What has the much hyped PM’s round table achieved?
About 900 briefs were tabled at a round table conference in Canberra from August 19 to 21 for consideration by 23 of the nation's best and brightest industry leaders handpicked by Prime Minister Anthony Albanese and Treasurer Jim Chalmers. Accordingly, given widespread awareness the nation’s economy is at a crossroads, there was expectation the meeting would yield something worthwhile.
Dr Chalmers has said it achieved “lasting and enduring economic progress” while a cohort of economists are saying the deliberations did little more that skirt the edges of Australia’s major problems of declining productivity and consequently living standards.
Optimists are taking various positions between those divergent viewpoints. They claim necessity for improved productivity has now been so highlighted at the conference, the government could suffer seriously at the polls if it doesn’t summon political will to meet that need.
Is tax reform the solution?
The Treasurer has indicated a modicum of interest in tax reform during the current term of government. He has conceded, in possibly the greatest understatement of his career, that the existing tax system is “imperfect”, and he’s now announced the roundtable’s agreement on three goals for reform.
These, he says, are a tax regime that delivers a fair go to working people when viewed through an intergenerational lens, plus taxation that incentivises business investment, and finally, a more sustainable tax system for funding people’s needed services.
However, Macks Advisory sees these goals as potentially contradictory. There’s been no indication from the round table on whether anyone present believes kicking goals depends on an overall increase of the current tax burden for all Australians or only some Australians (for example the wealthier ones).
Neither the PM nor Treasurer has since indicated whether they believe the meeting’s nominated goals can be scored by way of any sort of tax increase or reduction.
Macks Advisory is going for the trifecta here. First, we’re betting the government won’t attempt to score these goals by way of reduced taxes. Second, since productivity growth is essential for economic growth, and corporate tax reform is an essential element of productivity growth, we can see no sign of a consensus that would float that boat. Finally, we’re wagering we’ll see no sign in the immediate future of the Albanese cabinet summoning the political will to venture beyond traditional Labor thinking -- as great Labor governments have done in the past.
When announcing the round table to the National Press Club on 18 June, Dr Chalmers said “no sensible progress can be made on productivity, resilience or budget sustainability without proper consideration of more tax reform”.
And he added: “Australians could keep more of their wages if we rebalanced taxes on other forms of income. I don’t just accept that, I welcome it.”
After the three-day round table, the Treasurer offered a glimmer of hope for optimists on tax reform in his next three budgets by declaring changes should be guided by a desire to improve “intergenerational equity” by increasing business investment and making the system fairer to better fund essential services.
Sure: except there’ll be no worthwhile business investment in Australia given the current state of its economy.
Let’s cut the blah
But enough of aspirational blah and hypotheticals. Let’s talk reality. According to modelling for the Productivity Commission, expanding the goods and services tax, council land rates and the tax on offshore oil and gas, would be the most growth-friendly ways to pay for reductions in corporate tax to help stimulate business investment.
Chris Murphy, an economist who provided modelling for the GST, says it’s possible by widening it and giving the average Australian worker an annual $2,700 cut in income tax to, as a start on a thorough overhaul of the entire taxation system, add a combined $158b to the economy.
He claims the proposal would raise GDP by 6%, business investment by 11% (see article headed “Boosting private investment is a key to unlocking Australia’s economy” in our 14 August newsletter) and increase the number of homes being built by 8%.
Business Council of Australia CEO Bran Black says the nation’s business leaders agree with the Treasurer’s principles for budgetary improvement but won’t support them unless they’re proposed as an effective package.
Among the most economically damaging potential changes would be to attempt to raise more government revenue through the existing corporate tax system and from high earners, already paying a 47% rate for incomes above $190,000.
The disappointing round table
Worse than the disappointing lack of ideas from the round table on productivity, has been lack of any indication from PM Albanese on what sort of government he believes Australia needs.
Specifically, we believe that readers of the Macks Advisory newsletter, together with many other Australians, want to know whether it makes any sense at any level, for the government to be considering confiscation and redistribution of people’s accumulated wealth in the name of “intergenerational equity” (see reference to this aspiration by Dr Chalmers above).
Surely what’s needed here are indications from the government on how its focus on creating a more productive economy will make it easier for all generations, especially the current one, to accumulate capital assets of their own.
Does Mr Albanese really believe future Australian families will be better off living in their own homes, or in rented, higher-density accommodation built and owned by superannuation funds using and profiting from members’ money?
Readers may recall legend has it that King Arthur drew Excalibur from a rock to became leader of the Round Table, and that Geoffrey Monmouth and Sir Thomas Malory were proven correct when they said King Arthur would be the only person able to draw Excalibur from that rock so he could win England’s fight for good against not good.
Hands up those who believe Mr Albanese is Australia’s right man for a job like that, and there was any chance he had Excalibur on his lap when he was sitting at the August round table in Canberra.
