tag:theconversation.com,2011:/global/topics/company-tax-cuts-48905/articlescompany tax cuts – The Conversation2018-08-08T05:46:19Ztag:theconversation.com,2011:article/1012572018-08-08T05:46:19Z2018-08-08T05:46:19ZPolitics podcast: Barnaby Joyce at his provocative best<p>Barnaby Joyce has confirmed he could cross the floor on the federal legislation associated with the National Energy Guarantee. “Of course I could,” he says in an interview with The Conversation. </p>
<p>Joyce is out on the author’s circuit for his just-released book Weatherboard and Iron, which reprises the personal saga that took him from deputy prime minister to backbencher, as well as canvassing life in Canberra and policy issues.</p>
<p>On the NEG, he says in this podcast: “If it comes back from COAG and it’s absolutely untenable in regards to what happens to power prices and it forces even more misery onto people that can no longer afford power then I think you’re almost duty bound to leave that option [crossing the floor] up your sleeve.” </p>
<p>Asked whether the government should ditch its tax cuts for big business if it cannot get them through the Senate, Joyce says: “To be quite frank I’ve probably got a different view than some of my colleagues, in that I look at the company tax cuts and I say, well we have to also be internationally competitive.”</p>
<p>Provocatively, Joyce says the Nationals should run a candidate in the NSW Labor held seat of Eden-Monaro - which would mean contesting against a Liberal contender.</p>
<p>On future aspirations, Joyce makes it clear he would like to return to the frontbench after the election. “If I was offered that I would never knock it back,” he said. “In politics you should try to get to the point of most effect – because that’s how you bring the best outcome”.</p><img src="https://counter.theconversation.com/content/101257/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Barnaby Joyce has confirmed he could cross the floor on the federal legislation associated with the National Energy Guarantee. “Of course I could,” he says.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1010282018-08-03T03:44:33Z2018-08-03T03:44:33ZVIDEO: Michelle Grattan on the government’s uphill battle with company tax cuts and the NEG<figure>
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<p>Michelle Grattan speaks to University of Canberra Deputy Vice-Chancellor Nicholas Klomp about the week in politics. They discuss the results from Super Saturday, the state of play on the company tax cuts, dissent from the states and backbenchers on the National Energy Guarantee, and the future of Labor backbencher Emma Husar after allegations of questionable conduct.</p><img src="https://counter.theconversation.com/content/101028/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Michelle Grattan speaks to Nicholas Klomp about the week in politics.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1009832018-08-02T11:27:05Z2018-08-02T11:27:05ZGrattan on Friday: Dutton and Frydenberg struggle with the currents in shark-infested waters<p>Peter Dutton and Josh Frydenberg, both aged 47, are two of Malcolm Turnbull’s cabinet high flyers with dreams of eventually flying a lot higher.</p>
<p>Political life has been going very well for Dutton. He sits atop his mega home affairs portfolio. He’s open about his longer term leadership aspirations. But everything would crash if he lost his ultra-marginal Queensland seat of Dickson.</p>
<p>The 9-point drop in the LNP primary vote in adjacent Longman would have sent shivers up his spine. He already faces a massive “Ditch Dutton” GetUp campaign, in which 30,000 calls have been made so far to find out voters’ concerns, and 20 locals meet fortnightly to plan events.</p>
<p>Like Dutton, Frydenberg has plenty of ambition. Though he’s further down “future leader” lists, at present he has the government’s toughest policy job, trying to “land” the National Energy Guarantee (NEG).</p>
<p>As a key deadline looms next week, Frydenberg is surrounded by hostile forces stretching, bizarrely, across the political spectrum. Think Tony Abbott under the doona with the Victorian Andrews Labor government.</p>
<p>Dutton might be the tough man, the right wing ideologue, but he’s also pragmatic.</p>
<p>He opposed same-sex marriage, but pushed for the postal vote that delivered it. He just wanted the issue settled. So it’s unsurprising he appeared to signal this week that if the tax cuts for big business can’t be legislated in the next parliamentary sitting, they should be off the agenda.</p>
<p>The government needed to “negotiate in good faith” with the senators, he told the Seven Network. If that failed his advice was, “we shouldn’t give [Bill Shorten] the ammunition to try and strike back against us”.</p>
<p>A couple of days later, under an extraordinary <a href="https://www.2gb.com/i-hope-one-day-you-can-come-on-the-program-and-say-what-you-really-think/">barrage</a> from 2GB’s shock jock Ray Hadley - “I hope one day you can come on the program and say what you really think” Hadley told the minister - Dutton was more constrained.</p>
<p>In government circles, the big business tax cuts have gone from being vital for Australian competitiveness to a serious political handicap that many in the Coalition are becoming desperate to be rid of.</p>
<p>As Treasurer Scott Morrison put it: “There are two issues here. It’s the right economic policy. The politics is a separate issue.” Indeed. </p>
<p>The trouble is, how does the government rationalise their ditching, after all ministers have said? How to recast the jobs and growth story? How to explain wilting under pressure, to the business community and to international investors, given Australia has a high corporate rate among OECD countries?</p>
<p>And will voters, already distrustful, be cynical? Will a backflip solve the problem with them?</p>
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<a href="https://theconversation.com/video-michelle-grattan-on-the-governments-uphill-battle-with-company-tax-cuts-and-the-neg-101028">VIDEO: Michelle Grattan on the government's uphill battle with company tax cuts and the NEG</a>
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<p>The leading “true believer” on business tax policy is Finance Minister Mathias Cormann, who in the wake of the byelections continues to ring and text the crossbench. One crossbench staffer likens Cormann to the child begging for an ice cream - he’s constantly tugging at the senators’ sleeves.</p>
<p>The government may end up willing to compromise, by excluding the giant companies from the cut – that is the banks, which have become the bogeymen, although other companies would be caught. But if it did that, winning support from, for example, Victorian crossbencher Derryn Hinch, it could lose Liberal Democrat David Leyonhjelm.</p>
<p>Meanwhile, the media are like sleeve-tugging kids too, pursuing ministers with awkward questions about the policy’s future. Yet with parliament not meeting until the week after next, this hiatus will continue a while.</p>
<p>More immediately, the government is on edge over the NEG. The federal, state and territories’ Council of Australian Governments energy council meets on Friday of next week to agree to the details of the mechanism – or not. If it did, the federal legislation for emissions reductions would be put to the Coalition party room the following Tuesday. After that, if all went well, the COAG energy council would give the final tick off.</p>
<p>Last minute obstacles loom, although whether they will be serious, even disastrous, or just inconvenient remains to be seen.</p>
<p>This week Victorian energy minister Lily D'Ambrosio declared her state wouldn’t “rush into” signing up to the NEG, and questioned the federal Coalition party room’s support.</p>
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<a href="https://theconversation.com/victorian-minister-plays-hardball-with-turnbull-on-the-neg-100775">Victorian minister plays hardball with Turnbull on the NEG</a>
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<p>The government desperately needs the NEG and the associated narrative on power prices settled for next year’s election, but a more immediate election is intruding.</p>
<p>The Andrews government, facing the people in November, is under immense pressure from GetUp and the environment lobby not to sign up next week. GetUp has had ads running in Victoria and Queensland against Turnbull’s “dirty power plan”; Victorian ministers and backbenchers will receive a barrage of calls, with state cabinet meeting on Monday.</p>
<p>Now the Labor governments in Victoria, Queensland and the ACT are set to ratchet up demands to make the NEG plan “greener” - which would run right into the Abbott naysayers in the federal Coalition party room.</p>
<p>The Labor jurisdictions might agree to progress the NEG but make endorsing the needed state legislation contingent on their demands being met.</p>
<p>The hit Turnbull has taken to his authority from Super Saturday emboldens Abbott and his allies. As soon as modelling for the NEG was released on Wednesday Abbott <a href="https://www.2gb.com/this-is-just-wrong-tony-abbott-disputes-claims-neg-will-lower-power-prices/">slammed</a> it. “Pigs might fly”, he said to the suggestion the scheme would bring down prices. “This is just wrong, it’s completely implausible, it’s utterly incredible”.</p>
<p>The NEG “still needs an enormous amount of work,” he declared.</p>
<p>From the government’s point of view, the fate of the NEG is more important than that of the company tax cuts. As Dutton said on Thursday, “energy is the most important issue at the moment”.</p>
<p>If the big business tax cuts have to be jettisoned, that will dent the government’s economic credibility; the policy’s supporters will say it would have consequences for investment (Labor would dispute this).</p>
<p>But if the NEG is stymied, the investment consequences would be major because there is no suggestion the government has a fallback plan.</p>
<p>If Turnbull were hit with a double whammy – having to abandon the company tax cuts and unable to get the NEG – that would be a serious policy flunk.</p>
<p>The next few weeks will test whether Frydenberg can gain that moniker Christopher Pyne claimed but couldn’t grasp - “the fixer”.</p><img src="https://counter.theconversation.com/content/100983/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>If Turnbull were hit with a double whammy – having to abandon the company tax cuts and unable to get the NEG – that would be a serious policy flunk.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/992062018-07-03T04:08:08Z2018-07-03T04:08:08ZPoll wrap: Coalition gains in Newspoll after Shorten’s bad week, while left wins Mexican landslide<figure><img src="https://images.theconversation.com/files/225854/original/file-20180703-116147-28qfbw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Opposition Leader Bill Shorten had a rough week last week, and Labor has accordingly taken a hit in the polls.</span> <span class="attribution"><span class="source">AAP/Mick Tsikas</span></span></figcaption></figure><p>This <a href="https://www.theaustralian.com.au/national-affairs/newspoll">week’s Newspoll</a>, conducted from June 28 to July 1 from a sample of 1,609, gave Labor a 51-49 lead, a one-point gain for the Coalition since last fortnight. Primary votes were 39% Coalition (up one), 37% Labor (down one), 9% Greens (down one) and 6% One Nation (steady).</p>
<p>Although the gap narrowed, this was Malcolm Turnbull’s 35th successive Newspoll loss as PM, five more than Tony Abbott, and two more than the previous record 33 successive losses for a government.</p>
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<a href="https://theconversation.com/poll-wrap-coalitions-record-newspoll-losing-streak-and-rebekha-sharkie-has-large-lead-in-mayo-98304">Poll wrap: Coalition's record Newspoll losing streak, and Rebekha Sharkie has large lead in Mayo</a>
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<p>In this Newspoll, the total vote for Labor and the Greens was 46% (down two), and the total vote for the Coalition and One Nation was 45% (up one). This Newspoll matched a late April Newspoll as the worst performance by the left-of-centre parties since July 2017.</p>
<p>42% (up two) were satisfied with Turnbull’s performance, and 48% (down two) were dissatisfied, for a net approval of -6, Turnbull’s best since March 2016. Bill Shorten’s net approval dropped three points to -25. Turnbull maintained a large unchanged 46-31 better PM lead over Shorten.</p>
<p>By 52-37, <a href="https://cdn.newsapi.com.au/image/v1/7261ad6fa1d318a58ee1d11bb1db333f">voters supported</a> Shorten’s initial plan to “take tax cuts away” from companies with turnovers between $10 million and $50 million a year. By a narrow 46-44, voters opposed taking the tax cuts away from companies with turnovers between $2 million and $10 million a year.</p>
<p>Other questions on the company tax cuts repeated a skewed question that I criticised five weeks ago. The question on whether the cuts would create more jobs (50-36 agreed) focused on a pro-tax cuts argument, without any counter-argument presented.</p>
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<a href="https://theconversation.com/poll-wrap-newspoll-asks-skewed-company-tax-cut-question-as-labor-gains-97314">Poll wrap: Newspoll asks skewed company tax cut question as Labor gains</a>
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<p>The final question asked if it was fair for Shorten to attack Turnbull for “having been successful in his business career?” This framing is very favourable to Turnbull.</p>
<p>It is likely that Labor dropped in this poll due to Shorten’s mess-up over the company tax rates. When a party’s leader blunders, it is more likely to affect the party’s vote than a mistake by anyone else. After Tony Abbott announced the resumption of knights and dames in January 2015, the Coalition’s vote dived.</p>
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<a href="https://theconversation.com/federal-labors-lead-surges-after-knightmare-37049">Federal Labor's Lead Surges after 'Knightmare'</a>
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<p>I think Labor should be more worried about Turnbull’s rising ratings than Shorten’s bad week. The PM’s net approval and the government’s two party vote are strongly correlated, so the better Turnbull’s net approval, the better the Coalition will tend to do on voting intentions.</p>
<h2>Essential: 52-48 to Labor</h2>
<p>This <a href="https://www.theguardian.com/australia-news/ng-interactive/2018/jul/03/the-guardian-essential-report-1-july-results">week’s Essential</a>, conducted June 28 to July 1 from a sample of 1,035, gave Labor a 52-48 lead, unchanged since last fortnight. Primary votes were 40% Coalition (up two), 37% Labor (up two), 11% Greens (steady) and 6% One Nation (down one). If Essential used Newspoll’s new methods, it would probably be 51-49 to Labor. Essential continues to use 2016 election preference flows.</p>
<p>Following Newspoll’s positive trend for Turnbull, his net approval was +3 in Essential, up three points since early June. Shorten’s net approval was down three points to -16. Turnbull led Shorten as better PM by 42-25 (41-27 in June).</p>
<p>38% thought the Coalition’s National Energy Guarantee would make no difference to power prices (up seven since October 2017), 22% thought power prices would increase (down nine), and 15% thought prices would decrease (down one). </p>
<p>44% (down five since September 2017) blamed private power companies most for rising power prices, 21% the Turnbull government (down one), 11% environmentalists (up two) and 7% renewable energy companies (up two).</p>
<p>By 41-36, voters supported cutting the tax rate for businesses from 30% to 25% (tied at 37% each in early June). However, 41% agreed with a negative statement on the tax cuts, and 34% with a positive statement (38-32 negative in February).</p>
<h2>Longman ReachTEL: 51-49 to LNP</h2>
<p>Longman is one of five seats that will be contested at byelections on July 28. A <a href="https://www.pollbludger.net/2018/06/28/super-saturday-minus-four-weeks/">ReachTEL poll</a>, conducted for The Courier Mail on June 26 from a sample of about 800, gave the LNP a 51-49 lead, a one-point gain for the LNP since a ReachTEL poll for the left-wing Australia Institute on June 21. Excluding 4.1% undecided, primary votes were 40.7% Labor, 37.0% LNP, 15.3% One Nation and 3.4% Greens.</p>
<p>Since the earliest Longman poll in mid-May, Labor has turned a four-point primary vote deficit against the LNP into a four-point lead. Only One Nation’s strong preference flows to the LNP are keeping them slightly ahead or tied with Labor in the last two Longman polls.</p>
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<a href="https://theconversation.com/post-budget-poll-wrap-labor-has-equal-best-newspoll-budget-result-gains-in-ipsos-but-trails-in-longman-96513">Post-budget poll wrap: Labor has equal best Newspoll budget result, gains in Ipsos, but trails in Longman</a>
