This opinion article by Jennifer Westacott, Chief Executive of the Business Council of Australia was published in The Daily Telegraph on 27 May 2016.
When politicians feel comfortable joking about putting another million dollars on the “spend-o-meter” we have entered strange days indeed in election campaigning.
After all, this is our money that our politicians are talking about spending so readily.
There is no such thing as “government money”. In a busy modern society, when many Australians feel disengaged from their governments, it’s possible some have forgotten that point. But we all have a critical stake in this election campaign — beginning with our hip pockets.
Every dollar of tax raised to pay for government spending discourages valuable activity somewhere in the economy, like working, saving and investing. Every dollar needs to be spent efficiently and go to those who need it most. Otherwise increasing taxes will chase wasteful spending.
So let’s review some facts.
Who are the taxpayers who ultimately foot the bill for the promises made during an election campaign, whether on a “spend-o-meter” or elsewhere?
The most significant group are individuals paying tax on the income they earn. In the past year, about $180 billion, or 50 per cent of all commonwealth revenue, was raised from the taxes paid by roughly 10.5 million working Australians earning above the tax-free threshold.
But Australia has an ageing population, with our Baby Boomers beginning to retire from the paid workforce. That will put even more pressure on governments to fund health, aged care, and the age pension.
Faced with the stark demographics, that once bedazzling spend-o-meter is suddenly sounding less attractive.
Any Australian grappling with a household budget knows that unless you can pay for your promises — whether they are for a kitchen renovation, a university education for a child or simply a cricket bat for Christmas — they are meaningless, or worse, even harmful.
That is why “spend-o-meter economics” is so disturbing.
It would doom future generations to a higher tax burden as they struggle to pay for debts we have run up, and to maintain services for their families.
It would leave no buffer to deal with the sorts of cyclical economic shocks that history shows Australia usually experiences every 13 years or so.
But there is an alternative. We could call time on reckless spending and reform our outdated system to grow the economy overall.
Reducing the tax burden on Australian businesses is one important way of doing this.
In the past year Australian businesses paid about $66 billion in company tax. But the Australian rate of 30 per cent is a significant handicap in a globalised market, where companies in Asia pay on average 23 per cent and, across the OECD, 25 per cent.
Spend-o-meter economics would have us believe reducing our company tax to a more competitive rate of 25 per cent would permanently reduce government revenue and stymie spending on services. But this economic viewpoint is either wilfully shortsighted or woefully ignorant.
Australian businesses employ almost 10 million Australians, and drive about 80 per cent of our economic output.
It therefore makes sense to do everything we can to help our businesses thrive, so they can invest, expand and create more and better paid jobs, all of which will ultimately support a stronger revenue base to pay for the services and infrastructure we need.
Surely that is a far better outcome than anything you gain simply spinning the spend-o-meter.
The time for reform is now.