Mar 7, 2018

Reserve Bank head spoils the tax cut narrative at neoliberal frolic

Reserve Bank governor Philip Lowe has spoilt the corporate tax cut argument by pointing to surging investment and ignoring the whole issue of tax.

Glenn Dyer and Bernard Keane

Crikey business and media commentator / Politics editor

Governor of the Reserve Bank of Australia, Philip Lowe.

The merry gathering of neoliberals that is the Financial Review's Business Summit has provided some entertainment this week. Business luminaries have stroked their chins, scratched their pates and furrowed their brows about how they can better sell the idea of company tax cuts to Australians, with some even suggesting that they try convincing people that they're not a pack of greedy self-servers first.

Today, Malcolm Turnbull will show up and present the genius idea of linking company tax cuts to free trade agreements. Yep, good idea Prime Minister, free trade has such a great reputation with voters, that'll turn the whole argument around.

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19 thoughts on “Reserve Bank head spoils the tax cut narrative at neoliberal frolic

  1. zut alors

    Can’t wait to see if/how the Financial Review misreports Lowe’s speech.

  2. AR

    So BK, “Lowe is pointing to evidence infrastructure spending is a highly productive way of stimulating demand, employment and investment“, think how much your bete noire/blind spot, the Inland Rail, would do for the nation.
    But only if it were not fabricated entirely from imports, else we might wind up with the genius whizz of NSW buying Korean trains which don’t fit the stations, rails or tunnels.

    1. Arky

      “Infrastructure spending” means smart infrastructure spending, not spending on white elephants just for the sake of spending.

      Melbourne Metro (something going ahead despite the Federal Government’s signal LACK of support) is an example of the kind of infrastructure spending we should be doing more of.

  3. Bethany Challen

    …with some even suggesting that they try convincing people that they’re not a pack of greedy self-servers first….. ha ha ha what an outrageous suggestion!

  4. Dog's Breakfast

    “Australia does need to remain an attractive place for global capital to invest.”

    I know this statement is taken as gospel among business and economics graduates, but I’m not quite sure it is as axiomatic as appears. Why exactly? Anyone is free to explain. Do we really need Adani to invest billions here in a coal mine? Is that really going to pull us out of the fire? Surely it’s a case of ‘we need some foreign investment, probably, although we do have trillions of dollars in superannuation funds which would seem to be available for viable investments here’. Surely it’s about the quality, never mind the width?

    Bernard has elsewhere stated how it is the industry funds who have stumped up investment dollars for infrastructure in Australia. Presumably retail funds are sending their money overseas. Again, why do we need an international money merry go round? If there is something worth investing in here, surely there are oodles of places to find that money. Aren’t banks in that business?

    Further, while there is always panic about foreign investment dropping off a cliff if we don’t have competitive tax rates, Ross Gittins pointed out in a helpful article some moons ago that the amount of foreign investment we get has no correlation to our tax rates, going back to the 1980 when tax rates ere very high. Somehow Norway finance their oil rigs with tax rates in the 70%+.

    I suspect we are being sold a furphy, and often enough by highly educated people who didn’t ask the lecturer if what they were saying was bullshit, they just took it on board as an axiom of modern day economics.

    1. Dog's Breakfast

      Sorry, one more, surely infrastructure investment is in the higher orders for flow-on stimulatory effects, but there are good and much better. I posit that a world class FTTH or FTTK broadband system would be among the highest of all investments for stimulatory and flow on demand, and what have we got from the dear LNP, and Mr Turnbull, master of all he purveys.

      So I suppose in that sense, it’s a great idea to do it twice, the half-arsed way we are doing it and the way we are eventually going to get to, probably at double the infrastructure spend.


      1. shiner1

        ‘parrently,many folk will use the upcoming 5G to bypass NBN completely.

      2. PaulM

        FTTK? Fibre to the keyboard? Fibre to the Knode? Please explain.

        1. Luke Hellboy

          Fibre to the kerb

    2. AR

      One of the “reasons” given for Talcum’s recent trip to grovel before the Orange Ogre was the need to find investment opportunities in the Benighted States for our burgeoning super funds.

  5. David Stakes

    Turnbulls thought bubble on company tax cuts POPPED. $65billion on infrastructure a better spend. No brainer really. Only Neo Libs cant see this.

    1. brian crooks

      a stupid government, a stupid PM and stupid voters, a toxic mix.

