalists, and the tribal loyalties of conservative economists who are either adding to the deception or just keeping their mouths shut.

      This election will now hinge on argument about something as unreal as what's Santa giving you for Christmas, when we should be asking is there a Santa.

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    12. John Armour

      logged in via email @bigpond.com

      In reply to Judith Olney

      It gets wearisome doesn't it Judith.

      It seems to be the arrogance of the conservative mind that it thinks it can just say things that are so easily rebuffed by reference to facts, writings, and the economic canon. Or, god help us, common sense.

      I guess if they read a little more widely they would probably be "on our side". Unless of course, they fit J.S. Mill's famous aphorism.

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    13. James Hill

      Industrial Designer

      In reply to Peter Ormonde

      And it is a pity that the world did not listen to the young Keynes" arguments against the punitive Treaty of Versailles reparations imposed by mainly France against Germany, in fulfilment of their long term "Revanche" policy for the defeat and reparations imposed by Blut und Eisen Bismark in 1871.
      Just led to 54 Million deaths, didn't it.

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    14. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to James Hill

      Yep ... bit of a professional curse for good economists I suspect ... no one really wants to know. Or rather, they "know" already don't they?

      Versailles was the popular commonsense of the time - revenge and damn the consequences... just obvious innit? Who's going to listen to some Cassandra economist urging caution?

      I suspect the time for economists to worry is when folks in power start to listen to them ... there's gotta be a catch... someone's on an earner.

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    15. James Hill

      Industrial Designer

      In reply to Peter Ormonde

      It is the modern curse of specialisation at play, which denies such as Keynes the wider world view he obviously had.
      We are being sold down the river, dispossessed by debt.
      Hey, the East India company did it in Bengal, what goes round comes round.

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    16. Christopher Seymour

      Business owner at Location

      In reply to Peter Ormonde

      I am a business owner. A drop in corporate taxes will simply mean I pay more in income tax because of the drop in franking credits. To the extent that will encourage more investment, I don't see the problem. I would much rather have business owners as a group decide the investment priorities rather than the government pouring subsidies into high profile businesses like the car industry.
      Our little company is in the technology business and about half our sales go overseas. It is true that we have benefited from some government programs like the EMDG program, but we have returned far more in taxes - and we pay high Australian wages to people doing high value technology jobs, not trying to compete with the 3 billion unskilled workers in the world.

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