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<p>At the 2016 federal election, One Nation recommended preferences to Labor on their how-to-vote cards, and <a href="https://results.aec.gov.au/20499/Website/HouseDivisionPage-20499-302.htm">Labor won 56.5%</a> of One Nation preferences. According to The Poll Bludger, Labor would lead by 54-46 if 2016 election preferences were applied to this ReachTEL poll. At the byelection, <a href="https://www.theaustralian.com.au/national-affairs/longman-byelection-one-nation-set-to-preference-coalition/news-story/b8af57110f1005c42f6d8792d079c713">One Nation will recommend</a> preferences to the LNP.</p>
<h2>Mexican election: landslide for the left</h2>
<p>In Sunday’s <a href="https://en.wikipedia.org/wiki/Mexican_general_election,_2018">Mexican presidential election</a>, the left-wing candidate, Andrés Manuel López Obrador, known by his initials AMLO, won a commanding 53.0% of the vote, with Ricardo Anaya, who led a right-left coalition, in a very distant second with 22.5%. AMLO’s vote share was the highest in a Mexican <a href="https://en.wikipedia.org/wiki/Mexican_general_election,_1982">presidential election</a> since 1982. AMLO’s MORENA party and its allies are likely to win outright majorities in both chambers of the Mexican legislature.</p>
<p>I had a preview article for <a href="https://www.pollbludger.net/2018/06/30/mexican-election-minus-one-day/">The Poll Bludger</a>. AMLO’s win has been attributed to chronic violent crime and corruption, but I believe Donald Trump was also a factor.</p>
<p>Apart from the <a href="https://www.pollbludger.net/2018/05/27/ireland-abortion-repeal-referendum-66-4-yes-33-6-no/">Irish abortion referendum</a> in May, the left has not been able to celebrate in Australia or internationally in the first half of 2018. The Mexican election is a strong start to the second half of 2018 for the left.</p><img src="https://counter.theconversation.com/content/99206/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Adrian Beaumont does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>More worrying for Labor than Bill Shorten’s bad, though, is Prime Minister Malcolm Turnbull’s rising ratings.Adrian Beaumont, Honorary Associate, School of Mathematics and Statistics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/991042018-06-28T11:32:22Z2018-06-28T11:32:22ZGrattan on Friday: Bill Shorten had a ‘captain’s fall’ rather than making a ‘captain’s call’<p>One can only imagine the extreme tension gripping Bill Shorten, as the byelections in Longman and Braddon loom as “the only polls that count” for him in the immediate future.</p>
<p>For the first time in his leadership, the possibility of a serious threat to his position is there, resting in the hands of these voters in two marginal ALP seats in the south and north of the country.</p>
<p>Anthony Albanese has flaunted his availability, in the event of a Labor electoral disaster on July 28, with his speech last Friday which could have been titled “I’m not Bill”.</p>
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<a href="https://theconversation.com/anthony-albanese-sets-out-his-blueprint-for-labor-98776">Anthony Albanese sets out his blueprint for Labor</a>
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<p>On the other side Malcolm Turnbull and his crew, despite the polls and regardless of another failure this week to muster Senate votes for the tax cuts for big business, are looking more competitive.</p>
<p>Perhaps then it’s not so surprising that Shorten made a costly error when he responded to questions about Labor’s company tax policy, “announcing” (as we in the media put it) that an ALP government would repeal the legislated cut for firms with turnovers between $10 million and $50 million.</p>
<p>It’s been labelled a “captain’s call”, and angered colleagues. It was probably more likely a “captain’s fall” – Shorten answering reflexively, without thinking, believing that was where the policy was up to, or where it would be.</p>
<p>His office and colleagues at first tried convoluted rationalisations but they didn’t convince. Shorten might have done better to have said, “I stuffed up – that’s my recommendation, it’s not yet our decision”, and summoned a shadow cabinet meeting immediately to fix the matter. But only a few politicians are willing or able to use the mea culpa as a management tool when things go badly.</p>
<p>Such an “announcement” required the right framing. It also – most importantly – needed to include Labor’s stand on whether it would keep or repeal the cuts for businesses between $2 million and $10 million turnover.</p>
<p>Labor on Thursday was scrambling to reach its position for this band. Shadow cabinet will discuss it at a Sydney meeting scheduled for late morning Friday. In the political circumstances, it would be rash not to adopt the $10 million threshold. Some in shadow cabinet actually want Shorten’s position revisited and a $50 million threshold accepted.</p>
<p>Apart from framing, there was the question of timing. Would any leader thinking clearly create a situation where his opponents and the media were incentivised to trawl Longman and Braddon for businesses that would be hit by Labor’s policy? The ALP had refused to state its position since the legislation was passed last year – it could have waited a few more weeks.</p>
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<a href="https://theconversation.com/labor-would-quash-tax-cuts-for-businesses-with-10-50-million-turnover-98940">Labor would quash tax cuts for businesses with $10-$50 million turnover</a>
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<p>Shorten’s mistake was inevitably magnified by the combination of the byelection context and the fact that Albanese, as part of strutting his leadership claims, had made a big point of urging better relations with business. Those relations have now plummeted. Business groups, currently frustrated with both sides of politics, didn’t hold back with their criticism.</p>
<p>Albanese’s play is notable, not least because while his wording in that speech and elsewhere is careful, to give deniability, his intention is so overt.</p>
<p>Here is a man obviously aware he’s running out of time. If Shorten wins the election, Albanese, 55, will be a senior minister, but not even deputy prime minister as he was, very briefly, in 2013. If Labor loses, the party will likely move on to someone else.</p>
<p>Some who flirt with the idea of a change believe Labor is on the cusp of regaining office but fear Shorten mightn’t get over the final hurdle.</p>
<p>Super Saturday, including four Labor-held seats and two key ones, has given Albanese an unexpected if long-shot chance at the job he covets. He’s not stabbing Shorten in the back; he is standing out there publicly displaying his ambition.</p>
<p>Shorten told caucus on Tuesday that Longman was “very close” and Braddon – where the Liberals did so well at this year’s state election – was “very difficult”.</p>
<p>A Courier Mail-ReachTEL poll published on Thursday of 814 Longman voters, taken on Tuesday, had the government with a 51-49% two-party lead. Labor’s Susan Lamb was on a 39% primary vote; the Liberal National Party’s Trevor Ruthenberg was polling 35.5%. Despite Hanson’s gyrations on tax, One Nation was on 14.7%. The Courier Mail reported that the preferences from the 21.3% minor party/independent vote were splitting 70% the LNP way.</p>
<p>There is no doubt Labor is, at this point, in a lot of trouble in these two contests. On the other hand, there is a month to go and it is always a risk, in making political judgements, of getting ahead of ourselves. The campaigning by both sides will intensify. Some Labor sources predict the ALP will claw back in both seats, saying the Longman LNP candidate, a former state MP, is vulnerable, and a campaign on “government cuts” will be potent in Braddon.</p>
<p>If Shorten lost both seats things would be very grim for him. A mixed result – win one, lose one – would throw Labor into a good deal of turmoil, with Shorten wounded but probably not mortally, although what happened in Newspoll would be carefully watched. Albanese would be faced with an invidious choice: whether to help re-strengthen his weakened leader or try to bring him down.</p>
<p>Any move to replace Shorten is made more difficult by party rules, byzantine factional splits, and the role of outside players such as the powerful CFMMEU, which is close to Shorten and would be disadvantaged if Albanese replaced him.</p>
<p>The stance of Labor’s NSW right would be critical – Albanese would need some support from there.</p>
<p>In a change, shadow treasurer Chris Bowen, from that faction, would be safe in his position.</p>
<p>But Labor’s deputy leader Tanya Plibersek would be an almost inevitable casualty if Albanese became leader.</p>
<p>Plibersek is popular with the ALP rank and file and with the public. In a <a href="https://www.theaustralian.com.au/national-affairs/newspoll/personal-numbers-expose-shorten/news-story/95d9e03c99f11ab6f1c7f90204d2835a">May Newspoll</a> on preferred Labor leader, Albanese was on 26%, followed by Shorten and Plibersek on 23% each.</p>
<p>But Albanese and Plibersek are both from the left, and from NSW. Albanese would need a different deputy – a woman, but from the right and from another state, and with enough experience for the job. Affirmative action not withstanding, such a suitable woman would be hard to find.</p>
<p>The sum total of this is to say that any “Kill Bill” enterprise would be highly fraught for Labor.</p>
<p><strong>UPDATE</strong></p>
<p>Bill Shorten after the Friday shadow cabinet meeting announced a compromise which retreated from his Tuesday position.</p>
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<a href="https://theconversation.com/shorten-announces-company-tax-compromise-but-business-still-critical-99149">Shorten announces company tax compromise but business still critical</a>
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<img src="https://counter.theconversation.com/content/99104/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Shorten might have done better to have said, “I stuffed up – that’s my recommendation, it’s not yet our decision”, and summoned a shadow cabinet meeting immediately to fix the matter.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/990762018-06-28T01:30:19Z2018-06-28T01:30:19ZGovernment puts tax cuts for big companies on back burner - again<p>The government has pulled its legislation for tax cuts for big businesses – for the second time this year – after its last minute bid to get the Senate crossbench numbers failed.</p>
<p>Announcing the retreat, Finance Minister Mathias Cormann, who had been running the negotiations, reaffirmed that the government remained committed to the cuts, and cast the July 28 byelections as a referendum on them.</p>
<p>Cormann was unable to win Pauline Hanson’s two votes or the two senators from the Centre Alliance.</p>
<p>After flip-flops and with the byelection in Longman at the forefront of her mind, Hanson stuck with her rejection of the measure. The Centre Alliance’s opposition was reinforced by the fact that its lower house member, Rebekha Sharkie, is fighting for survival in the Mayo byelection.</p>
<p>The government had flagged that it intended to press the matter to a vote this week but then decided it did not want to be rebuffed on the floor or parliament.</p>
<p>Cormann told a news conference: “We
need more time to make our argument to our colleagues on the
Senate crossbench - and we, of course, will continue to make our argument in the Australian community.”</p>
<p>“The government remains fully committed to these business tax cuts for all businesses because it is the right thing to do for working
families around Australia.”</p>
<p>This is the second blow on the tax front for the business community this week.</p>
<p>On Tuesday, in what’s been labelled a “captain’s call”, Opposition Leader Bill Shorten announced a Labor government would repeal legislated tax cuts for businesses with turnovers between $2 million and $10 million. Business has reacted angrily to the repeal plan.</p>
<p>The ALP is still considering its position for those with turnovers from $2 million to $10 million. It is under pressure to clarify its policy quickly.</p>
<p>Cormann said the byelections “will
be a referendum on who has the better plan for a stronger economy and more jobs”. </p>
<p>In a reference to speculation about the Labor leadership in the event of bad byelection results, Cormann said, “After the byelections, who knows? We might
have a more business-friendly Labor leader. All sorts of things could
be different on the other side of the byelections.”</p>
<p>He said his message to the people of Longman and Braddon was that they “do have the opportunity to send Bill Shorten and Labor a message. If they don’t like Bill Shorten’s higher taxes on business, on hardworking Australians, on retirees, on home owners, on everyone who moves, then vote against Labor, put Labor last.”</p>
<p>Cormann also targeted One Nation voters. He pointed to polling showing two thirds of One Nation voters in Longman supported lower business tax.</p>
<p>“I hope that the fact that One Nation voters increasingly appear to be coming on board with our plan for lower business taxes will, over time, help to persuade Senator Hanson this is the right thing to do.”</p><img src="https://counter.theconversation.com/content/99076/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In announcing the retreat, Finance Minister Mathias Cormann reaffirmed that the government remained committed to the cuts, and cast the July 28 byelections as a referendum on them.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/987312018-06-21T13:38:21Z2018-06-21T13:38:21ZGrattan on Friday: Government celebrates on tax, fights on energy<p>The odds were always in the government’s favour in the battle to get its A$144 billion income tax package through parliament.</p>
<p>However much some Senate minnows might have objected to the package’s third stage – taking effect way out in 2024 and favouring the wealthy – they didn’t want to be blamed for denying middle and lower income earners early tax cuts.</p>
<p>Pauline Hanson - of course - attracted the limelight but at no point voted against stage three. But the two Centre Alliance (former Nick Xenophon Team) senators epitomised the dilemma - they voted (successfully) to amend the bill to exclude the last stage, but when the government said it was the whole package or nothing, they folded.</p>
<p>In response, they copped a serve from Tim Storer, the South Australian independent who was on the NXT election-ticket in 2016. Storer was the only crossbencher to hold out.</p>
<p>Clearly the government has had a big victory and Labor has taken a risk in saying that if elected, it will (Senate permitting!) repeal the legislation’s second and third stages, while keeping, and building on, the initial tax cuts.</p>
<p>What’s less clear is the size of the risk for Labor.</p>
<p>If the whole package had been defeated, the ALP would have been exposed as tax-cut spoilers. As it is, middle and lower income voters will know that whoever wins the election, they have a guaranteed tax cut, indeed a rather bigger one under Labor.</p>
<p>From Labor’s point of view, committing to repeal the second stage, which moves the threshold at which the 37% rate cuts in from $90,000 to $120,000, is more of a gamble than saying it will kill the third stage, which flattens the scale, with benefits directed to high earners.</p>
<p>But stage two doesn’t start until mid 2022, so a Labor government would not be taking away a bird in the hand but one that was still on the wing. Some voters might apply a discount to a cut so far in the future, even though it has been legislated.</p>
<p>How voters react to Labor’s position will also depend on whether the government can convincingly sell its arguments that the ALP is dissing “aspiration”, engaging in “class warfare” and, via a range of policies, is the “high tax” party.</p>
<p>Also, the debate over tax cuts can’t be seen in isolation. The opposition has money to use and policies still to unveil. Polls show people have other priorities – fiscal consolidation, spending in certain areas. Voters at the election will look at the full menus before them, as well as the leaders and the government’s record.</p>
<p>Nevertheless, the results in the July 28 byelections will be interpreted as a referendum on the competing tax plans, though other factors will feed into those contests as well. Super Saturday will reset the political landscape in one way or another.</p>
<p>It would have been a huge setback if the government hadn’t secured its income tax package, which was the budget’s centrepiece. Politically, there’s less at stake in its intention to put to a Senate vote next week its tax cuts for big business. On current numbers this legislation is headed for defeat.</p>
