Minutes after the Senate finally killed the government’s company tax cuts plan on Wednesday, the Prime Minister emerged to dump his signature economic policy. Turnbull announced that the government would not take its plan to cut the company tax rate to 25% for the world’s biggest corporations to the next election.
The decision frees up only a relatively small amount over the forward estimates — just over $1 billion — but tens of billions over the next decade that could be redeployed to other, more political appealing policies.
At the same time, the Prime Minister announced the government would not be proceeding with its long-proposed repeal of the pensioner energy supplement, originally established by Labor as a welfare measure for its carbon price. The policy has bedevilled the government since it formed part of the Abbott government’s toxic 2014 budget, allowing Labor to argue it is protecting pensioners.
However, bizarrely, the decision to dump the supplement repeal policy was made before the budget and not announced until now, when the backflip will be seen purely in the context of the government’s current leadership chaos. That strange decision means any political benefit from the backdown will be lost amid the swirl of leadership speculation, when it could have been revealed on budget night.
On the long-term fiscal gain from not proceeding with big business tax cuts, Turnbull said the government was currently considering its options, including the option of accelerating the reduction to 25% of company tax rates for small and medium businesses up to $50 million. How long there’s a government to do any considering, however, remains to be seen.