Speech

Address to the Business Council of Australia

Senator The Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia

Thursday, 23 November 2017

The Turnbull Government’s economic policy priority is to ensure that every Australian today and into the future has the best possible opportunity to be successful and get ahead.

We want every Australian today and into the future to have the best possible opportunity to get a job and to pursue a successful career here in Australia. 

A career where they can reach their full potential, take care of their family, contribute to their community and to our country and enjoy a high standard of living.

But – as you would appreciate – jobs don’t grow on trees.

Jobs are created by successful profitable businesses.

The more successful, the more profitable a business is the more people it can hire and the better the wages it can pay.

The opposite is also true. 

Less successful, less profitable businesses will necessarily employ fewer people and only be able to pay them less.

All these are pretty basic economic realities – but listening to some of the rhetoric and reading some of the policy propositions of our political competition, they do not seem to appreciate some of these common sense facts.

Nearly 9 out of 10 working Australians work in a private sector business.

Their job security, their future jobs and career prospects, their future wages growth depend on the future success of business right across Australia.

That is why we should always be very confident to say that our Government, the Turnbull Government, is unashamedly pro-business.

We are pro-business because we are pro-opportunity for every Australian. 

This is a key contrast between us and our political opponents.

The most important ingredients of your success as a business will always be the initiative, the skill, the entrepreneurial drive and the hard work you and your people deploy to find, to seize and to successfully exploit business opportunities in front of you.

For an open trading economy like Australia, global economic conditions are also clearly very relevant.

But, as I’m sure you would also appreciate, public policy choices, economic and fiscal policy choices matter. 

For better or for worse they can matter a lot.

A policy agenda designed to help Australian business be more internationally competitive, be more successful and more profitable will lead to stronger growth, more jobs and better opportunities for everyone to get ahead. 

Because more successful, more profitable businesses will hire more Australians in order to pursue new opportunities or opportunities to expand existing successful activities and they will be able to pay higher wages over time.

That is why we are pressing ahead with our commitment to reduce the corporate tax rate for all businesses in Australia down to 25 per cent.

Reducing our business tax rate will help business attract more investment, to invest more, to innovate, to boost productivity, to expand, to pursue new opportunities – to create more jobs and over time pay higher wages.

That is why we are pursuing an ambitious free trade agenda, helping our exporting businesses get better access to key markets around the world. 

Our free trade agreements with China, South Korea and Japan have helped drive increased Australian exports into those markets. Future agreements with Indonesia, India, the European Union and the UK as well as our participation in the Trans-Pacific Partnership, even if not all those we would like to see involved are involved at least as yet, will do the same.

Australia’s exports are up 4.3 per cent compared to a year ago. Rural exports are up 18.7 per cent compared to a year ago and services exports are up 5.4 per cent over that same period.

Selling more Australian products and services into key markets in our region and around the world means more successful, more profitable exporting businesses.

It also means more business for their suppliers. 

2.2 million Australians are employed in a trade-related activity.  

And of course our free trade agenda means lower prices for consumers.

Thanks to the trade liberalisation that has occurred over the last three decades, real GDP is 5.4 per cent higher, real wages are 7.4 per cent higher, and average family income is $8,448 higher than they otherwise would be.  

Helping business be more successful and more profitable is also an important reason why we are pursuing an ambitious infrastructure investment program – designed to improve the efficiency of our trading infrastructure and our productivity generally.

It is why we are so focused on reforms to ensure the reliable and affordable supply of energy, a key input cost for many businesses across Australia.

Lower energy prices and a stable reliable supply of energy help business be more successful and more profitable, which means they can hire more Australians and pay them better wages.

And of course more successful, more profitable businesses and their growing number of employees help government fund the important services we need in education, health, social welfare and on national security.

In the middle of all the continuous political noise people can be forgiven for missing the fact that our pro-business, pro-opportunity economic plan for jobs and growth is actually working and helping to deliver results.

When we came into government in 2013 our economy was weakening, the unemployment rate was rising and our budget position was rapidly deteriorating.

Today, our economy continues to grow with an improving growth outlook.

The unemployment rate is lower than where people thought it would be when we came into government; 

Employment growth is relatively strong; and 

The budget is now on a credible path back to surplus, with the final budget outcome for 2016-17 actually showing an improvement instead of a deterioration compared to Budget.