<p>More crucial than the fate of the company tax cuts is the government’s long struggle to nail down its national energy guarantee (NEG), with the crunch coming when Energy Minister Josh Frydenberg meets his Council of Australian Government counterparts on August 10.</p>
<p>The tax win has further enhanced the reputation of Senate leader and chief negotiator Mathias Cormann. The outcome of the NEG negotiation will be important for Frydenberg’s reputation.</p>
<p>On tax, the battle was only with the parliament. On energy, Frydenberg has to wrangle state and territory ministers (the ACT is particularly challenging), and also fend off an insurgency from Tony Abbott and other sceptics, who ran interference at this week’s Coalition parties meeting. As well, unease seems to be growing among some Nationals, including frontbencher Keith Pitt.</p>
<p>After an earlier general discussion in the party room, the Abbott band had wanted the NEG plan returned there before the August meeting. This isn’t happening – the next broad party room consideration is due when the legislation comes forward. But that doesn’t prevent ad hoc sorties of Tuesday’s kind.</p>
<p>Abbott also launched public attacks covering not just the energy issue itself but the way Malcolm Turnbull runs the party room.</p>
<p>“I think the government is more interested in reducing emissions than it is in cutting prices,” he told 2GB on Wednesday. And it was “a big mistake for the Coalition to sub-contract out its energy policy to the Labor state governments”.</p>
<p>He <a href="https://www.smh.com.au/politics/federal/coalition-mps-reject-tony-abbott-warning-on-energy-and-climate-change-20180621-p4zmy5.html">left open</a> the option of crossing the floor when legislation comes. It will formalise the emissions reduction target. The critics will cavil at any provision that would facilitate a Labor government moving to a more stringent target. Yet this flexibility might be needed to secure a deal for the package.</p>
<p>Abbott said he hoped things wouldn’t get to the floor-crossing stage but “the executive government needs to understand that you can’t take the party room for granted”.</p>
<p>He complained at Turnbull’s “practice of discussing legislation at enormous length every party room meeting before we actually get to backbenchers’ questions and comments”, declaring this “completely unprecedented”.</p>
<p>While by necessity, “the government spends an enormous amount of time negotiating with the crossbench”, it needed to “spend a bit more time talking to the backbench,” he said.</p>
<p>There are obvious retorts to Abbott’s criticisms. For example, on the “sub-contracting” to the states, it is the states that have the main responsibilities in this area.</p>
<p>As to party processes, while he contrasted Turnbull’s style with his own and that of Howard and others, some colleagues were quick to recall his notorious “captain’s calls”, especially the paid parental leave scheme.</p>
<p>By late Thursday, the pro-NEG forces were <a href="https://www.theguardian.com/australia-news/2018/jun/21/coalition-ministers-stare-down-naysayers-on-transition-to-renewable-energy">mobilised</a>, with an assortment of backbench Liberals (Julia Banks, Trent Zimmerman, Trevor Evans, Tim Wilson) and Nationals (Mark Coulton, Andrew Broad) publicly rallying to its defence.</p>
<p>As the Coalition celebrates on tax, the internal heat over the NEG has suddenly been turned up to high, with the disunity going on full display.</p>
<p>Frydenberg’s timetable means he doesn’t have to deliver on the NEG until after the byelections. But when it comes to the main election game, a credible (though inevitably disputed) energy policy is as crucial for the government as having its income tax plan in place.</p><img src="https://counter.theconversation.com/content/98731/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>More crucial than the fate of the company tax cuts is the government’s long struggle to nail down its NEG, with the crunch coming when Josh Frydenberg meets his COAG counterparts on August 10.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/983362018-06-14T11:34:03Z2018-06-14T11:34:03ZGrattan on Friday: The loners who lead, and trash, ‘personality’ parties<p>Let the voter beware. We may be in a “celebrity” age but personality parties, based around a “name” implode, explode, or fizzle. In the last few years, we’ve seen them do all three.</p>
<p>On Thursday came the latest episode in the One Nation soapie, when senator Brian Burston announced he was leaving the party to sit as an independent. Pauline Hanson had effectively tossed him out anyway.</p>
<p>Only a couple of weeks ago, after their <a href="https://theconversation.com/pauline-unplugged-lets-rip-against-senate-colleague-97574">spectacular</a> falling out over company tax cuts, Burston was declaring Pauline had her moods and he hoped they’d make up. She responded by saying he should give up his seat.</p>
<p>So now Hanson is down from having four Senate numbers after the 2016 election to two, with multiple bizarre twists in the course of the shrinkage. The combination of a capricious leader and eccentric and accident prone followers has cost the party what was a pivotal power position in the Senate.</p>
<p>On the face of it, Pauline Hanson and Nick Xenophon have little in common. Hanson’s politics operate, in considerable part, around the extremes; she taps into some dark places and often generates outrage. Ex-senator Xenophon hoovered up those disillusioned with the major parties, but from a centrist position.</p>
<p>In terms of leadership style, however, we can see a certain commonality. As a leader, Xenophon was autocratic – albeit his was a much smoother, smiley face of autocracy than Hanson’s. As in any party based around a personality, it was all (or at least mostly) about him.</p>
<p>One paradox of leaders of personality parties is that while they attract voters and so can get others elected, this can be their downfall, because they are by nature loners not team people.</p>
<p>Like Hanson, Xenophon ended up harming his creation. In his case, the flaw was overreach. Consider what might have been if Xenophon had not left the Senate for his ill-fated bid to be, if not the king, at least the king-maker in South Australian politics (his SA-BEST <a href="https://theconversation.com/liberals-win-south-australian-election-as-xenophon-crushed-while-labor-stuns-the-greens-in-batman-93355">won only</a> two upper house seats in the March state election).</p>
<p>He would still be leader and chief negotiator for the group, which started this term with three votes in the Senate. He would have <a href="https://theconversation.com/citizenship-crisis-claims-nick-xenophon-teams-kakoschke-moore-87935">lost</a> one senator, Skye Kakoschke-Moore, to the citizenship crisis, but her replacement, Tim Storer would probably be part of the team, instead of sitting as an independent. Before the High Court elevated him, Storer had fallen out with the party when he wasn’t given the casual vacancy Xenophon’s departure created.</p>
<p>If the party presently had three senators – rather than two - it would still have a veto power over legislation that Labor and the Greens opposed.</p>
<p>Post Xenophon, the old “Nick Xenophon Team” has become the Centre Alliance – Xenophon himself had always said the name would be de-personalised – and the one-time leader has no role in it.</p>
<p>Contacted this week, Xenophon sent a text saying he was “not making comment on anything political – my former colleagues are more than capable”. It was a far cry from when he quit the Senate last year, promising to keep a hand and a voice in what was happening in federal politics.</p>
<p>He’s concentrating on building his legal practice. Some believe he might have another shot at the Senate; others say that is out of the question but he could end up in state parliament. He has not even appeared in the campaign in the Adelaide Hills seat of Mayo where the Centre Alliance’s Rebekha Sharkie, another citizenship casualty, is fighting for her political life.</p>
<p>The battle in Mayo, while important for Centre Alliance, is more interesting on other grounds. It is a test of the ability of a crossbencher who wins a seat from a major party to entrench themselves. Tony Windsor did it in New England (won from the Nationals). Cathy McGowan has done in Indi (seized from the Liberals), as has Andrew Wilkie in Denison (wrested from Labor).</p>
<p>Sharkie in 2016 defeated a Liberal who was on the nose; in the byelection, she is up against high-profile Liberal candidate Georgina Downer, daughter of former foreign minister Alexander Downer, who occupied the seat in 1984-2008.</p>
<p>Two recent polls have put Sharkie <a href="https://theconversation.com/liberals-georgina-downer-trailing-in-early-mayo-poll-97965">ahead</a> of Downer 58-42% in two-party terms. It’s a long time until election day (July 28), but if Sharkie does regain her seat, perceptions about her as a local member would likely have counted more than her party branding, despite what would be Centre Alliance’s celebrations.</p>
<p>In terms of its Senate future, the Centre Alliance has some breathing space – its two senators, Stirling Griff and Rex Patrick, are long-termers and so don’t face the people at the next election. But that election will be crucial for the party – to show it still has life, it needs to get a new senator elected (and it won’t have the 2016 advantage of the smaller quota that applies in a double dissolution).</p>
<p>What used to be the Xenophon party will eventually fade away federally: the question is how long that will take. Its cycle will be rather longer and less spectacular than the personality-based Palmer United Party, which came and went in a single parliamentary term.</p>
<p>Pauline Hanson’s One Nation, at least in its present form, will also disappear in the fullness of time. Hanson, like the Centre Alliance senators, isn’t up for re-election, so she will be around a while. But apart from in Queensland it will difficult (albeit not impossible) for her to get anyone else elected under the larger quota required in the coming half-Senate election.</p>
<p>Personality-centred parties are different from more broadly-based minor parties - the Greens and the now defunct Australian Democrats - although the latter parties may be heavily identified with particular leaders.</p>
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Read more:
<a href="https://theconversation.com/view-from-the-hill-clive-palmers-back-on-the-trail-with-brian-burston-in-tow-98501">View from The Hill: Clive Palmer's back on the trail, with Brian Burston in tow</a>
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<p>Strong leaders, to whom the public relate, attract supporters to such parties (the Greens’ Bob Brown; Don Chipp, Cheryl Kernot for the Australian Democrats). But these parties have firmer and deeper roots than the personality parties, so they survive well beyond an individual figure. Though the Democrats are gone, they lasted a generation, through several leaders.</p>
<p>Most small parties, whether personality-based or not, get their backing by tapping into the dissatisfaction felt by many voters with the major parties. The Senate proportional representational voting system means they can translate modest – in some cases minimal - support into maximum impact in the federal parliament.</p>
<p>Changes the government has made to the Senate electoral system will put a check on that ability, but not wipe it out. In the years to come, mega personalities potentially will still be able to create parties in their image that become bright flames. But as with others before them, such parties would seem destined to be flashes in the pan.</p><img src="https://counter.theconversation.com/content/98336/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>One paradox of leaders of personality parties is that while they attract voters and so can get others elected, this can be their downfall, because they are by nature loners not team people.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/972522018-05-25T02:48:36Z2018-05-25T02:48:36ZVIDEO: Michelle Grattan on Labor’s byelection bother<figure>
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<p>Michelle Grattan speaks with University of Canberra’s Vice-chancellor Deep Saini about the week in politics. They discuss the conundrum Labor faces with the super Saturday by-elections set for the same weekend as their national conference, Pauline Hanson withdrawing One Nation’s support for the big company tax cuts, and what Andrew Hastie’s parliamentary speech about Chau Chak Wing means for Australia’s relations with China.</p><img src="https://counter.theconversation.com/content/97252/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Michelle Grattan speaks with Deep Saini about the week in politics.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/970282018-05-22T12:59:14Z2018-05-22T12:59:14ZView from The Hill: With apologies to Mathias, Hanson blows away government hopes on company tax<p>Not so long ago, new South Australian independent senator Tim Storer and Victorian crossbencher Derryn Hinch were set to be the pivotal players determining the fate of the government’s tax cut for big companies.</p>
<p>But after the evidence from the banking inquiry Hinch’s doubts about the measure hardened further, while Storer continued to <a href="https://theconversation.com/grattan-on-friday-tim-storer-the-35-billion-man-94178">agonise</a>.</p>
<p>The government then looked towards the Centre Alliance senators, Stirling Griff and Rex Patrick, for the two crucial numbers it needed. The rest of the votes were in the bag.</p>
<p>Only it turned out they weren’t. Pauline Hanson, who commands three Senate votes and thus a veto, has suddenly withdrawn the support she earlier pledged. Hanson has flipped-flopped before but she insists this is for real – that she won’t change her mind again.</p>
<p>Hanson says she’s “so disappointed in this government” after the budget it produced. She has a litany of complaints: inaction on debt; intransigence on immigration; the absence of changes to the petroleum resource rent tax; no appearance of promised apprenticeships, and many more.</p>
<p>Hanson denies her reneging is driven by her political needs in the Queensland seat of Longman, though that claim lacks credibility. Tax cuts for the wealthiest companies, including the banks, would hardly appeal to potential One Nation voters, and this byelection will be a test for Hanson’s party, just as it will be for Labor and the Coalition. Bill Shorten had already been exploiting her closeness to the government.</p>
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Read more:
<a href="https://theconversation.com/research-check-we-still-dont-have-proof-that-cutting-company-taxes-will-boost-jobs-and-wages-96012">Research check: we still don't have proof that cutting company taxes will boost jobs and wages</a>
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<p>As much as the Senate is unpredictable, this does look like the end of the government’s chances of getting its company tax package through parliament before the election.</p>
<p>Senate leader Mathias Cormann, the government’s chief negotiator, said he hoped “that this is not the last word” but admitted “it might well be that we won’t ever get there”.</p>
<p>Once again, Shorten has had a lucky break. The tax cut for big companies, which Labor has strenuously opposed, is still on the political agenda. If the Senate had passed it, Labor would have a diminished target.</p>
<p>It also remains on the books. Admittedly the cost is way into the future, but in these times when parties like to talk in terms of a decade, those notional future dollars are useful to Labor.</p>
<p>Also, if the package isn’t passed, Labor doesn’t have to cope with the question: how can you be sure a Shorten government could persuade a post-election Senate to repeal the cuts?</p>
<p>Most immediately, the opposition on Tuesday was making merry with questions about what “secret deal” the government had with Hanson to try to get the company tax cut through.</p>
<p>A Senate estimates hearing saw an angry clash between Labor’s Senate leader Penny Wong and Cormann, when Wong pursued whether the government was willing to meet Hanson’s various demands. As she went through these, Cormann retorted “I know that you always like channelling Senator Hanson”.</p>
<p>Wong, of Asian heritage, responded ferociously: “Don’t tell me I channel Pauline Hanson. I find that personally offensive. I can tell you what happened to me and my family and people like us, when she stood up in the parliament, possibly before you were here, saying Australia was in danger of being swamped by Asians. I will never do anything other than fight her.”</p>
<p>Cormann accused Wong of “confected outrage”; Wong countered “How dare you!”.</p>
<p>But a few hours later the two had made up.</p>
