Tax cuts, stimulus ‘the key to recovery’

Calls grow to bring forward personal tax cuts, investment tax breaks and continue a modified JobKeeper program.

Business wants the Morrison government to bring forward personal tax cuts, introduce investment tax breaks and continue some modified JobKeeper program in next week’s economic statement in a bid to head off a significant rise in unemployment.

The Business Council of Australia is also calling on the government to help ease the “bottleneck” of investment applications caused by foreign companies needing ­approval from the Foreign Investment Review Board due to the tightening of regulations introduced earlier this year in response to the pandemic.

Speaking at a round table titled Road to Recovery and organised by the BCA and The Australian, Wesfarmers chief executive Rob Scott said business wanted “some form of ongoing stimulus” from the July 23 economic statement.

“The JobKeeper and JobSeeker payments in particular have been very significant forms of stimulus that have been very impactful for the economy at such an uncertain time,” he said.

“We recognise that it is not ­sustainable to keep them going in their current form forever,” he added, but he recommended “some form of ongoing stimulus”.

Mr Scott, whose company owns Officeworks, Target, Kmart and Bunnings, said businesses wanted to see some short-term tax measures that could help stimulate corporate investment.

“There are some shorter-term changes to tax, particularly around potential investment all­owances and possibly the bringing forward of personal income tax cuts, that we think will be very meaningful and very positive to stimulate investment, which will be critical for jobs,” Mr Scott said.

The BCA is calling on the ­government to introduce an investment allowance that would allow companies to write off a percentage — possibly about 10 per cent — of an investment in the first year, in addition to conventional depreciation writeoffs.

It argues that this will encourage companies to accelerate proposed investments, allowing some projects that are not currently ­financially viable to go ahead.

Stimulate investment

“Investment allowances are some of the most impactful short-term tax measures that will stimulate investment by small business and big business,” Mr Scott said.

“Ultimately, that will have a flow-on effect to jobs.”

He said personal tax cuts could also help reduce pressure on the many workers who were now ­underemployed, including part-time and casual workers.

“At the moment we are seeing a significant reduction in hours worked, particularly across part-time and casual workers,” he said.

BCA president Tim Reed said business also wanted the July 23 statement to include some more streamlined processes for foreign investment approvals. Under the current rules, all investment proposals by foreign companies have to be approved by the FIRB.

He said there was a need for more streamlining of the standard transactions going through the FIRB. “There’s a bottleneck that is stopping a reasonable amount of corporate activity,” he said.

“We need to ensure that low-risk investments are streamlined and approved quickly so that businesses can attract the global investment they need to get on with creating jobs at this critical time.

“Australia must remain an open, trading economy because we need foreign capital to drive our recovery.”

Mr Reed said business was concerned at the rising level of unemployment due to the pandemic. “There are too many people who will be without a job at Christmas this year,” he said. “Focusing on that is the No 1 challenge.”

Mirvac chief executive Susan Lloyd-Hurwitz said there was a need for more government spending on public and social housing as approvals for private housing plunged due to lack of confidence.

She also called for amendments to the HomeBuilder grant to relax the three-month time frame for new projects to start.