GST to stay as is but Mathias Cormann flags incentives

Mathias Cormann flags further tax incentives for businesses in the October budget.

Finance Minister Mathias Cormann. Picture: AAP

Finance Minister Mathias ­Cormann has flagged further tax incentives for businesses in the October budget, killed-off any changes to the rate of GST and outlined the government’s plan to “re-shore” strategic and defence manufacturing in Australia.

In a private meeting with indust­ry representatives on Wednesday night, Senator Cormann ruled out tax increases and post-COVID-19 “austerity” measures and said the government was focused­ on five key priorities under its reform agenda and a return­ to “spending restraint”.

As former prime minister John Howard and federal Liberal Party president Nick Greiner called on the government to revisit the GST as part of its major tax reform agenda, Senator Cormann told the Sydney Institute virtual meeting there would be no changes to the rate of consumption tax.

He said the government would focus on industrial relations, dereg­ulation, tax, skills and sovereignty under its reform priorities and stressed the importance of “re-shoring” specialised niche and hi-tech manufacturing.

Speaking to about 30 guests, Senator Cormann shot down suggestions from NSW Treasurer Domini­c Perrottet that the GST be raised or broadened to help the state fund essential services.

Ahead of the October 6 budget­, the government plans to increase tax incentives for businesses including through a potential increase­ to the accelerated deprec­iation deduction for businesses announced in the March COVID-19 stimulus package.

Scott Morrison, who convened a budget razor gang meeting on Thursday, warned that the unprecedented level of government support risked creating a culture of “dependency” among households and businesses.

The Prime Minister said maintaining the extraordinary level of fiscal stimulus for too long risked working against the post-COVID revitalisation of the private sector.

“We can‘t let our (support measures) hold businesses back,’’ Mr Morrison said. “We can’t let that happen. That will cost jobs and livelihoods and create dependency, which will not mean that Australian businesses will be world-beating in the future and job generators in the future.

“The other thing is we have been incredibly careful not to lock in government spending into the decades into the future. That‘s how you swamp the Australian taxpayer unfairly.” The expenditure review committee of cabinet is working through recommend­ations made by Treasury secret­ary Steven Kennedy in his JobKeeper review handed to Josh Frydenberg last Friday and seen by Mr Morrison earlier this week.

Ahead of Saturday’s Eden-Monaro by-election, Mr Morrison has flagged there will be ongoing and targeted support for businesses and households beyond­ September, when the JobKeeper wage subsidy scheme and JobSeeker coronavirus supple­ment are due to end. He said “the future of the Australian economy is not to remain in ICU”. He pointed to the $50bn spent on fiscal stimulus in recent months as evidence the government was committed to “what was necessary” to nurse the country through its first recession in nearly 30 years.

“The future of the Australian economy is to become strong and independent again, and sovereign and able to grow jobs and have its own momentum,” he said. “In the meantime, the government will continue to do what is necessary to support us to get to that stage.”

Economist Saul Eslake­ told a Senate COVID-19 committee hearing that “the path out” of the pandemic downturn would be “much less steep than the path into it”. “I’m sceptical Australia or any country will have a V-shaped recovery­,” Mr Eslake said, as he warned against the premature withdrawal of government spending come October.