Of all the unkillable stupid ideas in Australian economic debate, a company tax cut is the dumbest — and most immortal. You can bury it under a pile, an avalanche, a whole mountain of facts, but there’ll always be someone, a business luminary, a lobby group, an economic commentator, a politician, who will dig the fetid corpse up and parade it around as though it’s a fresh, clever idea, waving its arms in a sick parody of life.
Normally Labor MPs can smell the rotting flesh a mile away, but maybe Industry Minister Ed Husic has a blocked nose. Invited last week to reflect on whether the decline in manufacturing investment was to do with Australia’s uncompetitive company tax rate, Husic opined that “either through corporate tax reform or the way in which we provide investment allowances for the uptick in manufacturing capital, that is something long term, I think, does need to be considered”.
Like flies on shit, business spokespeople immediately seized on Husic’s remark and showered him with praise — there was even talk of a “cabinet split” on the idea. Gee, and to think there are some Labor MPs who for years have thought Husic opens his mouth a bit too much. Perish the thought!
For Ed, if for no one in business because it’s not in their interests to listen, here are the facts based on Donald Trump’s mammoth company tax cut of 2017. It didn’t increase investment. It didn’t lift wages, except for — surprise! — highly paid executives. It didn’t increase manufacturing employment, which kept growing at the same rate until it plateaued in 2019. It did, however, cost the US government $1.7 trillion up to this year (remember, Australian business always wants company tax cuts to be offset by a rise in the GST). And it did fuel a massive share buyback spree by giant corporations.
But shouldn’t Australia be doing anything it can to encourage business investment? Actually, turns out, what we’re doing already is working well.
Last week the Australian Bureau of Statistics revealed a 1% rise in investment in the March quarter, for a 5.5% increase over the year to March.
What drove the rise? Transport and logistics had the biggest rise, but there was also a 60.6% — six-oh-point-six percent — rise in investments in data centres. Data centres also feature heavily in expected investment in coming quarters, along with infrastructure and energy — i.e. renewables.
At nearly $40.5 billion a quarter, investment is now at its highest level since mid-2015, when investment was collapsing from its Labor-era high — it peaked at over $52 billion in the June 2012 quarter, back when Wayne Swan, uniquely, had to manage an economy with a dollar at or above parity with the greenback. The highest investment in nine years, however, attracted little attention from the likes of the Financial Review, because it doesn’t fit the narrative that Labor is a massive impediment to business.
But it also doesn’t fit Labor’s narrative about the need for more manufacturing investment, either. At the moment, surging demand from AI and all sorts