<p>Wong <a href="https://twitter.com/SenatorWong/status/998809311626256384">tweeted</a>: “I will never do anything other than stand up to Pauline Hanson and her views, but I know Mathias is one of the decent people in this Government and accept his assurance he did not mean to cause offence.”</p>
<p>Cormann <a href="https://twitter.com/MathiasCormann/status/998829986902495232">replied</a>: “While we are fierce political competitors, I value the fact that we always aim to engage in the political contest professionally and with courtesy and mutual respect.”</p>
<p>It’s notable how much genuine respect Cormann commands in a parliament characterised by the lack of it.</p>
<p>Hanson went out of her way to stress she wasn’t blaming Cormann for anything - “his colleagues and the government” had let him down, she said. She told her news conference, “I know he’s devastated”, and she’s said to be genuinely upset that she’s left him in the lurch.</p>
<p>The government says that if there’s not a new turn of Senate fortunes, it will take the company tax policy to the election.</p>
<p>Although some argue the measure should be ditched, which is the superficially attractive course, that would potentially bring fresh difficulties. Not only would it open a brawl with business, but it would undermine the economic argument the government has been making for two years. Killing an albatross can be a dangerous business.</p>
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Read more:
<a href="https://theconversation.com/grattan-on-friday-can-the-turnbull-government-make-the-election-all-about-tax-95670">Grattan on Friday: Can the Turnbull government make the election all about tax?</a>
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<p>It would, however, be popular with the public. Tuesday’s Essential poll reported that when people were asked which in a list of measures they would support to cut government spending, the top item nominated (on 60%) was “not providing company tax cuts for large business”.</p>
<p>The <a href="http://www.essentialvision.com.au/category/essentialreport">Essential poll</a> brought mixed news on the tax front for the government.</p>
<p>Asked to choose between the budget’s income tax plan and the alternative outlined by Shorten in his budget reply, Labor’s plan was preferred by 45% to 33%. On the other hand, Labor and the Coalition were equal (on 32% each) when people were asked which party they trusted most to manage a fair tax system.</p>
<p>Particularly interesting was the poll’s voting figure. The two-party Labor lead has now narrowed to 51-49% (compared with 52-48% in the last poll). This is the closest result since late 2016, and in line with the most recent Newspoll. It reinforces the point that the contest is tightening.</p><img src="https://counter.theconversation.com/content/97028/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As much as the Senate is unpredictable, this does look like the end of the government’s chances of getting its company tax package through parliament before the election.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/960122018-05-10T09:11:34Z2018-05-10T09:11:34ZResearch check: we still don’t have proof that cutting company taxes will boost jobs and wages<figure><img src="https://images.theconversation.com/files/218409/original/file-20180510-185500-guowse.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There still isn't clear research showing company tax cuts will increase employment or wages. </span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>If you read these headlines you might think we finally have proof that cutting company taxes will boost employment and investment: </p>
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<li><a href="http://www.afr.com/news/policy/tax/company-tax-cuts-work-according-to-firstever-real-time-local-study-20180502-h0zj2a#ixzz5EP2DdERx">Company tax cuts work, according to first-ever ‘real time’ local study</a></li>
<li><a href="http://www.abc.net.au/news/2018-05-03/small-business-company-tax-cuts-lifted-employment-but-not-wages/9720004?section=business">Small business company tax cuts boost jobs but not wages</a></li>
<li><a href="https://www.smh.com.au/politics/federal/half-the-australian-businesses-that-got-a-tax-cut-have-banked-the-cash-20180502-p4zcuo.html">Half the Australian businesses that got a tax cut have banked the cash</a></li>
<li><a href="https://www.theaustralian.com.au/national-affairs/treasury/company-tax-cuts-lift-jobs-growth-study-finds/news-story/d6df5700c5ff55fbe84c11e61d92c0d0">Company tax cuts lift jobs growth, study finds</a></li>
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<p>These stories are <a href="http://www.alphabeta.com/wp-content/uploads/2018/05/Xero-SBI-AlphaBeta-Tax-Report_May-2018.pdf">based on analysis of the 2015 company tax cut</a> by consultants AlphaBeta. But the study, as well as some of the media coverage of it, show a worrying misunderstanding of how company tax cuts work. </p>
<p>Simply comparing companies that receive a tax cut with those that don’t isn’t the right methodology to conclude that the 2015 tax cuts created more employment or higher wages.</p>
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Read more:
<a href="https://theconversation.com/there-isnt-solid-research-or-theory-to-support-cutting-corporate-taxes-to-boost-wages-92031">There isn't solid research or theory to support cutting corporate taxes to boost wages</a>
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<p>Cutting taxes lets companies <a href="https://theconversation.com/qantas-and-other-big-australian-businesses-are-investing-regardless-of-tax-cuts-90536">keep more of their profits</a>, allowing them to <a href="https://www.investopedia.com/terms/c/capitalexpenditure.asp">invest</a> in new equipment and premises for example. The company then needs to hire more workers to work with these new assets. The newly created jobs require businesses to compete for workers and this increased demand pushes up wages across the entire economy. </p>
<p>Suppose a retail company gets a tax cut and opens a new store. It advertises for workers, many of whom are already employed by a rival store that didn’t get the tax cut. The first company will need to offer the workers higher wages to entice them away. The rival store will need to consider matching the wages in order to keep the workers.</p>
<p>In other words, even workers in companies that don’t receive the tax cut should see a wage rise.</p>
<h2>Going through the AlphaBeta report</h2>
<p>In 2015, the federal government cut the tax rate from 30% to 28.5% for businesses with less than A$2 million in revenue. Eligible businesses saved <a href="http://www.alphabeta.com/wp-content/uploads/2018/05/Xero-SBI-AlphaBeta-Tax-Report_May-2018.pdf">around A$2,940</a> on average because of the tax cut. </p>
<p>AlphaBeta <a href="http://www.alphabeta.com/wp-content/uploads/2018/05/Xero-SBI-AlphaBeta-Tax-Report_May-2018.pdf">used</a> transaction data from 70,000 businesses to compare businesses just below the A$2 million threshold to companies that were just above it.</p>
<p>The analysis looked at the differences between the two groups of firms in terms of whether they hired new workers, invested in their businesses, increased worker wages, or kept some of the cash as a reserve. </p>
<p>AlphaBeta chalked any differences between companies that received the tax cut and those that didn’t to the company tax cuts. </p>
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Read more:
<a href="https://theconversation.com/the-full-story-on-company-tax-cuts-and-your-hip-pocket-59458">The full story on company tax cuts and your hip pocket</a>
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<p>As <a href="https://www.theaustralian.com.au/national-affairs/treasury/company-tax-cuts-lift-jobs-growth-study-finds/news-story/d6df5700c5ff55fbe84c11e61d92c0d0">reported in The Australian</a>, AlphaBeta found that companies that received the tax cut increased their employee headcount by 2.6%. The companies that didn’t receive the cut increased employment by just 2.1%. </p>
<p>This difference turned out to be “<a href="https://www.investopedia.com/terms/s/statistically_significant.asp">statistically significant</a>”, meaning it is very unlikely to be the result of random chance. </p>
<p>As the <a href="https://www.smh.com.au/politics/federal/half-the-australian-businesses-that-got-a-tax-cut-have-banked-the-cash-20180502-p4zcuo.html">Sydney Morning Herald pointed out</a>, AlphaBeta also concluded that 51% of the tax cut was kept as cash, 27% went towards new investment, but only 3% was paid to workers in higher wages.</p>
<p>In other words, wages increased by just <a href="http://www.abc.net.au/news/2018-05-03/small-business-company-tax-cuts-lifted-employment-but-not-wages/9720004?section=business">A$1.44 per week</a>. This is not only a small amount, it was also found to be not statistically significant.</p>
<h2>Problematic methodology</h2>
<p>The main issue with this study’s methodology is actually <a href="http://www.alphabeta.com/wp-content/uploads/2018/05/Xero-SBI-AlphaBeta-Tax-Report_May-2018.pdf">noted by AlphaBeta in the report itself</a> (and echoed in the coverage by the <a href="http://www.abc.net.au/news/2018-05-03/small-business-company-tax-cuts-lifted-employment-but-not-wages/9720004?section=business">ABC</a> and <a href="https://www.smh.com.au/politics/federal/half-the-australian-businesses-that-got-a-tax-cut-have-banked-the-cash-20180502-p4zcuo.html">Sydney Morning Herald</a>). </p>
<p>The problem is that we cannot draw any conclusions about the effect of company tax cuts on jobs or wages by studying a bunch of firms that received them and another bunch that did not, even if the firms are only slightly different. </p>
<p>This is because, as noted above, the effect of company tax cuts on jobs and wages take place in the entire labour market. An increase in demand for labour flows through to all business, and therefore, so do higher wages. </p>
<p>So we should not expect to see wages rising only in those businesses that receive the tax cuts. The finding that an increase in wages is small and insignificant is exactly what we would expect to see from this study.</p>
<p>Another problem is that we do not know whether the characteristics of the companies in AlphaBeta’s sample. Were some industries with particularly pronounced employment or wage increases over represented in one group but not the other, for instance? </p>
<p>Studying the effect of company tax cuts on employment and wages also requires a longer time period - <a href="https://www.sciencedirect.com/science/article/pii/S0014292112000451">sometimes years</a> - and careful control of other factors affecting jobs and wages in some firms relative to others. </p>
<h2>Blind review:</h2>
<p>The analysis in this review is generally fair and reaches a sound conclusion regarding the AlphaBeta report. However, the logic behind company tax cut raising wages is somewhat simplified. </p>
<p>A cut in company tax lowers the costs of production and can flow to labour, capital (including equipment and buildings) and consumers. Economics tells us that who actually benefits from a tax cut depends on what is more responsive to the tax – labour, capital or output. </p>
<p>The lower production costs from a company tax cut can lead to greater output and lower prices as consumers buy more goods and services. This depends, of course, on how responsive consumers are to changes in price. </p>
<p>In the short-run labour is more mobile than capital, which is usually regarded as fixed. Therefore, in the short-run most of the benefit is borne by owners of capital (the companies) in the form of higher after-tax profits.</p>
<p>However, over the longer term, companies invest their after-tax profits in the business. So most of the benefit of the tax cut goes to workers though higher wages as the increased “capital stock” (such as equipment) makes labour more productive. </p>
<p>It follows that there is no reason to expect a significant increase in wages over a period of one or two years (as the AlphaBeta report covers). Indeed, such a result would be somewhat surprising. <strong>- Phil Lewis</strong></p><img src="https://counter.theconversation.com/content/96012/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ross Guest has previously received funding from the Australian Research Council.</span></em></p><p class="fine-print"><em><span>
Phil Lewis does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article. He also has no relevant affiliations. During his career he has received funding from many private and public sector organisations including most recently the ARC, NCVER, DEEWR, the AFPC, ABLA and CPA Australia. </span></em></p>Comparing companies that receive a tax cut with those that don’t isn’t the right methodology to conclude that tax cuts create more employment or higher wages.Ross Guest, Professor of Economics and National Senior Teaching Fellow, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/959442018-05-08T20:13:53Z2018-05-08T20:13:53ZGovernment timing tricks hide the real budget story<figure><img src="https://images.theconversation.com/files/217921/original/file-20180507-46359-1xxvux1.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Timing tricks help politicians avoid dealing with the substance of their policies. That isn’t going to change any time soon.</span> <span class="attribution"><span class="source">Cindy Zhi</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>This year’s budget may not have had a whole lot of surprises, but it was chock full of crafty timing tricks. The government’s new personal income tax plan is implemented over seven years, the much-vaunted return to surplus begins in 2019-20, and support for the “smart economy” involves $2.4 billion over, wait for it, 12 years.</p>
<p>In fact, it seems that timing tricks are now a thing in Australian politics. Revenues are brought forward and spending pushed back for cosmetic effect.</p>
<p>The Coalition’s company tax cuts are scheduled to be implemented over a full decade, Labor’s plan to cut back on negative gearing has modest short-term impact on the budget but ramps up over time, and on and on.</p>
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<a href="https://theconversation.com/morrisons-budget-tax-plan-is-another-missed-opportunity-95943">Morrison’s budget tax plan is another missed opportunity</a>
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<p>This gradual, glide-path approach to fiscal policy is sometimes good, sometimes not so much.</p>
<p>Labor’s negative gearing plan is an example of where the long timeframe is both sensible and appropriate. By grandfathering in existing negatively geared properties the Labor plan ensures that folks who relied on existing tax arrangements when making investment plans are not punished. Similarly, current Coalition policy regarding raising the retirement age for the pension is not retrospective.</p>
<p>Protecting reliance interests in this way is important for both fairness and certainty. The principle applies equally to potential changes in superannuation taxation, indexation of the aged pension, and other budget measures past, present and future.</p>
<p>Having said that, both sides of politics could do a better job of protecting Australians who have relied on existing policy settings when making big decisions. The government’s changes to superannuation taxation last year clearly violated the principle, and Labor’s plan to curtail the use of franking credits also runs afoul of it.</p>
<p>But many of these timing tricks are just that—tricks. Take the company tax cut. It is clearly structured to make sure the big revenue hits happen in years eight to 10.</p>
<p>The hope seems to be that voters don’t focus on things that far into the future, but companies possibly do. Add to that the fact that the federal budget is heavily focused on a four-year horizon — the so-called “forward estimates period”.</p>
<p>Four years is a completely arbitrary time frame with no real economic basis. The idea is that it is far enough into the future to be meaningful, but close enough to the present to be predictable. In reality it is neither meaningful nor predictable. </p>
<p>Treasury forecasts are almost always overly optimistic. In the last 20 years of budgets, from both sides of politics, they are almost always wrong. </p>
<p>From Wayne Swan’s <a href="https://www.youtube.com/watch?v=i8hZ0wxSUV0">“the four years of surpluses I announce tonight”</a> to Joe Hockey’s hockey-stick GDP growth numbers and Scott Morrison’s fantastic forecasts, the federal budget makes Disney movies look pessimistic.</p>
<p>Yet this forward-estimate timing window, a media that goes along with it, and a public that is starved for time, mean that politicians can get away with pulling good news forward and pushing bad news back; gaming the system.</p>