The number of jobs in Australia has increased for 13 consecutive months so far – the longest straight run of jobs growth since 1994.

Since our election to government in September 2013, more than 830,000 net new jobs have been added to the economy – an average of 200,000 new jobs a year.

There are now 355,700 more Australians in work than a year ago – more than 80 per cent of these new jobs are full time jobs.

In fact jobs growth over the past 12 months is more than four times stronger than during Labor’s last year in office.

According to the NAB Monthly Business Survey in October 2017, business conditions are at their highest level in two decades – four times the long-run average.

And that increase in business conditions is widespread.

Surveys of the services sector show the longest run of positive data in a decade.

As global economic sentiment continues to improve, Australia needs to ensure that we are in the best possible position to capitalise on the opportunities that come our way as a result. We need to ensure Australia is internationally as competitive as possible. 

That is where our political opponents are proposing to take Australia in precisely the wrong direction.

Labor under Bill Shorten has consciously and cynically decided to adopt an anti-business, and consequently an anti-growth, anti-opportunity and anti-jobs approach.

As I said during a speech to the Sydney Institute in August this year – 

Bill Shorten is prepared to trash the proud economic reforming legacy of the Hawke and Keating governments, which helped drive our international competitiveness as an increasingly open trading nation. He is taking Labor back to its failed socialist roots.

The reason is because he thinks it will win him votes.

He clearly thinks business is unpopular.

He thinks pro-business policies are too hard to sell, whereas anti-business policies and anti-business rhetoric is popular, politically more convenient and will help him win government.

Yes, business should be concerned about that. 

But really – every Australian should be concerned about that. 

Because the future success of every Australian, and indeed the future job security for many Australians, in particular lower income earners, one way or the other, is directly dependent on the future success of Australian business.

In his first major speech at the beginning of this year, Bill Shorten said he wanted to make 2017 a “contest about jobs”.  

He said he had “three major economic priorities: jobs, jobs and jobs”.  

He mentioned “job” or “jobs” 40 times.  He insisted that Labor was the “party of jobs” and that this was “not a slogan”.

Yet since then, while we have continued to successfully implement our plan for jobs and growth and helped secure consistently strong employment growth over that period, he has not only vacated the field on jobs, he has persisted with and further developed an anti-business, anti-growth agenda which if ever implemented in government would cost jobs. 

Let’s consider the respective key economic and fiscal policy positions – 

Where the Coalition argues for lower taxes overall, lower taxes for business and for individuals, to drive future growth, opportunity and jobs – Labor unashamedly argues for higher taxes overall, higher taxes on business, higher taxes for savers and home owners – 

Even though that will lead to less investment, lower growth and consequently fewer jobs and lower wages.

Bill Shorten’s decision to oppose tax cuts for all business to 25 per cent when many of our important competitors around the world have materially lower business tax rates already, or are moving there in the near future, is wilfully reckless and destructive.

His decision to permanently increase the top marginal tax rate to about half of every dollar earned above an income level that is now just over twice average weekly earnings – a wage which many middle income Australians aspire to earn will be a disincentive to work.

His decision to increase taxes on housing and other investment will lead to less investment and lower growth.

Not only would his high taxing agenda, in particular his higher business taxes, make it harder to attract more investment to Australia, it would send investment and jobs overseas. It would mean that more young Australians would have to pursue career opportunities overseas, where hard work, risk taking and success are more highly valued and rewarded.

Where the Coalition is actively working to open markets and promote free trade, Labor is increasingly embracing the populist and protectionist agenda pushed by militant unions and left-wing activists, which they believe will win them votes, even though it would unequivocally lead to less investment, lower growth, fewer jobs and lower wages for working Australians.

And where the Coalition is working to deliver stable reliable more affordable energy supplies, Labor is unashamedly pushing policies like a 45 per cent emissions reduction target and a 50 per cent renewable energy target, to drive up electricity prices while putting our energy security at risk – even though, again, that would clearly lead to less investment, lower growth, fewer jobs and lower wages.

So at the next election – the choice for the Australian people will be very clear. 

A vote for a continuation of a Liberal-National Coalition Government will be a vote for a pro-business, pro-growth, pro-opportunity policy agenda which will deliver more jobs and higher wages over time.

A vote for a change to a Shorten led Labor government will be a vote for an anti-business, anti-growth, anti-opportunity agenda putting jobs at risk and forcing people’s wages down on the back of lower business performance. 

