Voters send message to Labor on tax hikes, as Productivity Commission backs carbon price and cashflow levy
As voters revolt against new taxes, the Productivity Commission will declare a carbon price and its controversial cash flow levy are the most efficient ways to future-proof the economy.
The Productivity Commission will declare a carbon price and its controversial cashflow levy are the most efficient ways to future-proof Australia’s economy, as a majority of voters revolt against the prospect of new taxes on the eve of Anthony Albanese’s economic reform roundtable.
An exclusive Newspoll conducted for The Australian shows 57 per cent of voters believe increasing or introducing new taxes is the worst action the government could take to balance the budget compared with 27 per cent who nominate reduced spending on government programs and services as their least preferred option.
While the Prime Minister and Jim Chalmers have elevated cutting red tape, speeding up approvals for clean energy and housing projects, removing nuisance tariffs and progressing a road-user charge as roundtable priorities, expectations have been tempered over debate around government spending and major tax reform.
As business, union, public service and community leaders arrive in Canberra for the three-day roundtable, Mr Albanese on Sunday said he would keep Labor a party of “lower taxes” despite warnings about government spending pressures on the budget.
Commission chair Danielle Wood on Monday will say successive federal and state governments have put their political goals ahead of growth for too long and call for a major deregulation push alongside serious consideration of landmark tax and market reforms. “You only get to float the dollar once … (but) growth has simply fallen down the list of priorities in policy making,” Ms Wood will say.
“This manifests not just in less economic reform but in decisions by governments – federal, state and local – to pay less attention to growth trade-offs in pursuing other policy goals.
“Regulatory creep is in part a function of demand for governments to ‘do something’ every time an issue emerges. When combined with Australians’ tendency to look to government for answers – our ‘Canberra fix’ – we have ended up with a system that dampens growth.”
While she will acknowledge the nation can make progress on Labor’s climate goals without a carbon price, the PC boss will say the green market policy that has daunted governments for nearly 20 years is the best way to achieve a decrease in carbon emissions.
Ms Wood will also defend her cashflow tax proposal as “worth getting out of bed for” despite backlash from the nation’s most senior corporate leaders. After Treasury used its post-election incoming government brief to warn the budget can’t be fixed without raising taxes and cutting spending, Newspoll has revealed strident opposition to higher taxes.
Amid competing tax reform proposals from unions, the Productivity Commission and business, a Newspoll survey of 1283 voters conducted between Monday and Thursday last week showed that greater opposition to tax cuts than lower government spending was dominant across every age group.
The 35-49 and 50-64 years age cohorts, many with mortgages and families, were most strongly opposed. A majority of Labor, Coalition, Greens and independent voters all chose higher taxes as the worst option ahead of reducing government spending.
After Mr Albanese and Dr Chalmers took GST reform and other proposals off the table to allay fears the summit would green light big taxing measures, an alliance of almost 30 industry groups will on Monday release four priority roundtable outcomes.
The alliance, representing big and small business, miners, builders, universities, tourism operators, energy companies, telcos, tech giants, banks, insurers and airports, wants red tape reduced by 25 per cent by the end of the decade, planning approvals to be fast-tracked, more support to boost investment and innovation and a considered debate on tax reform that doesn’t raise consumer or business costs.
“We must avoid any moves that threaten confidence, including high taxes on business which will only drive away the investment needed to boost Australian living standards and real wages,” the Alliance of Industry Association said.
“Investment is needed to deliver everything from faster home builds, through to breakthrough medical research and the energy transition. Investment in our nation comes from confidence in doing business.”
ACTU secretary Sally McManus said the union movement’s priority at the roundtable was to address intergenerational inequality by tackling housing affordability, ensuring the future of work “in an AI world is a positive one”, and workers share in productivity improvements.
Ahead of the roundtable, the ACTU has promoted a wishlist of proposals including $25bn-a-year in new or higher taxes and a four-day working week.
“Unfortunately, workers have not seen the benefits of productivity growth in the last 25 years and this needs to change,” Ms McManus said.
“Australia’s productivity growth has been held back because we have a relatively small number of big businesses that extract super-sized profits because they have limited competition.