<p>Indeed, since future parliaments are not bound by today’s legislation, I wonder whether there is any use at all for a government to announce what they plan to do 10 years hence. If history is any judge, then the political party in question probably won’t be in office. Prime ministers and treasurers have a tough enough time surviving to the next election, let alone making it through a decade.</p>
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<a href="https://theconversation.com/infographic-budget-2018-at-a-glance-95649">Infographic: Budget 2018 at a glance</a>
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<p>But there is a purpose to this long-term planning with legislative force. It creates a default that a future government needs to reverse. And we know from the Nobel-prize-winning <a href="https://www.aeaweb.org/articles?id=10.1257/jep.5.1.193">work of Danny Kahneman and Dick Thaler</a> that defaults can have a powerful psychological and behavioural effect — it can change the choices people make, and how they feel about those choices. </p>
<p>Speaking of defaults and timing, perhaps the most natural thing that could be done with regard to the federal budget would be to index tax brackets to wages growth. This would instantly do away with “bracket creep”, where wages growth and fixed tax thresholds lead middle Australia to pay an ever-increasing average tax rate. Governments of all stripes hate this because it forces them to actually raise taxes rather than get a free kick every year which folks tend not to notice very much. In fact, 80% of deficit reduction in recent years has come from such bracket creep.</p>
<p>Timing is likely to be a constant theme in the run-up to the next federal election. We can expect Labor to emphasise their $200 billion “war chest” that they plan to spend over the next decade. Equally, the government looks set to keep pushing the line that the big banks are paying more tax now and won’t get a tax cut until close to 2030.</p>
<p>Timing tricks help politicians avoid dealing with the substance of their policies. That isn’t going to change any time soon.</p><img src="https://counter.theconversation.com/content/95944/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It seems that timing tricks are now a thing in Australian politics. Revenues are brought forward and spending pushed back for cosmetic effect.Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/959432018-05-08T09:41:10Z2018-05-08T09:41:10ZMorrison’s budget tax plan is another missed opportunity<p>Even though <a href="https://www.budget.gov.au/">this year’s budget</a> is pretty good politics and reasonable economics, on almost every front, it is a missed opportunity to be bold. </p>
<p>Last year’s budget was a bank-bashing bombshell, with 4-5% of profits for five of Australia’s biggest banks yanked away, not for financial stability reasons, but because, as Treasurer Scott Morrison hinted at the budget press conference, people don’t like the banks very much.</p>
<p>With that populist mission accomplished, this year’s budget is more mundane. </p>
<p>The much-vaunted return to surplus is now planned for 2019-20 at just 0.1% of GDP. In 2017-18 we are told to expect a deficit of 1% of GDP ($18.2 billion). That’s before the forecast 3% real GDP growth from 2018-19 onward kicks in. An heroic assumption. </p>
<p>Compare that to an actual of 2.1% in 2016-17. That topline forecast is not insane, but it is certainly bullish. One is tempted to ask the Treasurer whether he would bet a year’s salary that real GDP will be above 3% compared to below that. I suspect he wouldn’t.</p>
<h2>A new personal income tax plan</h2>
<p>Having previously introduced, but not wholly managed to get through the Senate, a 10-year plan to reduce the company tax rate from 30% to 25%, this year the government has a seven-year “Personal Income Tax Plan”.</p>
<p>Under the “PIT plan” (pun absolutely intended) the number of tax brackets will be reduced from five to four. By 2024-25 the tax-free threshold will remain at $18,200 and a 19% tax rate will apply up to income of $41,000, at which point the 32.5% rate will kick in. The top marginal rate of 45% will apply to incomes above $200,000. </p>
<p>One good thing the plan does address (at least in part) is “bracket creep,” where wage growth coupled with fixed tax thresholds, leads taxpayers to pay more. Under the new plan, 94% of Australians will pay no more than a 32.5% marginal tax rate. That compares to 63% of Australians who pay that rate or less, under existing policy settings.</p>
<p>In terms of tax relief, it’s relatively modest. A person earning $50,000 will be $530 better off in 2018-19. Because of changes to the Low and Middle Income Tax Offset, this falls to $215 for someone earning $120,000 (and less still beyond that).</p>
<p>Now $530 post-tax dollars, for someone on $50,000 a year, isn’t nothing. But it doesn’t really make up for wage growth so sluggish (2.2% on average last year) that it barely keeps up with inflation.</p>
<p>This is all part of the government’s newly announced, but thoroughly leaked, mantra that taxes should be no more than 23.9% of GDP. The rationale is, as the budget papers put it “so we do not unfairly burden Australians, nor allow taxes to chase ill-disciplined spending”. </p>
<p>In some sense that’s a fair point, but the 23.9% is completely unscientific. It appears to be the average of what tax as a share of GDP was during the Howard government, which has left most economic commentators wondering “so what?”</p>
<h2>The black economy and superannuation</h2>
<p>There’s a “crackdown” on the black economy with a $10,000 limit on cash transactions. Who knows how that will be enforced. Perhaps our good friends the banks will start complying with anti-money laundering provisions. </p>
<p>In any case, I prefer a $0 limit on cash transactions by transitioning over three years to a cashless Australia. That would likely raise $5-6 billion a year every year, maybe more.</p>
<p>The sneakiest thing of all is taxing tobacco 12 weeks earlier upon entry into Australia, rather than at present when it leaves the warehouse. That will boost tax receipts once, and once only, in 2019-20 by $3.27 billion. Without that timing trick the return to surplus would be pushed back a year to 2020-21.</p>
<p>Having attacked retirement savings last year, the government is now “reuniting Australians with lost super”. Hard to be against that, but hard to get too excited either. Exit fees on superannuation accounts will also be banned, which is a very good idea and should help consolidation of accounts.</p>
<p>One step better would be making it a net zero cost to transfer all banking arrangements (mortgage, accounts, credit cards, etc) from one bank to another, through a mandate on banks and a subsidy for customers. That would help with competition in the banking sector, which has come under recent scrutiny.</p>
<p>Another small but sensible initiative is increasing the Pension Work Bonus from $250 to $300 per fortnight, which permits pensioners to earn up to that amount without affecting their pension eligibility.</p>
<p>On a more disappointing note there is a reasonably large amount of fanfare but very little substance about “backing regional Australia”. There is $200 million for a third round of the Building Better Regions Fund to support infrastructure on top of the $272 million from the Regional Growth Fund. </p>
<p>That’s fine but falls well short of a systematic plan for regional infrastructure and does not address regional unemployment, particularly youth unemployment, in a meaningful way. Tackling that would require the kind of place-based policies like targeted wage subsidies and reduced payroll taxes <a href="https://theconversation.com/the-government-should-pick-towns-not-industries-to-fund-78464">that I have advocated before</a>.</p>
<p>There are a host of so-called “integrity measures” to do with taxation. There’s the oft-talked about tightening of thin capitalisation rules, whereby companies load worldwide debt onto an Australian entity to increase interest charges in Australia, instead of in low taxing jurisdictions like Ireland. This is in addition to other attempts to get multinationals to pay more tax. These are more likely to get multinationals to pay lawyers more, but it’s now customary padding in every budget. </p>
<p>The forecasts are pretty rosy in this year’s budget, but they always are. Overall, it’s a hard budget to hate, and a hard budget to like. But it is a classic political pre-election budget.</p><img src="https://counter.theconversation.com/content/95943/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Even though this year’s budget is pretty good politics and reasonable economics, on almost every front, it is a missed opportunity to be bold.Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/944832018-04-27T02:02:11Z2018-04-27T02:02:11ZBudget policy check: do we need company tax cuts?<p><em>In this series - Budget policy checks - we look at the government’s justifications for policies likely to be in this year’s budget and measure them up against the evidence.</em></p>
<p><em>In this piece we look at the need for company tax cuts.</em></p>
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<p>Business investment in Australia declined steadily for four years after peaking in 2013. In early 2016, the Turnbull government settled on a series of company tax cuts as their preferred policy to reinvigorate business investment and the economy. </p>
<p><a href="http://www.copsmodels.com/elecpapr/g-260.htm">Our modelling shows</a> that a cut to the company tax rate for large businesses will indeed lift foreign investment in Australia, driving an economic expansion and an increase in pre-tax wages, but there is more to the story. </p>
<p>Like many policy changes, there are winners and losers. The give-and-take nature of the tax cut means that the <a href="https://theconversation.com/big-business-doesnt-want-to-talk-about-it-but-smes-lose-from-a-company-tax-cut-57965">“losers” from the tax cut</a> will be Australian-owned businesses and the Australian government. We find that despite the expansion in GDP, the average income of the Australian population (a more suitable measure of the material welfare of the population) will fall.</p>
<h2>Do we need investment to maintain jobs and economic growth?</h2>
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<p>The jobs growth figures last year – we all know now, more than 1,100 jobs a day – that’s had a really big impact on our economy and we can expect that to continue and now lead to – I would expect – better wage outcomes as long as businesses keep investing and businesses can keep remaining competitive.</p>
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<p><em><strong>- Treasurer Scott Morrison</strong></em></p>
<p>More investment creates more buildings, equipment and intangible assets that enable workers to be more productive and, in theory, earn higher wages. </p>
<p>If investment is weak for a prolonged period, job opportunities are reduced and wage growth will weaken. </p>
<p>In a well-functioning economy, population growth and technological progress naturally attract investment. When investment only keeps pace with population or employment growth, wages stagnate. For wages to grow, investment needs to be above this level. This happens when there is technological progress, generating the higher returns which attract the level of investment needed. </p>
<p>Australian investment depends largely on foreign finance, so world economic conditions, including rates of corporate tax in other countries, also play a role.</p>
<p>In reality the link between investment and wages is not always clear cut. If unemployment or underemployment is high, investment may lead to growth in jobs without wage growth. </p>
<p>Businesses might also make profits in excess of a “normal” rate of return. These profits exist when new businesses struggle to break into a market dominated by a few large players, and can be an impediment to wage growth. </p>
<p>Even if you do accept that higher investment does lead to higher wages, giving tax cuts to companies to stimulate investment is not justified on this basis. </p>
<p>If company taxes are cut there will be significant costs to government revenue that amount to a “windfall gain” to the (mostly foreign-owned) investments that have already been made on the basis of the 30% tax rate. On balance, the positive impact on growth and wages is not enough to justify the loss of this revenue.</p>
<h2>Is there a problem with business investment in Australia?</h2>
<blockquote>
<p>Business investment is critical to economic growth. When firms are empowered to invest in new productive capacity and technology, it supports innovation and helps create new opportunities and employment for Australians.</p>
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<p><em><strong>- Treasurer Scott Morrison</strong></em></p>
<p>Business investment is now showing signs of picking up. <a href="https://www.rba.gov.au/speeches/2017/sp-dg-2017-11-13.html">In a speech</a> late last year, Reserve Bank deputy governor Guy Debelle saw “signs of life” in investment growth, particularly in the services sector and in infrastructure projects completed by the private sector on behalf of the public sector.</p>
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<p><a href="https://grattan.edu.au/report/stagnation-nation/">A Grattan Institute report</a> identifies four very good reasons for the four-year decline. These include a return to “normal” investment following the mining boom and an overall decline in the amount of money needed to create capital goods in most industries. The report also points to an ongoing shift towards households spending more on services such as retail, cafes, and professional services and slow economic growth overall.</p>
<p>Viewed in this light, there are plausible and benign reasons underlying the decline in investment. These suggest that it is not a large enough problem to justify “repair” in the form of a costly tax cut.</p>
<h2>What’s the verdict?</h2>
<p>Certainly business investment has weakened over the last five years, and along with this we have seen weak wage growth. It would be foolhardy to argue against the need for more business investment. Jobs and growth underpinned by a healthy level of investment are essential aspects of a modern society. </p>
<p>But cutting the company tax rate is not the way to go. It may deliver more business investment and economic activity, but by forgoing taxation revenue from existing investment, it comes at a cost to the average income of the Australian people.</p>
<p>To reap the benefits of strong business investment without a costly tax giveaway, Australia must continue to play to its strengths. Reducing the government revenue base through a cut to company tax will undermine the sort of stable, prosperous society that underpins the world-class environment that we strive to offer all investors.</p><img src="https://counter.theconversation.com/content/94483/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Janine Dixon does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>To reap the benefits of strong business investment without a costly tax giveaway, Australia must continue to play to its strengths.Janine Dixon, Economist at Centre of Policy Studies, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/941782018-03-29T11:11:27Z2018-03-29T11:11:27ZGrattan on Friday: Tim Storer, the $35 billion man<p>Put yourself in the shoes of Tim Storer. The accidental senator from South Australia has one hell of a decision to make shortly after the May budget, when the government plans to <a href="https://theconversation.com/government-defers-company-tax-cut-vote-for-want-of-numbers-94038">bring back</a> its legislation to give tax cuts to big business.</p>
<p>A week ago the Coalition’s fairly confident hopes rested on Storer voting in favour of its A$35.6 billion package. A deal with Victorian crossbencher Derryn Hinch, whose vote also had to be secured, was seen as doable. Then Storer baulked, and the legislation’s future has again become anybody’s guess.</p>
<p>Think of the situation from Storer’s perspective. He has literally just arrived in the Senate, elected to replace a Nick Xenophon Team (NXT) <a href="https://theconversation.com/citizenship-crisis-claims-nick-xenophon-teams-kakoschke-moore-87935">victim of the citizenship crisis</a> but sitting as an independent because of a stoush with his former party.</p>
<p>It’s amazing he’s there at all, and he’s not likely to be there long – one can’t see him re-elected next year. Now he has life-or-death sway over a key measure the government took to the 2016 poll. He has to ask himself whether he should use the extraordinary power that bizarre circumstances have given him to frustrate legislation on which the Coalition can argue it has a mandate.</p>
<p>On the other hand, as he said in his <a href="https://theconversation.com/senate-newcomer-tim-storer-plays-hardball-on-company-tax-94121">Wednesday Senate statement</a> outlining his doubts about the bill, he is concerned about whether the budget can afford the cuts. And then, he noted, there’s the question of whether the money could be better spent on other things – infrastructure and the like.</p>
