Labor takes fight to Morrison on economy

ALP pledges on budget surpluses and a new tax revenue ceiling sparks high-stakes battle.

Fishing for votes ... Bill Shorten visits Cairns Aquarium during a campaign swing through north Queensland yesterday. Picture: AAP

Bill Shorten’s pledge to deliver ­bigger budget surpluses and ­impose a new ceiling on ­tax ­revenue has sparked a high-stakes election battle as the campaign ­enters its final week, with the ­Coalition accusing Labor of “hiding­” the real impact of its economic policies from the public.

Releasing its costings eight days before the election, Labor promised it would use $87 billion in bigger surpluses over the coming­ decade to pay down debt in a bid to derail Scott Morrison’s re-election agenda and combat perceptions the Coalition is a superio­r economic manager.

The pledge came as both party leaders campaigned in Queensland, where a new poll showed ­Coalition support in that state up three points since February to 38 per cent, securing a 51 per cent to 49 per cent two-party-preferred lead over Labor.

The Courier-Mail/YouGov Gal­­axy poll also has Labor’s prim­ary vote slipping 1 per cent to 33 per cent, and the One Nation vote up one point at 9 per cent, four points ahead of Clive Palmer’s United Australia Party.

Economists questioned the ability of Labor and the Coalition to deliver on their ­planned surpluses­ after the Reserve­ Bank yesterday lowered the outlook for household consumption and downgraded economic growth forecasts.

Opposition Treasury spokesman Chris Bowen yesterday committed to a tax ceiling of 24.3 per cent of GDP, almost half a percentage point higher than the ­Coalition’s, in order to return $200bn in tax relief to low- and middle-income earners from 2022-23 if conditions permitted.

He argued this was a more ­fiscally responsible approach than the government’s plan to legislate tax cuts years in advance.

 

“When the budget returns to sustainable surplus, that’s when tax relief can prudently and sensibly be considered and delivered,” Mr Bowen said. “I agree with Peter Costello. Tax relief should be delivered budget by budget, term by term — not on the never-never.”

He also forecast “bigger budget surpluses each and every year under a Shorten Labor govern­ment­”, with a surplus of $21.7bn, or 1 per cent of GDP, estimated for 2022-23, achieving that target four years sooner than the Coalition.

Labor’s economic blueprint was dismissed by Josh Frydenberg and Finance Minister Mathias Cormann as “unbelievable”.

They said Labor’s high-­taxing agenda would have a negative impac­t on growth at a time of global­ uncertainty, with “downside risks in the economy” following a series of challenges, ­including the drought.

Labor’s costings confirmed its signature revenue measures — including­ its franking credits crackdown, overhaul of negative gearing, halving of the capital gains tax discount and clamp on income splitting within discretionary trusts — would raise $154bn over the decade. Mr Bowen said the shake-up would modernise the tax system by “making it fairer (and) making it better.”

Opposition finance spokesman Jim Chalmers said a strategy of shutting down tax loopholes would allow Labor to deliver more reliable surpluses, pay down debt and make “game-changing investments in health and education”.

The Treasurer rejected Mr Bowen’s assurances that taxes would not exceed 24.3 per cent of GDP, saying that taxes would instead­ climb to 25.9 per cent as a share of the economy by 2029-30.

“The Labor Party, under Bill Shorten, if given the chance in government, would be the highest-taxing government in Australia’s history,” Mr Frydenberg said. “The impact on jobs, on wages, on economic growth will be very, very bad for our country. Labor’s surpluses cannot be believed and the Australian people know that. They know that the last time Labor delivered a surplus was 1989 and the Berlin Wall was still standing.”

Labor’s $32.4bn negative gearing clawback and $58bn plan to end cash refunds for unused franking credits are facing resistance from minor parties, imperilling spending promises headlined by Labor’s $2.3bn cancer treatment package and $10bn plan to boost wages for childcare workers.

The Property Council of Australia said Labor’s plan to grandfather negative gearing and extend the tax concession only to newly built homes was the “wrong policy change” and came at “the wrong time”.

“Property market conditions now are vastly different to those when Labor first announced these measures,” Property Council chief executive Ken Morrison said.

“The Property Council remains concerned that these changes will have a harmful economic impact and questions the assumption that they will be a stimulus to new housing construction.”

 

In a quarterly review of its economic outlook, the RBA yesterday signalled its expectation that core inflation would sit at 1.7 per cent by the end of the year — well short of the bank’s 2-3 per cent target band.

The RBA said GDP growth was also forecast to remain about 2.75 per cent until mid-2021 — a cut from the bank’s previous 3 per cent forecast and well below the long-term growth average of 3.25 per cent. Household consumption growth forecasts were cut from 2.75 per cent to 2 per cent.

Household consumption has been identified by the RBA and Treasury as the key threat to the domestic economy.

In a bid to unpick Labor’s costings, Senator Cormann said Mr Shorten was hiding the impact of his tax hikes on the economy, jobs and property values, as well as the cost of rents. He warned Labor had “not properly accounted for a number of key, very expensive spending promises, which would increase the expenditure on a structural basis over the next decade”. These included a planned increase in foreign aid to 0.5 per cent of gross national income, a hike in the refugee intake to 32,000 a year and a boost to science spending of 3 per cent a year.

AMP Capital chief economist Shane Oliver said there was an issue with forecasting revenue through changes to particular tax concessions, such as Labor’s negative gearing or franking credit ­reforms. “If you change those concessions, people change their behaviour and that means projected revenue won’t be as good as you had been assuming,” he said.