“They prioritise their own interests – not the national interest – by distributing their substantial profits to shareholders, share buybacks and executive bonuses, rather than investing in capital, research or people.”
Amid speculation that the Prime Minister and Treasurer have differing views on how fast Labor should pursue wide-ranging economic reform, Mr Albanese on Sunday said he wanted “lower taxes” and that some of the ideas proposed this week will be “long-term” projects.
“Labor stands for lower taxes. We put that to the election and the Australian people voted for the lower taxes and lower deficits that we were offering compared with the Coalition,” Mr Albanese said in Perth, with billionaire Kerry Stokes standing to his side. “I think that Australians want two things. One, they want a government that leads, but secondly, they want a government that listens.
“There’ll be some measures that can be done immediately if the government adopts them. There’ll be some that feed into budget processes. But there’ll be some about the long term challenges in the global economy, the impact on Australia and how we deal with those issues. And that’s a good thing.”
Dr Chalmers on Sunday said he and his party leader were “similarly ambitious”, and that Mr Albanese also saw the need to do more to make the nation more productive and the budget more sustainable.
“I think we’re aligned when it comes to the ambition we have to build on this progress that we’ve made, this plan that we’re rolling out, that we are delivering,” Dr Chalmers told Sky News.
On spending reform, Dr Chalmers told Sky News that the government had made “good progress” on reforms tackling growth in the NDIS and aged care. “The budget is in much better nick than what we found it, but it will require ongoing attention and ongoing work. And I suspect, and I hope and I welcome the fact that these sorts of issues will come up in the course of the next week as well,” he said.
At the heart of Ms Wood’s address will be a warning that a carbon price – introduced by Julia Gillard more than 15 years ago on the back of a broken election promise and then stripped away by Tony Abbott – is still what the PC considers the best way to cut emissions.
“A single national carbon price would be the most efficient and lowest cost way to reduce emissions – particularly if it had bipartisan support to ensure its longevity,” she will tell the Press Club. “But without it, we can still make substantial progress by continuing to build a more consistent and market-based set of emissions reduction incentives. This means addressing some gaps in current emissions-reduction policies for heavy vehicles, our electricity market post-2030 and smaller industrial facilities.
“And it means winding back duplicative and high-cost policies such as fringe benefits tax concessions for electric vehicles.”
The commission chair’s speech comes after five major reports into productivity that have suggested Labor reduce regulations constraining artificial intelligence; expand the Safeguard Mechanism for carbon emissions; consider Victoria-like preventative health policies on a national scale, and develop a single national platform for AI lesson plans for school teachers.
The commission chair will also hit back at claims that the boom in care economy jobs is dragging down private sector employment growth.
Ms Wood’s first paper on tax prompted corporate leaders to implore Dr Chalmers to rule out her “experimental” blueprint to raise the effective company tax rate of Australia’s 500 largest firms with a cashflow levy.
The commission recommended a new 5 per cent net cashflow tax that would allow businesses to immediately deduct the full cost of capital investments against it.
The plan would be accompanied by tax cuts for businesses with local revenues below $1bn, lowering their corporate tax rate from 25 per cent to 20 per cent, while larger firms in excess of that threshold would continue to pay the existing 30 per cent rate.
While more than 99 per cent of companies would pay less tax under the proposal if they invested, about 500 big firms, including miners, retailers and banks, would face tax hikes of up to five percentage points.
But Ms Wood on Monday will push again for the cashflow tax as a sure-fire way to boost GDP and investment, which has been endorsed by super fund chair and ex-Queensland treasurer Andrew Fraser who is attending the summit.
“The shift to the cashflow tax rewards investment by allowing businesses to expense their capital expenditure in the year that it occurs. It will promote investment among newer and smaller firms, allowing them to grow and challenge incumbents,” she will say.
“It is simple to administer, relying purely on information already submitted to the ATO.
Our modelling suggests that this first step in our proposed ‘tax mix switch’ journey would
increase investment by $7.4bn and GDP by $14.6bn.
“Big enough to get out of bed for, I would think.”
ADDITIONAL REPORTING: EWIN HANNAN
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