<p>When he was sworn in last week, Storer was escorted by the government and opposition Senate leaders, Mathias Cormann and Penny Wong. He chose his escorts. It was to signal his independence, and perhaps to flag that he saw himself as an active player.</p>
<p>He brings to the huge decision before him training in economics, and experience of business, especially in Asia. That presumably helps with evaluating the argument the government makes about the competitive importance of these cuts.</p>
<p>He also comes from a state with a history of federal politicians who focus locally when there are Commonwealth dollars to be had. Nick Xenophon <a href="https://www.smh.com.au/national/42b-stimulus-package-rudd-cuts-a-deal-with-xenophon-20090213-86jw.html">once held up</a> the Rudd government’s $42 billion economic stimulus package while he extracted water concessions that would benefit South Australia.</p>
<p>While Storer has been willing to engage with the government, and will continue to do so, if he eventually voted no, he’d be in line with his former party. The two NXT senators are opposed, despite the government trying to lure them. </p>
<p>Labor, fighting the tax cuts, also observes Storer’s <a href="https://www.theaustralian.com.au/national-affairs/alp-links-189vote-senator-tim-storer-blocking-tax-reform/news-story/6a6335b77118c448d888676e8b94ba1b">past ALP membership</a> as a sign of his general political orientation and thus perhaps a clue to his final decision.</p>
<p>But the government hopes more talking, more incentives, and perhaps the content of the budget might be enough to persuade him.</p>
<p>Parliament is off until the May 8 budget, when attention will turn from company tax to the government’s income tax plans – which are crucial as it tries to improve the community mood for the election due before mid-next year.</p>
<p>Politically, the budget will be preceded by a media feeding frenzy around the <a href="https://theconversation.com/coalition-trails-47-53-in-29th-consecutive-newspoll-loss-93940">next Newspoll</a> that – barring a miracle for Malcolm Turnbull – will be the 30th in which the Coalition trails Labor.</p>
<p>This will be a diversion, as attention harks back to Turnbull’s invoking 30 Newspolls against Tony Abbott. But with no challenger in sight, it won’t be a decisive moment – just another bout of bad publicity to be endured.</p>
<p>Abbott no doubt will make the most of it. But the more time that passes, the less relevance the former prime minister seems to have, despite a <a href="http://www.afr.com/news/politics/national/tony-abbott-may-be-lining-up-a-new-job-opposition-leader-20180315-h0xipo">speculative story</a> this week that he might he positioning for a tilt at the opposition leadership if Turnbull loses the election.</p>
<p>Abbott’s <a href="https://theconversation.com/australia-would-be-better-if-wed-heeded-pauline-hansons-message-more-tony-abbott-94030">decision to launch</a> Pauline Hanson’s book of speeches this week was eccentric and ill-judged. </p>
<p>Can anyone forget his toxic view of her two decades ago, when he established a fund to facilitate legal actions against One Nation and she ultimately ended up in jail? Now he is saying that “if over the last two decades we had been more ready to heed the message of people like Pauline Hanson and less quick to shoot the messenger, I think we would be a better country today”. The bitter enemies have turned into kissing cousins.</p>
<p>Hanson might have mellowed slightly second time around, and she is certainly helping the government in the Senate. But her politics should still be condemned by Liberals, certainly not given the sort of qualified endorsement Abbott extended.</p>
<p>Abbott said the only way the Coalition could win the election was if it could harvest One Nation’s preferences, and “if I can make that more likely, that is a very positive contribution that I can make to the prospects of the Turnbull government”.</p>
<p>His remarks at the book launch suggested a mix of conviction and expediency – regardless, they further fuel cynicism about our politicians.</p>
<p>Speaking of cynicism, one couldn’t miss how quickly some observers segued from the cricket scandal to political behaviour. But as they (rightly) criticise the errant Australian players, politicians would prefer to overlook awkward parallels with conduct in politics – for instance the endemic tampering with the ball of truth.</p>
<p>On Tuesday a fired-up Turnbull told a news conference: “I think there has to be the strongest action taken against this practice of sledging. It has got right out of control, it should have no place … on a cricket field.”</p>
<p>Absolutely. And also it has got out of control on the political field. But when a journalist interjected with “doesn’t it happen in parliament?”, Turnbull chose to let that pass without response.</p><img src="https://counter.theconversation.com/content/94178/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Tim Storer has one hell of a decision to make shortly after the May budget, when the government plans to bring back its legislation to give tax cuts to big business.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/938572018-03-23T04:48:41Z2018-03-23T04:48:41ZVIDEO: Michelle Grattan on musical chairs in the Senate<figure><img src="https://images.theconversation.com/files/211670/original/file-20180323-54875-baxsx9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Mathias Cormann congratulates new Senate arrival Amanda Stoker, who replaces George Brandis.</span> <span class="attribution"><span class="source">Mick Tsikas/AAP</span></span></figcaption></figure><figure>
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<p>Michelle Grattan speaks with Deep Saini about the week in Australian politics. They discuss the fallout from Super Saturday – Labor’s win in the Batman byelection against the Greens, and the Liberals’ victory over the longstanding Labor government in South Australia. They also talk about the government’s negotiations with the changed composition in the Senate to pass their tax cuts for big companies.</p><img src="https://counter.theconversation.com/content/93857/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Michelle Grattan speaks with Deep Saini about the week in Australian politics.Michelle Grattan, Professorial Fellow, University of CanberraPaddy Nixon, Vice-Chancellor and President, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/938092018-03-22T11:03:21Z2018-03-22T11:03:21ZGrattan on Friday: New players in ‘Bradbury’ Senate a gift to government’s company tax cut prospects<p>Yet another new Senate crossbencher was sworn in this week. But like several other recent arrivals, Tim Storer is not in the clothes he wore when he was elected.</p>
<p>Storer, from South Australia, replaced a former senator from the Nick Xenophon Team (NXT), <a href="https://theconversation.com/citizenship-crisis-claims-nick-xenophon-teams-kakoschke-moore-87935">Skye Kakoschke-Moore</a>, a casualty of the citizenship saga. Storer had been fourth on the NXT ticket. By the time he arrived in Canberra, he had fallen out with the party and so he is an independent.</p>
<p>As a free floater, he has become a key to the government’s suddenly improved prospects of passing its tax cuts for big companies, which would take their tax rate from 30% to 25% by 2026-27. Settling into his new surrounds, Storer had the adrenaline hit of being targeted by government, opposition and vested interests ahead of the tax vote, due next week.</p>
<p>These A$35.6 billion worth of business tax cuts – part of the government’s $65 billion ten-year package and applying to companies with turnovers above $50 million annually – were effectively dead last year. Now, because of the Senate’s goings and comings, they’re seen to have a good chance of passing, with the crossbench negotiations being run by the infinitely patient and usually effective Mathias Cormann, finance minister and Senate leader.</p>
<p>With Labor and Greens opposed to the cut, the government needs nine of the 11 non-Greens crossbenchers. If Storer had stayed with the NXT, the legislation would still be dead, because the NXT, opposed to cuts for large companies, would have retained the numbers to stop it. Without him, the NXT has gone from three to two senators and so lost its veto power.</p>
<p>This Senate is without doubt the strangest in our history. Of the 20 original crossbenchers (including nine Greens) elected at the 2016 double dissolution, only 12 are still there.</p>
<p>Two Greens (Scott Ludlam, Larissa Waters), two from One Nation (Malcolm Roberts, Rod Culleton), two from the Nick Xenophon Team (Nick Xenophon, Kakoschke-Moore), <a href="https://theconversation.com/explainer-why-the-high-court-ruled-bob-days-election-to-the-senate-invalid-75556">Bob Day</a> (from the now-defunct Family First) and <a href="https://theconversation.com/lambies-senate-replacement-steve-martin-flags-that-he-wont-stand-aside-91333">Jacqui Lambie</a> (Jacqui Lambie Network) are out of the parliament. All but one were felled by various parts of the Constitution’s Section 44. Xenophon (whose citizenship received a tick from the High Court) resigned to try his fortunes in the South Australian election, a move that <a href="https://theconversation.com/liberals-win-south-australian-election-as-xenophon-crushed-while-labor-stuns-the-greens-in-batman-93355">didn’t turn out so well</a>.</p>
<p>Since the 2016 election, there has been movement between the Liberal Party and the crossbench. Cory Bernardi quit the Liberals, and now sits as an Australian Conservative. Lucy Gichuhi, the next on the Family First ticket, replaced Day – she sat first as an independent and then joined the Liberals.</p>
<p>Of the 11 of the current non-Greens crossbench, only five were sitting there at the start of the term – two Hansonites (Pauline Hanson, Brian Burston), Stirling Griff from the NXT, Derryn Hinch of the Justice Party, and Liberal Democrat David Leyonhjelm.</p>
<p>Five of the other six came into parliament since the election: Rex Patrick (NXT), Peter Georgiou (One Nation), Fraser Anning, a One Nation replacement who immediately declared himself an independent, Steve Martin, who replaced Lambie but sits as an independent, and Storer. Only Bernardi was elected in 2016.</p>
<p>Martin was a gift for the government – he quickly announced he supports the tax legislation, to which Lambie was opposed. In his <a href="http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansards%2F498dc2d9-bf91-4bc6-af04-1b3b5fe0a794%2F0242%22">maiden speech</a> this week, Martin quoted a headline in his local paper, The Advocate, describing him as “Bradbury of the Senate”, a reference to the Australian speed-skater Steven Bradbury who won Olympic gold in 2002 when all the other racers crashed out.</p>
<p>“We now have a small army of Bradburys in this chamber, thanks to Section 44 of the Constitution,” he said, in what’s becoming a popular joke around the upper house.</p>
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<p>The Coalition and Labor have had their parliamentary exits and entries, but we’ll avoid further complicating the story except for noting a couple of points.</p>
<p>The Coalition now has the same numbers (30) as after the election – the acquisition of Gichuhi cancelling out the loss of Bernardi. But within the Coalition, the Nationals lost one to the Liberals, after the High Court struck down Fiona Nash, who was replaced by Liberal Jim Molan. </p>
<p>Storer wasn’t the only arrival this week. Amanda Stoker, from the Queensland Liberal National Party, was sworn in to replace former attorney-general <a href="https://theconversation.com/george-brandis-warns-liberals-against-rise-of-populist-right-91408">George Brandis</a>, the new high commissioner to the UK.</p>
<p>In the tax negotiations, by Thursday the government had seven of the required nine votes in the bag. Hanson had been brought on board. One Nation was previously opposed, but Hanson was persuaded by funds for apprenticeships and influenced by the Trump cuts, saying “a lot of the companies [in the US] now are actually starting to employ more people”.</p>
<p>Only Hinch and Storer are needed now. Storer has an extraordinary opportunity to win concessions in his first parliamentary fortnight.</p>
<p>If the government clinches the legislation it will be a major victory – with its own irony. The citizenship crisis, which caused the Coalition so much grief, will have facilitated the passage, through bringing in key new players (notably Martin and Storer) more open to the policy or to negotiation than those they replaced.</p>
<p>Passage would complicate Labor’s situation. The ALP has yet to announce what it would do about the cuts already legislated for small- and medium-sized businesses – it is expected to want to confine these to smaller companies. </p>
<p>Given all it has said, presumably Labor would commit to repeal this second tranche, using the savings for other things. But could it get the repeal through a post-election Senate? And before the election, an undertaking to repeal would make for bad relations with big business.</p>
<p>Senate President Scott Ryan (whose predecessor, Stephen Parry, quit in the citizenship crisis) tweeted on Thursday that the Senate now has its complete membership for the first time since Ludlam’s resignation last July.</p>
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<p>But nobody should become too complacent. The High Court is considering the future of Labor’s ACT senator Katy Gallagher, who <a href="https://theconversation.com/shadow-minister-katy-gallagher-was-british-when-she-nominated-for-2016-election-88594">did not have her renunciation</a> of British citizenship confirmed until after she nominated. That judgment will decide whether we see another “Bradbury” arrive.</p><img src="https://counter.theconversation.com/content/93809/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>If the government clinches the tax cut legislation it will be a major victory – with its own irony.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/930062018-03-13T18:59:29Z2018-03-13T18:59:29ZThe US isn’t a shining example for Australia when it comes to jobs<p>A booming economy is part of the sales pitch for company tax cuts in Australia. And the strong performance of the low-tax US economy is <a href="https://www.theaustralian.com.au/national-affairs/us-tax-reform-underlines-benefit-of-company-tax-cuts-turnbull/news-story/11aa722ce1a6e96ec8421a39e2d55834">held up as evidence to support this</a>. </p>
<p>Take the example of unemployment rates – where a comparison between the US and Australia appears to show a US labour market roaring back into life, while the Australian labour market has remained sluggish. But appearances can be deceiving. </p>
<p>If we examine the proportion of people employed in Australia, as compared to the US, there is a very different story.</p>
<h2>Comparing employment rates in the US and Australia</h2>
<p>During the global financial crisis, the <a href="https://data.bls.gov/timeseries/LNS14000000">US unemployment rate</a> rose from 5 to 10%. Since then, however, it has steadily fallen to its current level of only 4%. So high unemployment in the US seems a thing of the past – a temporary false step in the progress of the world’s most dynamic economy. </p>
<p>Compare this to the situation in Australia. The <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6202.0Jan%202018?OpenDocument">rate of unemployment</a> during the global financial crisis rose by only a small amount, from 4 to 6%. But, in contrast to the US, after that time in Australia it has hardly moved. </p>
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<p>The rate of unemployment in a country is equal to the ratio of the number of people unemployed and the number of people in the labour force. The labour force equals employment plus unemployment; that is, people who are in jobs plus people who are not employed and actively seeking work. </p>
<p>Suppose, for example, that in a country there are 90 people who are employed and 10 who are unemployed. This means that the labour force is 100 people and the rate of unemployment in the country is then 10%.</p>
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<a href="https://theconversation.com/the-growing-skills-gap-between-jobs-in-australian-cities-and-the-regions-88477">The growing skills gap between jobs in Australian cities and the regions</a>
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<p>This definition of the rate of unemployment means that it can decrease in two ways. </p>
<p>First, an increase in employment, keeping the size of the labour force constant, will cause a reduction in unemployment and hence in the rate of unemployment. This is the way we would most often think of the rate of unemployment being reduced.</p>