Firstly, based on our respective policy positions as publicly stated, there is no question that – taxes in Australia will be lower under the Liberal-National Party than under Labor.

Not only are we committed to deliver tax cuts for all business bringing the corporate tax rate for all businesses down to 25 per cent –

We are also committed to a tax as a share of GDP cap of 23.9 per cent.

Something that we keep pointing out again and again, but which doesn’t ever seem to be appropriately well understood by analysts or commentators, is that our budget revenue forecasts are based on an assumption imposed on our forecasting model that tax revenue as a share of GDP is not allowed to exceed 23.9 per cent.

Without future tax cuts, tax as a share of GDP would exceed 23.9 per cent.

To keep tax as a share of GDP below 23.9 per cent, we will have to cut taxes in the future without that impacting on our projected return to surplus, because future tax cuts are already reflected in our revenue forecasting methodology.

That is, beyond the business tax cuts in our ten year enterprise tax plan already previously announced and reflected in our Budget bottom line since the 2016-17 Budget, we have effectively already assumed future further tax cuts in our Budget projections.

For those of you who are interested to review that reflected in our published Budget papers – please go to Budget Paper 1 for the 2017-18 Budget, page 3-17 and check out Chart 2 of the Underlying Cash Balance projected to 2027-28.

What it will show you is both a continuous and an interrupted line. 

The continuous line shows the projected budget surplus from 2020-21 onwards all the way to 2027-28 – after the imposition of a 23.9 per cent tax as a share of GDP cap.

The higher interrupted line shows you the higher surplus on the back of higher revenue growth if tax as a share of GDP was unconstrained – that is if we did not impose the 23.9 per cent tax as a share of GDP cap.

Now Labor has already said formally and on the record that they will not take any notice of the 23.9 per cent tax as a share of GDP cap. That they will not limit their tax take out of the economy to 23.9 per cent.

In fact they have already announced a massive increase in the overall tax burden.

The effect of their tax policies announced so far, would increase the overall tax burden on the economy by $167 billion to 2027-28, which as a share of the economy would increase the overall tax burden beyond 25 per cent and rising further beyond the medium term. 

That is, as a result of Labor’s tax increases announced so far, Labor would take more than a quarter of the value of the economy out of our economy in federal taxes. 

Yet Labor’s pre-election costings at the last election showed that because of higher spending exceeding higher taxes over the then forward estimates period, deficits would have been higher and debt would have been higher meaning more new taxes to pay for that down the track.

There is no question that increasing the overall federal tax burden on the economy that way would make it harder for business to be successful, would lead to less investment, lower growth, fewer jobs and lower wages.

Combined with a manifestly anti-business rhetoric;

An at best indifferent approach to open markets and free trade;

A plethora of unfunded and unaffordable spending promises which necessarily would have to lead to further increases in taxes down the track;

And their stated – but uncosted – policy to impose a 45 per cent emissions reduction target on top of a 50 per cent renewable energy target by 2030 which would drive up electricity prices by more.

There is no question that our international competitiveness would suffer under a Shorten led Labor government.

And that at a time when Australia, as an open outward looking globally focused economy needs to ensure we are more competitive internationally not less. 

This is a core economic challenge for our nation.

The decision made by the Australian people at the next general election will have a major impact on the opportunity for Australians today and for future generations of Australians to get ahead. 

Bill Shorten will do and say anything if it helps him get elected.

We know that in the previous Rudd and Gillard Labor Governments – when he was the Assistant Treasurer among other things – he was the number one cheerleader of business tax cuts.

Back then it was jobs right up and down the income ladder.

Now it is a handout to multinationals and millionaires.

Not because the policy merit of a more competitive business tax rate has reduced or disappeared. 

To the contrary, reducing our business tax rate given the substantially lower  business tax rates in countries like Canada, Ireland, the UK, soon the US and many other countries around has become more urgent – both to protect jobs and investment as well as to attract more investment and to create more jobs.

The only thing that has changed is the politics and Bill Shorten’s assessment of his own political self-interest. He is not a politician fighting for what he knows to be right for our nation. He is fighting for himself.

This is not the time for Australia to change course.

This is the time to persist with our pro-business, pro-growth, pro-opportunity and jobs economic policy agenda.

To ensure Australians today and for generations to come, have the best possible opportunity to get ahead. 

[Ends]