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The federal budget beyond the talking points

The Conversation releases a new series of articles, ‘Budget policy checks’, focusing on the coming federal budget in May.

‘It’s two weeks until the Turnbull government hands down its 2018/19 budget and with an election looming, there’s sure to be some sweeteners on the cards for voters.

‘But before we hear more talking points from Treasurer Scott Morrison, we’re taking a look at the government’s justifications for policies that have already made the cut in this year’s budget. We’re asking whether these policies stand up to the economic evidence.’

Does Australia need personal income tax cuts?

Saul Eslake writes (24.4.18) that the federal government says personal income tax cuts are needed to provide relief from low wages and high cost of living, but will tax cuts make up for that?

‘Cutting personal income taxes seems likely to provide much more of a boost to the Australian economy than cutting company income tax. As the government’s own published modelling shows, the benefits of its proposed cuts to the company income tax rate are small relative to their cost.’

Do we need ribbon-cutting infrastructure for jobs and growth?

Hugh Batrouney writes (26.4.18) that Australia does need infrastructure to spur growth and support jobs – that idea, however, comes with a big “but”.

‘We shouldn’t be fooled into thinking any spending is good spending. There are many examples where the opposite is more likely true: where poorly targeted infrastructure wastes resources and weakens economic growth.’

Do we need company tax cuts?

Janine Dixon writes (27.4.18) that, to reap the benefits of strong business investment without a costly tax giveaway, Australia must continue to play to its strengths.

‘Our modelling shows that a cut to the company tax rate for large businesses will indeed lift foreign investment in Australia, driving an economic expansion and an increase in pre-tax wages, but there is more to the story.’

Treasurer Scott Morrison’s speech

Charis Palmer, Editor at The Conversation, analyses (8.5.18) the contents of Treasurer Scott Morrison’s budget speech, asking: What does the evidence say about the policy measures announced in the budget?

‘Treasurer Scott Morrison has laid out his budget plan to further strengthen Australia’s economy, with a focus on constraining both spending and taxing. Economist and tax expert John Freebairn says capping tax revenue is an arbitrary measure that overlooks the many potential reforms to the tax system that are revenue-neutral.’

Bill Shorten outbids Turnbull’s tax cut for lower and middle income earners

Michelle Grattan writes (10.5.18) that the Labor leader’s alternative economic statement almost doubles the budget’s relief for low- to middle-income taxpayers, incorporating the early part of the government’s plan and then building on it.

‘Opposition leader Bill Shorten has launched a tax bidding war, promising to top the government’s tax relief for lower and middle income earners, as he prepares to fight a string of byelections in Labor seats.’

We still don’t have proof that cutting company taxes will boost jobs and wages

Ross Guest writes (10.5.18) that comparing companies that receive a tax cut with those that don’t isn’t the right methodology to conclude that tax cuts create more employment or higher wages.

‘The effect of company tax cuts on jobs and wages take place in the entire labour market. An increase in demand for labour flows through to all business, and therefore, so do higher wages. So we should not expect to see wages rising only in those businesses that receive the tax cuts.’

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