Company tax cuts 'urgent' as Morrison issues warning

Treasurer Scott Morrison at a press conference in Sydney, Wednesday, July 5, 2017. (AAP Image/Mick Tsikas) NO ARCHIVING
Treasurer Scott Morrison at a press conference in Sydney, Wednesday, July 5, 2017. (AAP Image/Mick Tsikas) NO ARCHIVING

Treasurer Scott Morrison has declared business tax cuts are "urgent" as productivity growth dwindles and competitor economies prepare to slash company tax rates in a bid to attract capital and accelerate economic growth.

In a speech to be delivered Tuesday launching a landmark Productivity Commission report on a new wave of measures to lift Australia's productivity, the Treasurer will say that unless productivity growth lifts and Australia attracts new investment, wage growth will stay low.

The Senate has passed has passed only $24 billion of the government's $50 billion program of company tax cuts, meaning the rate will fall from 30 to 25 per cent for small and medium size businesses but not for big ones.

Extending the $24 billion program of tax cuts had become "an urgent matter" given moves by the UK, France and US to cut tax to drive investment. Australia risked becoming "an uncompetitive tax island" if it didn't act.

Mr Morrison will liken the proposals in the first of the Productivity Commission's five-yearly reviews to those introduced by the Keating and Howard governments that cut tariffs, sold government assets and reformed labour markets in the 1990s.

But he will say that those reforms were easier to achieve, in part because the "burning platform provided by early 1990s recession focussed the debate and compelled greater bipartisanship".

"The price of a generation of Australians growing up without ever having known a recession is that reform comes more stubbornly and incrementally," Mr Morrison will say.

"We also need to understand that many Australians are now far more sceptical of change. Whenever governments mention the word 'reform' or 'productivity', they get nervous."

The Productivity Commission's central concern is that, as exciting as recent technological advances have been, the productivity gains from change "appear to be diminishing".

The key recommendations are designed achieve a more integrated patient-centered healthcare system; an education system that supports better teaching to create more resilient and adaptive workers; and more functional cities that will not choke the economy.

While Australia's health system is the envy of much of the world, there are some clear "fault lines". Fewer than 20 per cent of Australian GPs are told when one of their patients has been seen in an emergency department, compared to 56 per cent in New Zealand and 68 per cent in the Netherlands.

The gains from the commission's proposals on healthcare alone could amount to $200 billion over 20 years.

The university reforms would delink funding for research from funding for teaching, so that income from teaching no longer subsidised research. Workers with real world experience would be able to become teachers quickly and teachers without skills in the subjects they teach would be retrained. Thirty percent of high school information technology teachers have never studied the subject.

The potential gains from changing the way infrastructure is funded and delivered amount to $2.9 billion per year. Charging drivers for road use might lead to a permanent increase in gross domestic product of $20 billion.

The changes would need to be pursued in cooperation with the states. They were not government policy, but the result of a brief given to the commission by the Treasurer to come up with ideas that would work.

This story Company tax cuts 'urgent' as Morrison issues warning first appeared on The Sydney Morning Herald.