Exclusive: PM urges Senate to back economic plan, warning that US president-elect’s move to lower company taxes could make Australia ‘even less competitive’
Malcolm Turnbull will press on in 2017 with his plan to cut taxes for big business despite Senate opposition, and says the government hopes Donald Trump will boost its economic case by cutting the US corporate tax rate.
In an interview marking the end of the 2016 political year in which the Coalition was returned to office after the federal election with a slender one-seat majority, the prime minister said his government was undeterred by Senate opposition to its proposed business tax cut – the centrepiece of its “jobs and growth” election pitch.
Turnbull also flagged that the Coalition would press ahead early in 2017 in an effort to implement the government’s childcare package, which has been the subject of protracted Senate negotiations, and indicated that the government could have more to say on housing affordability.
The government has been negotiating with the Senate crossbench for months about savings measures required to fund the childcare package, and the education minister, Simon Birmingham, has indicated that the package might be trimmed “a little” to get it implemented.
Turnbull said the childcare reforms were an important productivity measure that would improve women’s participation in the labour market.
While ministers have played down persistent reshuffle speculation, which has bubbled in the lead-up to the Christmas break, the prime minister is leaving his options open for the new year.
Asked about a potential refresh, Turnbull declined to rule one out, saying only he was “honoured to lead an outstanding ministerial team which is working hard and effectively in delivering the government’s commitments”.
In a end-of-year conversation with Guardian Australia that centred largely on the economy, tax and budget repair in anticipation of the mid-year economic forecast, scheduled for release on Monday, Turnbull said the government had achieved more legislatively during 2016 than it had been given credit for, but he acknowledged there was “a lot more work to do”.
He wouldn’t engage when asked whether there was any risk of recession in the new year, given gross domestic product figures confirming that the Australian economy went backwards in the September quarter, shrinking 0.5% in seasonally adjusted terms. It was the first time in five years the economy had recorded three months of negative growth. The technical definition of recession is two consecutive quarters of negative growth.
Turnbull said he hadn’t seen commentary contemplating the risk of recession, and he pointed to stronger employment figures, charting jobs growth, released this week.
He conceded that the GDP result was “a wake-up call” – but largely for the opposition.
“GDP was a real wake-up call, a reminder – it was a wake-up call for those, particularly in the opposition, who seem to think you can talk about economic growth and have literally no policies that would support it whatsoever,” Turnbull said.
He said people were free to criticise the government’s economic policy agenda but it was geared to boosting investment and employment, and those remained government priorities.
The political year has been turbulent for Turnbull and the Coalition government, and opinion polling charts a significant tumble in the prime minister’s personal approval ratings over the course of 2016. Turnbull’s standing as measured in Newspoll’s better prime minister rating dived 18 points.
The former prime minister, Tony Abbott, has campaigned post-election for a return to the cabinet, and is continuing to speak out on hot-button issues for the government’s conservative faction, which has been restive and outspoken since the July election.
The government worked in the final parliamentary sitting fortnight to emerge with some key legislative wins, including the two double-dissolution election triggers, the restoration of the Australian Building and Construction Commission, and the registered organisations bill, as well as resolving the long-running Senate standoff over the rate of the backpacker tax by cutting a deal with the Greens to boost Landcare funding.
But having emerged with the victory it was again plunged into political controversy, with the energy and environment minister, Josh Frydenberg, floating an emissions intensity trading scheme for the electricity sector before abruptly ruling it out after backbench insurgency led by prominent conservatives.
The government will use the looming Christmas break to reset after a gruelling year. Asked to nominate his political priorities for the new parliamentary year, Turnbull said: “Continued delivery of our economic plan.
“We have our business tax cuts to deliver, obviously continuing to roll out our big programs, the NDIS most notably, the big infrastructure projects including the NBN.
“We clearly have a big energy challenge and we need to ensure all of our national policies support the three goals I’ve set out: security, affordability and emissions reduction.
“While we’ve achieved an enormous amount this year – I mean, I’m sure you will be writing about that – I mean, there were some prominent commentators who demanded I acknowledge we didn’t have the numbers in the Senate, and were cross with me when I didn’t or were perhaps puzzled with me when I didn’t acknowledge that. Anyway, nonetheless, we got a lot through.
“Business tax cuts are an important element and obviously the childcare package is one that is still before the parliament. That’s a big part of the economic agenda as well. It’s critical.
“We are on the way, but we have a lot more work to do with the Senate.”
Turnbull indicated that any move by Trump to follow through on his election promise during the US presidential election to cut corporate taxes would boost the government’s case with a Senate that has been, thus far, disinclined to support the proposed tax cut for larger businesses.
Trump’s election commitment was to slash the top business tax rate from 35% to 15%, while closing loopholes.
The government’s plan is to cut the Australian company tax cut progressively from 30% to 25% over 10 years, at a cost of $48.2bn. Even if that succeeds the Australian rate would still be 10 percentage points higher than the US rate if Trump implemented his pre-election policy.
