Signs are already not good for Chalmers' productivity testament
Policy festivus is celebrated in Australia when a political party is ascendent but its courage is in retrograde. This cargo cult-style ceremony mimics the Accord, a revered moment in Australian political lore when the Hawke-Keating government brought together the heads of the unions and business to reach a groundbreaking arrangement which, it is widely agreed, set Australia on the path of prosperity.
The Albanese government has shown itself to be a great devotee of the Cult of the Accord. In its first term, it held the Jobs and Skills Summit, which lined up all the key players and ideas to simulate the process. Thanks to meticulous planning, the Rites of Full Employment performed at the summit confirmed the government in its conviction that it is the key player in creating jobs. Those who lack faith say that it is doubtful that the summit has led to actual employment outcomes.
Aglow from its success, Treasurer Jim Chalmers launched his next project, ' Measuring What Matters', or the wellbeing budget. But Measuring What Matters had a problematic feature: it opened a window into a deeper theology. Namely, the question of what exactly wellbeing might be. If there is one thing the Albanese government, dominated by Labor Left, will not tolerate, it is the idea that there might be different conceptions of wellbeing than the one which it preaches.
By the October 2022 out-of-cycle budget, wellbeing had been reduced to a tiny addendum. The following May, it was gone entirely, and the addendum from October had been scrubbed from the previous year's budget papers online. In July 2023, Treasury put the completed paper up online without fanfare. Measuring What Matters was shrunk and sunk.
Not to be deterred – and it is quite refreshing to see a politician doggedly attempt to do his actual job rather than just play politics – Chalmers requested that the Productivity Commission produce a set of proposals for improving Australia's prosperity. This week the first of these dropped, marking the official start of the festival of productivity.
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It's a doozy. The interim report on ' Creating a more dynamic and resilient economy' is brief (under 100 pages), simple and bold. It proposes lowering the tax on companies with revenue below $1 billion from 30 per cent to 20 per cent, replacing the resulting decrease in tax take with a 5 per cent tax on cashflow. Companies with a turnover above $1 billion would continue on the 30 per cent tax rate, as well as paying the cashflow tax. Regardless of size, all companies could immediately deduct capital investment – for instance in equipment needed to grow the business – against the cashflow tax.
The genius of the cashflow tax, which would be the first of its kind in the world, is that it would encourage companies to buy what they need in Australia, creating a further benefit to the economy. In particular, overseas companies with revenue over $1 billion – those that could undertake their procurement anywhere in the world – would have an incentive to make their acquisitions in Australia in order to reduce their tax bills.
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