    2. gjb

      I totally agree, we should be investing $65Billion in our own infrastructure first, then attract super funds to co-finance and only then allow international investment… NOT INTERNATIONAL OWNERSHIP.

  6. brian crooks

    a stupid government, a stupid PM and stupid voters, a toxic mix.

  7. klewso

    “Here we are at the Anal Fin Rev Casino …. and look, here’s the BCA and their government at the craps table – betting with our chips.”

  8. Robert Garnett

    Offshoring, the neutering of labour unions by business, our politicians and their handmaidens in the media have swung the pendulum away from labour and very strongly towards capital. The monetarists in the 70’s and 80’s, (yes I was alive then), blamed the inflation of the seventies and early eighties as a result of excessive money supply. It was not. It was caused by labour cost push inflation and it was the only time in the history of money that this ever happened. Yes I know about Germany pre WW2 but this was all about the avoidance by the Wehrmacht Republic of paying the French the egregious reparations required by Versailles.

    With labour’s power to bargain, busted back to third world levels, by Hawke, Keating Howard and Costello, cost push inflation has gone. The reserve banks, because they are populated by economists and accountants who live in the past still think that inflation is just around the corner. But it aint. They keep money cheap so that the rich can play games with share buy-backs, property bubbles and all the other rubbish they pursue. With all the cash floating around if the monetarist were right we should be paying $1000 for a loaf of bread, but we are not. They keep hoping for an inflation outbreak, and the Reserve Bank Governor keeps encouraging wage growth to get one so that their economic models will work, but somehow the capitalists like it just the way it is.

    The economists keep wringing their hands about the decline in labour productivity, but labour productivity is only sought by the capitalists when labour costs are high, as an incentive exists to increase labour productivity to reduce unit labour costs to increase profits. If the production worker making widgets in China or Malaysia is on a bowl of rice a day, labour productivity is of little consequence. An example of this is Foxconn who make Apple phones. In 2010 I think it was, Foxconn who manufacture Apple I Phones made US$4 billion. Apple in the same year made $40 billion. So profits are sky high, and they don’t know what to do with all the cash, but they sure as hell don’t want to pay any tax. Apple has $450 billion off shore in tax havens. When it repatriates it, tax free, they will use it to buy back their shares to make the executives even richer. The people who sell their shares in these diabolical transactions will no doubt use the cash to push up property prices or the price of Lear jets. The kid selling drugs on the stoop in Baltimore or Washington won’t get a look in. These kids made bad choices. When they picked their parents, their suburbs and their schools prior to their birth they should have done a bit more due diligence. It’s their own fault if they ended up on the wrong side of the tracks.

    With Australian manufacturing declining and the service industry becoming a larger part of the game, productivity can’t simply be measured in widgets per person, it is a more about the “customer experience” Service industries are notorious for their lack of worker power and so again, the urge to increase labour productivity in Australia is non-existant. Of course in some service industries such as aged care the number of inmates per nursing home worker is the benchmark that all nursing home profiteers would like to change and given the fealty of our politicians to large and medium businesses they will no doubt get their way. Communal baths in kerosene such as those overseen by one of our past Ministers for Aged Care may re-emerge as a way of achieving this.

    It was interesting to note that Uber, a service provider in the Gig economy, is underpaying it’s employees, sorry “independent contractors” well below minimum wages, but Uber aren’t making a profit. I wonder how much their Australian CEO takes home every year and the principles of the company who set up the scam in the first place. Perhaps the lack of profit is a bit like Apple’s lack of profit more to do with tax avoidance than reality. I imagine it would be impolite to ask Mr Uber what he’s on as this is playing the man rather than the ball. Very unsporting.

    I wonder if Ubers productivity is greater than the old Taxi Rort?

    1. shiner1

      Great commentary..I’m sure the principals of Uber have no principles or scruples even.

    2. [email protected]

      Not disagreeing with the general thrust of your comment, but I have noticed that in most articles about labour productivity that it is going up not down. Profits are up, wage growth down, and labour productivity is up.

  9. MAC TEZ

    Infrastructure done well will always work out great
    gotta get it right early as the future just won’t wait
    but when neoliberals spruik their infrastructure
    you know for sure they’re out to fuck ya
    we get the new trains that don’t fit
    are stuck with stupid to-the-node shit
    Tibby’s bridge and toll roads to nowhere
    while public transport draws a blank stare
    Proper infrastructure puts the civil back into civilisation
    but neoliberals seek only profits as they shit upon the nation.

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