Thursday, February 1, 2018

Today by Paddy Manning

Staying the course
The PM, a businessman, is very pro-business

The prime minister’s big gamble in his big year-ahead speech in Toowoomba today was to say or offer nothing new. Turnbull has a plan – for what Ross Gittins has dubbed “Jobson Grothe” – and he’s sticking to it.

Citing record job creation last year, Turnbull said his plan was delivering results and that “the challenge now is to stay the course”.

Business and personal income tax cuts are the centrepiece of the plan, and that is no surprise ahead of a federal election tipped for spring.

Tax cuts are the last refuge of the election-year politician, but they can misfire. Whether it’s an election year or not is still unclear, but it’s obvious that Turnbull is going to treat it as one, perhaps out of necessity. The government insists that bringing the budget back to surplus is an iron-clad commitment. Business tax cuts are already in the budget forecasts, which means personal income tax cuts can’t be reckless. So personal income tax cuts could be staged, which will bring back the spectre of Paul Keating’s legislated L-A-W tax cuts ahead of the 1993 election, or they will be modest, which may remind everyone of John Howard’s “sandwich and a milkshake” tax cuts in 2003. Needless to say, both PMs went on to win elections anyway.

As Paul Kelly wrote [$] at the end of last year, the government has no choice but to offer tax cuts, given the pace of bracket creep and the 0.5 per cent increase in the Medicare levy to fund the NDIS. The government needs tax cuts if for no other reason than to match Labor, which is opposing the Medicare levy increase for workers earning less than $87,000.

By putting more money into consumers’ pockets, personal income tax cuts are part of the government’s answer to the twin challenge of low wage growth and rising living costs. The other part is the second tranche of company tax cuts, for businesses with turnover of more than $50 million, which the government will try to get through the Senate when parliament resumes. The theory is that lower company taxes will lead to higher profits, which will mean more investment, which will create more jobs, which will eventually mean higher wages. Believe it if you wish.

Treasury modelling estimated that a company tax cut from 30 per cent to 25 per cent would in the long run lead to a permanent increase in after-tax wages of about one per cent. Public faith in treasury modelling is pretty low by now, however, and there is good argument that companies will simply distribute higher profits to shareholders. As Bernard Keane and Glenn Dyer pointed out [$] in Crikey a few days ago, that’s exactly what is happening with Donald Trump’s business tax cuts.

“The laws of supply and demand have not been suspended,” Turnbull said today, citing the IMF’s decision to lift forecasts for global growth based on the Trump tax cuts. “Wages growth will come because a stronger economy results in more investment, more jobs and more intense competition for workers.” It sounds more axiomatic than evidence-based.

Turnbull’s plan is a double-down on trickle-down economics, as though all the “end of neoliberalism” talk on the left is just socialist wishful thinking. The Coalition’s blunt answer to the rise of Jeremy Corbyn and Bernie Sanders overseas is that both are losers. It’s a “not for turning” response, which dares Labor to make a decisive break from the economic rationalist consensus of three decades-plus, namely more and more tax cuts, privatisation, deregulation, and so-called free trade.

As predicted, Bill Shorten is already copping it from the government for being “anti-business” in this week’s National Press Club speech, with ministers Peter Dutton [$] and Mathias Cormann accusing [$] him of (in Cormann’s words) “cynical, lazy plagiarism of the socialist, populist playbook of Corbyn Labour”. That’s before Shorten offered much in the way of concrete solutions for the “left-behind society” he addressed himself to on Tuesday.

Turnbull joked today that we heard a lot about jobs and growth in the last, eight-week election campaign – so much so that “some of us were saying it in our sleep”. Let’s hope we’re not in for a repeat.

since this morning

As expected, Malcolm Turnbull has topped the list of individual donors to the Liberal Party in 2016–17 [$]. He gave $1.75 million around the time of the last federal election.

Labor’s David Feeney has announced his resignation from federal parliament, triggering a by-election in his inner-northern Melbourne seat of Batman. ACTU boss Ged Kearney may stand.

Kevin Rudd is suing the ABC over allegations he ignored warnings of risks to installers’ safety in the home insulation program.

in case you missed it

Fairfax reports that 65 per cent of Australians oppose Adani’s coal mine, while 62 per cent don’t want to #changethedate of Australia Day (but they do want the day to recognise Indigenous Australians).

Peter Greste had an illuminating, measured conversation with Fran Kelly this morning about the impact of foreign espionage laws on journalism.

In another financial advice scandal, the ABC’s Michael Janda reports that real estate sales companies are tempting mortgage brokers and others with big commissions to sell overpriced properties to unsuspecting clients.

by Sarah Krasnostein
Noah’s Ark floats again
The Australians bringing creationism to Kentucky

by Jenny Valentish
Mona Foma: Dark Mofo’s sunnier sister
A particularly genteel and suitably confusing festival

Paddy Manning

Paddy Manning is contributing editor (politics) at The Monthly and has worked for the ABC, Fairfax, Crikey and The Australian. He is the author of Inside the Greens and the unauthorised biography of Malcolm Turnbull, Born To Rule?


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