13th December 2016
Australian Treasurer Scott Morrison used the results of the 19 December Mid-Year Economic and Fiscal Update (MYEFO) to continue the Federal Government’s march to cut the company tax rate. Mr Morrison argued that the company tax rate should be decreased to 25 percent—a number that, according to him, would lure business investment, lead to higher employment, and be crucial to ensure future economic growth.
Several rating agencies left the country’s AAA rating still intact after the mid-year update, but some of the same organisations voiced their concerns over the Australian economy including Standard & Poor’s which said they remain ‘pessimistic’ about the nation’s financial matters.
The latest MYEFO predicted a deficit decrease for the remainder of the financial year whereas the deficit predicted in May was much higher. Deficits are expected to rise in the coming years leading up to when the budget is due to balance around 2020.
Mr Morrison said he believed there were many positive things happening in the economy, but more could be done to ensure they continue. One of the important things that we need to see in the economy going forward is increased investment, he said.
It’s fair to say the treasurer has his share of supporters on the issue. Conservative lawmakers and some key business groups and organisations have voiced their support for the measure. One of the more outspoken of these groups, the Australian Chamber of Commerce and Industry (ACCI), has called on those in government against the tax cut, many of whom are Labor Party members, to end their opposition.
The ACCI said the tax cut would allow Australia to become more economically competitive on a global scale and that should be something that grabs the interest of all politicians regardless of party affiliation. The Labor Party and other critics have put forth stiff resistance to such a cut, especially in the wake of the MYEFO findings. They claim the government cannot afford the $50billion in tax cuts the measure would incur. Other Labor members like Chris Bowen expressed trepidation that there were absolutely no guarantees that the cuts would bring on more investment. It’s on a wing and a prayer that it somehow stimulates more business investment at a massive cost to the budget, he said.
Welfare and other poor advocacy groups have also come out against the company tax cuts and have blamed the Federal Government for trying to repair the budget at the expense of the less fortunate. The MYEFO partially accounts for savings by cutting unemployment benefits as well as making other cuts to welfare programs.