While the government may be able to shift one of the key Senate blocs in the new year by offering enticing trade-offs – Nick Xenophon, for example, is interested in persuading the government to come back to the table on emissions trading for the electricity sector – the politics of implementing an expensive tax cut for big business is fraught, with low wages growth continuing to squeeze households, and widespread community concern about profit shifting, avoidance and evasion by big firms.
Tax transparency data released by the Australian Taxation Office in early December shows more than 35% of the largest public companies and multinational entities paid no tax in Australia in the latest financial year on record.
Turnbull indicated that the case for a business tax cut remained strong and Trump could help push the global competitiveness argument along. “If the US does reduce the company tax rate, as president-elect Trump has promised, that will certainly make our company tax rate even less competitive than it is now,” he said.
“So, it is part of our case. It was part of Paul Keating’s case and Peter Costello’s case and part of Chris Bowen’s case when he wrote about it in a book.” But now Labor was in “reality denial mode”. “We will seek the Senate’s support for the whole package.”
Turnbull stonewalled when asked whether pushing for the full company tax cut package would mean the government would have to seek a new round of budget savings, given that the return-to-surplus timetable has been again pushed back, and Australia’s triple-A credit rating is under threat.
“The savings we are seeking the support of the parliament for are the ones set out in the budget,” he said. “Our policy is set out in the budget. I’m not going to run through the contents of Myefo next week, let alone the 2017 budget.”
Pressed on whether that meant the government was not minded to seek additional savings or pursue new revenue measures in the new year, Turnbull again declined to engage with the point.
“I’m not going to speculate. If you are asking me to speculate what might be in Myefo – let alone the budget – I’m not going to. We have set out a set of measures in the budget. The progress of that plan will be reviewed in Myefo but I’m not going to speculate about future budgets.”
Asked whether the government would have to be more proactive on housing affordability, which has emerged as a significant political issue given the cost of buying a home in Australia’s major cities, Turnbull flagged action in 2017.
The Coalition rejected Labor’s election policies at the July poll on negative gearing and capital gains tax, which were badged as affordability measures, but the New South Wales government has sought to reopen that conversation, saying high prices in capital-city markets can’t be countered with supply measures alone.
“So, it is part of our case. It was part of Paul Keating’s case and Peter Costello’s case and part of Chris Bowen’s case when he wrote about it in a book.” But now Labor was in “reality denial mode”. “We will seek the Senate’s support for the whole package.”
Turnbull stonewalled when asked whether pushing for the full company tax cut package would mean the government would have to seek a new round of budget savings, given that the return-to-surplus timetable has been again pushed back, and Australia’s triple-A credit rating is under threat.
“The savings we are seeking the support of the parliament for are the ones set out in the budget,” he said. “Our policy is set out in the budget. I’m not going to run through the contents of Myefo next week, let alone the 2017 budget.”
Pressed on whether that meant the government was not minded to seek additional savings or pursue new revenue measures in the new year, Turnbull again declined to engage with the point.
“I’m not going to speculate. If you are asking me to speculate what might be in Myefo – let alone the budget – I’m not going to. We have set out a set of measures in the budget. The progress of that plan will be reviewed in Myefo but I’m not going to speculate about future budgets.”
Asked whether the government would have to be more proactive on housing affordability, which has emerged as a significant political issue given the cost of buying a home in Australia’s major cities, Turnbull flagged action in 2017.
The Coalition rejected Labor’s election policies at the July poll on negative gearing and capital gains tax, which were badged as affordability measures, but the New South Wales government has sought to reopen that conversation, saying high prices in capital-city markets can’t be countered with supply measures alone.
Turnbull acknowledged that housing was a hot-button issue: “Housing affordability is a very central issue in our thinking. Most of the remedies lie in the hands of state governments but it is something we are very focused on.”
The non-Labor states had signed on to a program of streamlining planning measures, he said.
“If you want to improve housing affordability you need to build more houses. You need more dwellings. It is overwhelmingly a supply-side problem and our city deals are focused on that and we’ll continue to work on every aspect.
“It is a multifaceted problem and there is no single silver bullet.”
In addition to the government’s economic agenda, one of the breakthroughs of the 2016 political year was a deal reached between the Turnbull government and the Obama administration to resettle refugees, now detained in offshore immigration detention, in the US.
There is a significant question mark over whether Donald Trump will honour that agreement given that he campaigned for the presidency on a strident anti-immigration platform.
The prime minister said he expected Trump would honour the deal. “The arrangements with the US are under way and we expect them to continue following the change in administration.”
“US authorities are conducting their own assessment of refugees referred by the UNHCR to determine which refugees and how many are resettled in the US,” he said.
In the event the deal fell over, Turnbull said the government was continuing to discuss resettlement options with other countries. “Refugees who are not resettled in the US will still have access to other resettlement options.
“Anyone who is not found to be a refugee should return to their country of origin.”
Online Source: The Guardian