<p>But there is also a second way this can happen. A decrease in the labour force, holding constant the number of people employed, will also shrink the number of people unemployed and the rate of unemployment. </p>
<h2>Why labour force participation matters</h2>
<p>Understanding whether it’s rising employment or decreasing labour force participation behind a falling unemployment rate matters – because they say very different things about what is happening in the economy.</p>
<p>Rising employment means a growing economy – where the rate of unemployment is decreasing because extra jobs are available. By contrast, decreasing labour force participation means that jobseekers who want to work are actually stopping actively looking for jobs – so the decreased rate of unemployment is explained by a lack of jobs.</p>
<p>Between the onset of the global financial crisis and the end of 2017, the <a href="https://data.bls.gov/timeseries/LNS12300000">proportion of the US population</a> aged 16 and above who were employed fell by 2.7 percentage points. Over the same period the proportion of that population who were in the labour force (employed or looking for a job) decreased by 3.3 percentage points. </p>
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<p>So the rate of unemployment in the US decreased because jobseekers were stopping looking for work – rather than because a larger proportion of the population were able to find jobs. There is little sign of a US labour market roaring back into life.</p>
<p>Compare this to Australia <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6202.0Jan%202018?OpenDocument">where the proportion of the Australian population</a> aged 15 and above who were employed fell by 0.9 of a percentage point, only about one-third of the decrease in the US. {Same source as table below} </p>
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<p>Meanwhile, the proportion of the population who were in the labour force in Australia remained steady, compared to the large decline in the US. </p>
<p>So if we were judging economic performance by the labour market over the past decade, it’s the Australian economy that has had the superior performance. </p>
<p>Australia’s rate of unemployment may have moved upward, compared to the falling rate in the US. But it has experienced a much smaller decline in the proportion of its population who are employed. </p>
<p>And its rate of unemployment is higher today only because unemployed jobseekers have retained the motivation to actively look for work, while many US jobseekers have withdrawn from the labour market.</p><img src="https://counter.theconversation.com/content/93006/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeff Borland receives funding from the Australian Research Council.</span></em></p>Unemployment rates have risen in Australia while falling in the US. But Australia has experienced a much smaller decline in the proportion of its population who are in work.Jeff Borland, Professor of Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/927392018-03-07T19:24:51Z2018-03-07T19:24:51ZHow the government can pay for its proposed company tax cuts<figure><img src="https://images.theconversation.com/files/209222/original/file-20180307-146703-12sxaj4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The government is still attempting to lower the corporate tax rate to compete globally. </span> <span class="attribution"><span class="source">Ben Rushton/AAP</span></span></figcaption></figure><p>There are ways the government can pay for a cut in the company tax rate. In <a href="https://taxpolicy.crawford.anu.edu.au/publication/ttpi-working-papers/12216/australias-company-tax-options-fiscally-sustainable-reform">a recent working paper</a>, we worked with researcher Chris Murphy <a href="https://taxpolicy.crawford.anu.edu.au/publication/ttpi-working-papers/12211/modelling-australian-corporate-tax-reforms-updated-recent-us">to model three different options</a>: reforming Australia’s <a href="https://www.ato.gov.au/Business/Imputation/">system of giving shareholders tax credits</a>, allowing less tax deductions on interest for companies, and introducing a tax on the super-profits of banks and miners.</p>
<p>After taking economic growth into account, the budget cost of the tax cut could be <a href="https://taxpolicy.crawford.anu.edu.au/publication/ttpi-working-papers/12211/modelling-australian-corporate-tax-reforms-updated-recent-us">net A$5 billion</a> a year. </p>
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<a href="https://theconversation.com/race-to-the-bottom-on-company-tax-cuts-wont-stop-tax-avoidance-69209">Race to the bottom on company tax cuts won't stop tax avoidance</a>
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<p>In the US, a company tax cut to 21% continues an inexorable global trend of cutting rates, making international tax competition even more pressing. As our working paper noted, Australia’s rate is now higher than most other countries, making tax avoidance even more attractive and deterring inbound foreign investment.</p>
<p>A cut in the Australian company tax rate to 25 or even 20% is important because it will attract foreign investment, <a href="https://theconversation.com/explainer-how-company-versus-personal-tax-cuts-boost-the-economy-56497">boosting wages and the economy</a> in Australia. </p>
<h2>Remove dividend imputation</h2>
<p>Australia has an unusual system of integrated company and personal tax, called <a href="https://www.ato.gov.au/Business/Imputation/">dividend imputation</a>. It has been in place since the 1980s. </p>
<p>Australian shareholders receive franking (imputation) credits for company tax. If shareholders are on a personal tax rate less than 30%, they receive a refund.</p>
<p>The company tax cut could be financed by removing dividend imputation. Our modelling indicates a company tax rate of 20% would mean the government breaks even, while halving imputation could finance a 25% rate. </p>
<p>It would be simpler to abolish dividend imputation and replace it with a discount for dividend tax, at the personal level.</p>
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Read more:
<a href="https://theconversation.com/qantas-and-other-big-australian-businesses-are-investing-regardless-of-tax-cuts-90536">Qantas and other big Australian businesses are investing regardless of tax cuts</a>
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<p>Dividend imputation only makes sense if we assume Australia is a closed economy with no foreign investors. In reality, Australia depends on <a href="https://www.rba.gov.au/publications/bulletin/2017/jun/3.html">inflows of foreign investment</a>. About one-third of the corporate sector <a href="https://taxpolicy.crawford.anu.edu.au/publication/ttpi-working-papers/12211/modelling-australian-corporate-tax-reforms-updated-recent-us">is foreign owned</a>.</p>
<p>The likely source of additional finance, especially for large Australian businesses, is a foreigner who does not benefit from dividend imputation. So the company tax pushes up the cost of capital and domestic investors benefit from franking credits for a tax they don’t actually bear.</p>
<p>But the politics of making a change to the system are difficult, because domestic investors, especially retirees on low incomes and superannuation funds would lose out. But this approach could benefit workers, jobs and Australian businesses.</p>
<h2>Broaden company tax by removing interest deductibility for companies</h2>
<p>Another approach is to remove or limit deductibility of interest for companies. This can raise the same revenue at a lower rate, by allowing less deductions. Excessive interest deductions are used by multinationals to reduce their Australian tax bill, as shown in the recent <a href="https://www.taxinstitute.com.au/news/chevron-case-ato-wins-landmark-transfer-pricing-case">Chevron case</a>. </p>
<p>This would be like imposing a withholding tax on interest paid offshore. We explore a comprehensive business income tax on all corporate income. Modelling shows that this tax would finance the rate cut to 25%. </p>
<p>The comprehensive business income tax raises some difficult issues for taxing banks. This is because their profit is interest income less interest expense. </p>
<p>But there are numerous policies to restrict interest deductions already in place, here and around the world. These restrictions could be expanded. For example the <a href="https://www.ato.gov.au/Business/Thin-capitalisation/">thin capitalisation</a> rules limit of the amount of loans a business can have relative to equity.</p>
<p>We still need anti-abuse rules because businesses can use other methods to minimise tax, as canvassed by the OECD in its <a href="http://www.oecd.org/tax/beps/">Base Erosion and Profit Shifting</a> project, including transfer pricing, and deductible payments offshore for intellectual property fees. </p>
<h2>A rent tax or allowance for equity</h2>
<p>A third option for a company tax cut is to change to a tax with a lower <a href="https://taxpolicy.crawford.anu.edu.au/files/uploads/taxstudies_crawford_anu_edu_au/2015-05/ttpi_chapter5.pdf">effective marginal rate</a>. This means that the return on a new investment is taxed less heavily than under a company income tax.</p>
<p>We could introduce an allowance for corporate equity, or corporate capital, which provides a deduction for the “normal” or risk-free return for capital investment. This is also called an economic rent tax because it only taxes the above-normal profit.</p>
<p>Modelling shows that the allowance for corporate capital encourages new investment, which helps economic growth, but there is a large budget cost. The extra deduction reduces the overall tax take and so a higher rate is needed for the same revenue. </p>
<p>It is unlikely Australia would want to maintain or increase our company tax rate, as this directly contrary to the global trend and can lead to even more tax planning by businesses. </p>
<p>For Australia, a supplementary rent tax aimed at the financial and mining sectors – where above-normal returns are known to occur – could be combined with a lower company income tax. Modelling this option for the finance sector shows a large welfare gain and sufficient revenue to fund the rate cut to 25%.</p>
<h2>The government has a lot of choices</h2>
<p>We show that the government has many options available to finance the needed corporate rate cut and improve efficiency of the company tax. </p>
<p>Policymakers could mix and match these options. Dividend imputation could be replaced with a discount and combined with a comprehensive business income tax. Limits on interest deductibility could be combined with a part allowance for corporate capital. </p>
<p>Replacing dividend imputation with a dividend discount at the personal level could be the best initial step. Other options for major reform of Australia’s company tax need to remain on the table, as company taxes drop to a new low and systems are reformed around the world.</p><img src="https://counter.theconversation.com/content/92739/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Miranda Stewart receives funding from the Australian Research Council.</span></em></p><p class="fine-print"><em><span>David Ingles does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A cut in the Australian company tax rate to 25 or even 20% is important because it will attract foreign investment, boosting wages and the economy in AustraliaDavid Ingles, Senior Research Fellow, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National UniversityMiranda Stewart, Professor and Director, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/920442018-02-20T03:39:04Z2018-02-20T03:39:04ZA public broadcaster that bows to political pressure isn’t doing its job<figure><img src="https://images.theconversation.com/files/207016/original/file-20180219-116330-15nphvn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The ABC's independence is a global concern.</span> <span class="attribution"><span class="source">AAP/Joel Carrett</span></span></figcaption></figure><p>The ABC’s chief economics correspondent, Emma Alberici, did her job the other day. She wrote a well-researched <a href="https://johnmenadue.com/emma-alberici-theres-no-case-for-a-corporate-tax-cut-when-one-in-five-of-australias-top-companies-dont-pay-it/">analysis piece</a> investigating whether the Turnbull government’s proposed company tax cuts would grow the economy and break Australia’s wages deadlock. </p>
<p>Alberici’s article came in for a lot of criticism from the Turnbull government for its one-sidedness and lack of balance. Later, the ABC took down the article from its website.</p>
<p>If you read <a href="https://johnmenadue.com/emma-alberici-theres-no-case-for-a-corporate-tax-cut-when-one-in-five-of-australias-top-companies-dont-pay-it/">her piece</a>, you’ll see that, yes, she could have included more voices, and yes, the case for company tax cuts was forcefully argued against. But the argument and analysis was built on sound research, as Saul Eslake (one of Australia’s most senior and respected independent economists, who was quoted in Alberici’s story) <a href="http://www.abc.net.au/mediawatch/transcripts/s4805870.htm">has pointed out</a>.</p>
<p>So, why on earth did ABC take the article down? </p>
<p>Part of the answer to this lies in the very editorial policies that are supposed to safeguard the ABC’s independence. The current wording of these polices function as a straitjacket on ABC journalists and make it <a href="http://www.abc.net.au/mediawatch/transcripts/s4805870.htm">hard for them</a> to toe the line between analysis and opinion.</p>
<p>And that in turn makes the ABC look less independent.</p>
<h2>High level of trust</h2>
<p>One of the ABC’s greatest assets is the high <a href="https://mumbrella.com.au/trust-in-daily-and-local-newspapers-on-a-steady-decline-according-to-essential-research-432670">public trust</a> it enjoys compared to many of its commercial media competitors. </p>
<p>That trust is to a large extent built on the broadcaster maintaining and defending its independence from commercial, political and any other societal interests.</p>
<p>There are a lot of misconceptions regarding what a public broadcaster is. But one thing it is not is a government or state broadcaster. </p>
<p>There are certainly examples of some public broadcasters that are. One prominent recent case was when the Polish government in practice <a href="https://af.reuters.com/article/worldNews/idAFKCN0US2IC20160114">took control</a> of the country’s public broadcaster and turned it into a government mouthpiece.</p>
<h2>A serious case of self-doubt</h2>
<p>The ABC Act and the <a href="http://www6.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/abca1983361/s6.html">ABC Charter</a> are the safeguards of ABC’s independence from the government of the day. This independence was challenged to unprecedented levels <a href="https://theconversation.com/crude-tone-of-attacks-is-new-but-softening-up-the-abc-for-cuts-isnt-25993">by the Abbott government</a> a few years ago.</p>
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Read more:
<a href="https://theconversation.com/crude-tone-of-attacks-is-new-but-softening-up-the-abc-for-cuts-isnt-25993">Crude tone of attacks is new, but softening up the ABC for cuts isn't</a>
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<p>A new major challenge to the ABC’s independence is the <a href="http://www.smh.com.au/federal-politics/political-news/abc-sbs-funding-could-unlock-media-reform-say-greens-20170815-gxwgrq.html">current change</a>, driven by One Nation, to the ABC Charter requiring it to be “fair” and “balanced” in its reporting. If you recognise these terms, that’s because it used to be Fox News’ catchphrase.</p>
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Read more:
<a href="https://theconversation.com/how-the-government-and-one-nation-may-use-media-reforms-to-clip-the-abcs-wings-84615">How the government and One Nation may use media reforms to clip the ABC's wings</a>
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<p>The ABC is not turning into the Polish Broadcasting Corporation, but it has clearly lost a lot of confidence lately. In Alberici’s case, it appears it <a href="http://www.abc.net.au/mediawatch/transcripts/s4805870.htm">bowed to government pressure</a> when it should have stood its ground. </p>
<p>But getting heat from the government of the day (regardless of the particular side of politics) is an indication that a public broadcaster is doing its most important job (provided you get your facts right): holding power to account. If you bow to political pressure, you’re not doing your job.</p>
<p>A public broadcaster with a confidence problem is a serious issue for political and democratic wellbeing.</p>
<p>Globally, there are between ten and 15 properly funded public broadcasters (depending on what level of funding you define as proper) with enough funding and safeguards to be able to call themselves editorially independent. This means there are only ten to 15 large repositories of in-depth public interest journalism – globally. </p>
