Jobs reward for growth post-Covid

As the growth of Victoria’s COVID-19 caseload slows down, gradually and painfully, it is encouraging to see business leaders, among others, developing constructive proposals for rebuilding our ravaged economy through reform. Come next year, when government borrowings, support measures and stimulus, of necessity, will need to be wound back, growth strategies will be the lifeblood of recovery. Writing on Monday, Wesfarmers chief executive Rob Scott points out an inconvenient truth. For the first time since the 1970s, more funds are being invested offshore than overseas investors are pumping into Australia. For an economy in which successive waves of foreign investors have been crucial to economic development and unlocking resources, this is alarming. As Mr Scott, who is chairman of the Business Council of Australia’s tax and federation working group, says, Australia’s uncompetitive corporate tax system is a significant part of the problem.

Josh Frydenberg is correct when he says the Morrison government has moved to drive lower taxes and investment and improve conditions to create jobs. The government has increased the instant asset write-off threshold from $30,000 to $150,000. For businesses with turnovers of less than $500m it has introduced an accelerated 50 per cent depreciation investment boost. Tax cuts for 3.5 million small and family businesses with turnovers under $50m have been legislated and by 2021-22 such firms will be paying tax at the rate of 25 per cent rather than 30 per cent. The past two budgets have also legislated income tax cuts of more than $300bn.

That said, as The Australian has pointed out consistently, the refusal of the Senate two years ago to back a tax cut for larger businesses was a setback for the nation, leaving large companies at a disadvantage in attracting international investment. Our 30 per cent tax rate for large corporations is higher than that of most comparable economies. It exceeds the OECD average of 23 per cent and even the Latin American average.

Australian Industry Group chief executive Innes Willox, writing in Monday’s business pages, urges the government to bring forward the tax cuts that have already been legislated. That would make sense in the current environment and the government appears open to the idea. Headway should be made in the October budget.

Mr Willox was candid about the impact of Victoria’s stage-four lockdown, which had driven the national economy “even further backwards”. Melbourne, he says, feels like its heart and soul has been ripped out and is “a shell of its former self’’, a “confused, quiet and fearful place, stripped of activity, community and enterprise’’. With weeks more lockdown ahead, there is “no clear or articulated exit strategy’’. Further afield, prolonged border closures meant more disruption and less opportunity for doing business around the nation.

Amid such a predicament, federal and state measures to boost demand, confidence and investment are key. The long road back to recovery will need adroit policy and planning, on the part of both the private sector and government. As Mr Willox says, Australia is not going to tax or regulate ourselves towards a return to prosperity. In addition to tax reform, sensible improvements to workplace relations, skills and training, red tape reduction and energy policy will be crucial to the jobs of the future.

Assessments by Mr Scott and Mr Willox coincide with Master Builders Australia, the nation’s peak building lobby group, forecasting a 27 per cent drop in residential building activity and the largest dive in commercial building activity since 1976. As well as focusing attention on economic strategies, the concerns of business are a clarion call to governments to get their strategies to contain and manage COVID-19 right in the absence of a vaccine. Australia cannot afford another Ruby Princess or hotel quarantine debacle. As Mr Willox says: “There simply cannot be another lockdown without creating a total economic catastrophe.’’