Outlook conference: Labor considers government tax cut plan

Chris Bowen will reveal “in coming days” whether Labor will back or oppose plans to fast-track small business tax cuts.

Chris Bowen addresses the Outlook conference. Pic: Aaron Francis

Opposition treasury spokesman Chris Bowen says he will tell his colleagues whether to back or oppose a government plan to fast-track small business tax cuts “in coming days”.

Speaking on the sidelines of the Melbourne Institute/The Australian Economic and Social Outlook Conference, Mr Bowen said Labor wanted to see if the numbers stack up before supporting the government’s plan to bring forward company tax cuts for small and medium-sized businesses.

Mr Bowen said Prime Minister Scott Morrison failed to tell Australians how much the tax cut would bring forward costs to the budget. The proposal will reduce the tax rate for companies with turnovers of less than $50 million to 25 per cent by 2021/22, five years earlier than first intended.

“They have thrown out their own budget rules,” Mr Bowen said. But he said Labor would consider the policy and come to a conclusion on whether to support it.

“I will make a recommendation to my shadow cabinet colleagues in coming days,” he said.

Opposition Leader Bill Shorten said he would keep an open mind about the plan.

“We are not ruling it out and we are not ruling it in. We want to see the numbers. You just do not spend tens of billions of dollars on a whim,” Mr Shorten told reporters in Brisbane.

When asked whether small business tax cuts were the best way to drive innovation, Reserve Bank assistant governor Luci Ellis, who advises the RBA board on economics, said productivity wasn’t just about innovating.

“There is an issue around innovation around the world. Innovation is hard,” Ms Ellis said. “In Australia we have some fantastic research being done inside our universities, CSIRO and other third sector researchers. In terms of private sector firms, one of biggest producers of patents is aristocrat poker machines. There is a genuine question in Australia about the level of innovation across the private sector, not only in terms of discovering something new but as to whether firms are being fast followers,” she said.

The RBA’s Luci Ellis at The Australian's Outlook conference. Pic: The Australian

Ms Ellis said firms that adopted newer technologies grew faster and created better paying jobs.

“Firms that are highly productive – so-called ‘superstar firms’ – tend to grow faster, grow employment faster, and pay better than firms that are a long way from the frontier of productivity,” she said.

“Laggard firms will never catch up, and will never become those better firms offering better jobs, if they have no chance of contesting the market or fully competing within it. And if incumbents never face rivals, they are more likely to become complacent. Innovation could slow down, and growth in living standards with it.”

The government’s policy is understood to have gone through a meeting of the government’s razor gang yesterday, with a price tag of $3.2 billion over the forward ­estimates.

Legislation will be moved in parliament as early as next week with the majority of Senate crossbenchers having indicated they would be more amenable to ­further tax cuts for small business, instead of the rollout of the ­enterprise tax plan for larger ­companies.

In a speech to the Melbourne Institute/The Australian Economic and Social Outlook Conference today, the Prime Minister was to confirm that companies with turnovers of less than $50m a year, having last year benefited from a drop in the tax rate from 30 per cent to 27.5 per cent, will now receive a further cut to 26 per cent in 2020-21 before moving to 25 per cent the following year.