<p>So, the case is strong for the Australian public to get behind the ABC and ask it to snap out of its crisis of confidence. Then it can get on with the job of keeping power to account – just like Alberici tried to do.</p><img src="https://counter.theconversation.com/content/92044/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Johan Lidberg does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There are a lot of misconceptions regarding what a public broadcaster is. But one thing it is not is a government or state broadcaster.Johan Lidberg, Associate Professor, School of Media, Film and Journalism, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/917652018-02-14T04:24:26Z2018-02-14T04:24:26ZLiberals gain a Tasmanian long Senate term due to citizenship saga, while polling on Adani is mixed<figure><img src="https://images.theconversation.com/files/206321/original/file-20180214-174982-hk2dnc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Steve Martin has been sworn in to take Jacqui Lambie's place as a Tasmanian senator.</span> <span class="attribution"><span class="source">AAP/Mick Tsikas</span></span></figcaption></figure><p>As the 2016 federal election was a double dissolution, half of the 72 state senators were assigned long terms expiring in June 2022, while the other half received short terms expiring in June 2019. The four territory senators have terms tied to the House of Representatives.</p>
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<a href="https://theconversation.com/major-parties-to-allocate-long-and-short-senate-terms-using-order-of-election-method-63890">Major parties to allocate long and short Senate terms using order-of-election method</a>
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<p>In Tasmania, Labor won five of 12 Senate seats at the election, the Liberals four, the Greens two, and the Jacqui Lambie Network (JLN) one. The original long-term allocation was two Liberals, two Labor, one Green, and one JLN. However, <a href="https://twitter.com/smurray38/status/963359338051047424">the Senate</a> – with opposition from only the Greens and two crossbenchers – changed the Tasmanian Senate long terms to three Liberals, two Labor, and one Green. The Liberals gained a long term at the JLN’s expense.</p>
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<a href="https://theconversation.com/tasmanian-senate-result-5-labor-4-liberals-2-greens-1-lambie-63117">Tasmanian Senate result: 5 Labor, 4 Liberals, 2 Greens, 1 Lambie</a>
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<p>This outcome distorts the election result. Labor won five seats, but only gets two long terms, while the Liberals won four seats but get three long terms. </p>
<p>The Liberals will now be defending only one Tasmanian Senate seat at the next election. They are very likely to win at least two of six, so a Liberal gain is effectively locked in.</p>
<p>The motion passed by the Senate was a fix for the issue of disqualified long-term senators being replaced by someone who did not originally win a seat inheriting their term. Three of the terms altered are not controversial.</p>
<p>In Western Australia, the Greens’ number one Scott Ludlam was disqualified, and replaced by number three Jordon Steele-John, who originally inherited Ludlam’s long term. Now, the party’s number two, Rachel Siewert, will have a long term, while Steele-John receives a short term. </p>
<p>New South Wales and Tasmania are similar, following Fiona Nash and Stephen Parry’s disqualifications.</p>
<p>In late 2017, Lambie and Parry resigned as Tasmanian senators, as they held dual citizenships. On February 9, the <a href="https://www.sbs.com.au/news/martin-colbeck-sworn-in-to-upper-house">High Court declared</a> Liberal Richard Colbeck elected to replace Parry, and Steve Martin, the Jacqui Lambie Network’s number two, elected to replace Jacqui Lambie.</p>
<p>The Liberals’ gain of a long term in Tasmania was due to the high below-the-line voting in that state. The order-of-election method rewards parties that win full quotas (1/13 of the vote, or 7.7% at double dissolutions). On <a href="http://results.aec.gov.au/20499/Website/SenateStateFirstPrefs-20499-TAS.htm">the original count</a>, Lambie had just over a full quota, but about 40% of her votes were below-the-line. Unlike ticket votes, below-the-line voters choose their preferences. </p>
<p>When Lambie was disqualified, Martin did not win a full quota, as some Lambie below-the-line voters did not have him as number two on their ticket. As a result, he lost his place in the top six using the order-of-election method.</p>
<p>Labor won 33.6% of the Tasmanian Senate vote to 32.5% for the Liberals. But Labor had more below-the-line votes than the Liberals, with Labor’s Lisa Singh winning from number six on the ticket. </p>
<p>Counting ticket votes and the votes for the number one candidate on each major party’s ticket, the Liberals had 27.2% and Labor 25.8%. People who vote below the line for a major party’s number one candidate are more likely to follow the party ticket.</p>
<p>As a result, the new order-of-election method produces the following results: Liberal number one, Labor number one, Greens number one, Liberal number two, Labor number two, Liberal number three. Thus the Liberals win three long terms from Tasmania.</p>
<p>Ironically, this distortion was caused by the below-the-line votes. If only ticket votes had been used, Martin would have received a long term.</p>
<p>The High Court has ruled that Martin’s Devonport mayoralty does not disqualify him from sitting in the Senate. This decision means people in local government do not need to resign before contesting federal elections.</p>
<p>Lambie expelled Martin from her party as he refused to resign his seat and allow her to retake it. Martin will sit as an independent.</p>
<p>In another Section 44 case, the High Court <a href="http://www.abc.net.au/news/2018-02-13/skye-kakoschke-moore-high-court-throws-out-bid-senate/9431730">ruled on Tuesday</a> that SA-BEST’s disqualified senator Skye Kakoschke-Moore cannot replace herself, and SA-BEST’s number four, Tim Storer, will win that seat – even though he has since been expelled from the party.</p>
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<a href="https://theconversation.com/with-feeney-gone-greens-sniff-a-chance-in-batman-and-has-xenophons-bubble-burst-in-south-australia-91059">With Feeney gone, Greens sniff a chance in Batman, and has Xenophon's bubble burst in South Australia?</a>
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<h2>Essential 54-46 to Labor</h2>
<p><a href="http://www.essentialvision.com.au/wp-content/uploads/2018/02/Essential-Report_130218-1.pdf">This week’s Essential</a>, conducted February 8-11 from a sample of 1,026, gave Labor a 54-46 lead, unchanged since last fortnight. Primary votes were 37% Labor (up one), 36% Coalition (up one), 10% Greens (steady), 6% One Nation (down two), and 4% Nick Xenophon Team (up one).</p>
<p>Malcolm Turnbull’s net approval was -3, up four points since January. Bill Shorten’s net approval was -13, also up four.</p>
<p>38% thought cutting company taxes would simply deliver business A$50 billion more in profits, and would not result in higher wages. 32% thought cutting company taxes would attract more investment, create jobs, and increase wages. By 72-10, voters would approve of forcing businesses to pass on a proportion of tax cuts as pay rises to their workers.</p>
<p>By 58-25, voters thought the Adani coal mine would create jobs that Queensland badly needs. However, voters also thought it would undermine tourism jobs (53-22), divert renewable energy investment (51-25), and undermine action on climate change (52-26). Queenslanders were more likely to agree with the first statement and less likely to agree with the last three statements.</p>
<h2>Queensland Galaxy: 52-48 to federal Coalition, 52-48 to state Labor</h2>
<p>A <a href="https://www.pollbludger.net/2018/02/10/yougov-galaxy-52-48-federal-coalition-queensland/">Queensland Galaxy poll</a>, conducted February 7-8 from a sample of 860, gave the federal Coalition a 52-48 lead in Queensland, a one-point gain for the Coalition since August. Primary votes were 41% Coalition (up four), 32% Labor (steady), 10% Greens (up three), and 9% One Nation (down three).</p>
<p>The swing to federal Labor in this poll since the 2016 election is just two points, which is a disappointing result for the party. Labor would not win many additional seats in Queensland if this poll was replicated at a federal election.</p>
<p>41% supported and 41% opposed the development of the Adani coal mine. In southeast Queensland, oppose led 43-38, while support led in the rest of Queensland by 45-37.</p>
<p>On <a href="https://www.pollbludger.net/2018/02/12/yougov-galaxy-52-48-state-labor-queensland/">state voting intentions</a>, Labor led by 52-48, a one-point gain for Labor since the November election. Primary votes were 37% Labor (up two), 36% LNP (up two), 10% Greens (steady) and 10% One Nation (down four). </p>
<p>One Nation’s drop is worse than it looks, as it only contested 61 of 93 seats at the election. However, this poll would have asked for statewide support.</p>
<p>44% approved of Queensland Premier Annastacia Palaszczuk (up three since early November), and 38% disapproved (down four), for a net approval of +6. Opposition Leader Deb Frecklington had initial ratings of 29% approve, 25% disapprove.</p><img src="https://counter.theconversation.com/content/91765/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Adrian Beaumont does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The reallocation is short and long Senate terms for Tasmania distorts the 2016 election result.Adrian Beaumont, Honorary Associate, School of Mathematics and Statistics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/905362018-01-24T04:01:17Z2018-01-24T04:01:17ZQantas and other big Australian businesses are investing regardless of tax cuts<p><a href="http://faculty.tuck.dartmouth.edu/images/uploads/faculty/jonathan-lewellen/Investment_and_cashflow.pdf">Research</a> shows that tax cuts lead to increases in corporate investment. But analysis of Australian companies’ financial statements, and what American companies have done since the <a href="https://theconversation.com/gop-tax-plan-doubles-down-on-policies-that-are-crushing-the-middle-class-89047">Trump tax reform</a>, show this increased investment could be rather small.</p>
<p>High-profile Australian CEOs have been <a href="https://www.businessinsider.com.au/corporate-tax-cut-create-more-jobs-2018-1">campaigning</a> for company tax cuts, claiming it would lead to more corporate investment, jobs and even wage rises. </p>
<p>But it is unlikely that a lower tax rate will be a key driver of investment. Especially as companies like Qantas have <a href="https://www.qantasnewsroom.com.au/media-releases/qantas-group-full-year-2017-financial-result/">already announced</a> billions in investments. </p>
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<a href="https://theconversation.com/why-australia-doesnt-need-to-match-the-trump-tax-cuts-84903">Why Australia doesn't need to match the Trump tax cuts</a>
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<p>The idea behind tax cuts driving investment is that they create more “<a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1911-3846.1998.tb00564.x/full">free cash flow</a>”. This is the amount of cash a business generates from its day to day operations minus what it spends on capital expenditure (property, equipment and maintenance for example). </p>
<p><a href="http://faculty.tuck.dartmouth.edu/images/uploads/faculty/jonathan-lewellen/Investment_and_cashflow.pdf">Studies</a> show more free cash flow does, on average, lead to increased investment. But the extra cash is also used to pay down debt, pay dividends and increase working capital (cash used for day to day expenses). </p>
<h2>A look at the books</h2>
<p>Qantas CEO Alan Joyce has been <a href="https://www.businessinsider.com.au/corporate-tax-cut-create-more-jobs-2018-1">one of the most vocal</a> proponents of corporate tax cuts, claiming it could lead to new routes and the purchase of new aircraft. </p>
<p>This is plausible, but a 5% tax cut is not likely to lead to huge increases in profitability or cash flows for Qantas. At least in the short term.</p>
<p>Qantas <a href="http://investor.qantas.com/annual-report-2017/">currently has</a> A$951 million of tax losses due to a couple of lean years <a href="http://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/file/full-year-results/mediaReleaseResults14.pdf">before 2014</a>. These can be used to offset any future taxable income.</p>
<p>Qantas will not pay tax until its profits in the years after 2014 exceed the tax losses recorded before 2014. Only once these tax losses have been used up will a lower tax rate lead to an increase in cash flow.</p>
<p><iframe id="ME0TY" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/ME0TY/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>But even if Qantas didn’t have tax losses, the impact of the tax cut would be marginal. Analysts are <a href="https://www2.commsec.com.au/Private/MarketPrices/CompanyProfile/Forecasts.aspx?pID=p5aGOCFwhXY_WCJEsJPOYLuamyHpix_e6buhnW95muA1&stockCode=QAN">forecasting</a> earnings growth of 1.2% for Qantas in the 2018 financial year. </p>
<p>Given 1.2% profit growth, a 5% reduction in Qantas’ effective tax rate would mean an additional A$60 million in after tax profit in 2018.</p>
<p>This additional A$60 million for Qantas is relatively small when you compare it to the <a href="https://www.qantasnewsroom.com.au/media-releases/qantas-group-full-year-2017-financial-result/">A$3 billion</a> in capital investment already announced for 2018 and 2019. </p>
<p>This investment was planned, and it’s irrespective of any tax cuts. Qantas generated over A$2.7 billion in cash in 2017, so the A$3 billion capital investment was already plausible without a tax cut.</p>
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<p>A similar analysis on Wesfarmers’ <a href="http://www.wesfarmers.com.au/docs/default-source/asx-announcements/app-4e---preliminary-final-report-and-2017-full-year-results.pdf?sfvrsn=0">2017 results</a> shows a 2017 pre-tax profit of A$4.1 billion. A 5% reduction in the tax rate would correspond with an approximate saving of just A$206 million in 2017, compared to A$ 1.6 billion <a href="https://www.wesfarmers.com.au/docs/default-source/reports/j000901-ar17_interactive_final.pdf?sfvrsn=4">in capital investment</a>. </p>
<p>For a smaller company like <a href="http://investors.myob.com.au/Investors/?page=financial-reports">MYOB</a>, with a pre-tax profit of A$73.7 million in 2016, the impact is even smaller. A 5% tax saving would result in an increase in after-tax profits of just under A$4 million. </p>
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Read more:
<a href="https://theconversation.com/business-investment-is-weak-but-an-unfunded-company-tax-cut-wont-fix-it-73655">Business investment is weak, but an unfunded company tax cut won't fix it</a>
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<p>So, it is plausible that tax cuts could lead to increased investment, more jobs or higher wages. Changes in tax rates can affect both investment decisions and shorter-term operational decisions. </p>
<p>But beyond the circumstances of individual companies, there are other factors that in how tax cuts factor in to company investment. This includes <a href="http://www.businessinsider.com/mark-cuban-trump-tax-rate-has-zero-impact-on-investment-2017-11?IR=T">how competitive</a> an industry is, and whether it is capital or labour intensive. </p>
<p>When corporate taxes are changed, firms <a href="http://www.jstor.org/stable/248269?seq=1#page_scan_tab_contents">will also</a> try to shift their spending and profits, where possible, in order to claim the most profits in periods of lower tax.</p>
<p>One way to do this is to pay bonuses. In the United States, we have seen <a href="https://www.atr.org/list">over 150</a> public companies announce bonuses following the recent tax reform. These bonuses are not a permanent salary increase. They are being paid this year, reducing the firm’s current taxable income, before tax rates change.</p>
<p>While the claims of increased corporate investment and jobs are supported by the research, and even the recent US experience, we should be wary about how large the benefits are.</p><img src="https://counter.theconversation.com/content/90536/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeff Coulton does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Research shows there is a link between tax cuts and increased business investment, but the effect is likely smaller than politicians and businesspeople say.Jeff Coulton, Senior Lecturer, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.