Chief economic mouthpiece of the Federal Government, Treasurer Scott Morrison has rejected an Australia Institute suggestion that taxes should be raised to address inequality and ensure continued prosperity, describing this as a “numpty of an idea”, adding that “the idea that you increase taxes to grow the economy is stupid”1.
Morrison has stood by the government’s full plan to deliver all its $65 billion in business tax cuts, and stated that “we’ve had significant success already in delivering tax cuts for small and medium-sized businesses, and we’re looking at being able to continue to pursue the full tax cuts right across the board, because we know that if you tax your economy less, it grows more”2. Of course, the Coalition’s mantra of ‘Jobs and Growth’ indicates that growth and jobs are intimately causally related.
The tax take for Australia as a percentage of GDP as at 2015 was 35.6%. So, if taxing the economy less is a way to growth and prosperity, then countries like the UK (38.1%), New Zealand (39.4%), Canada (40.6%), Netherlands (42.8%), Germany (44.5%), European Union (44.6%), Euro area (46.2%), Sweden (49.8%), Austria (49.9%), Belgium (51.3%), France (53.1%), Denmark (53.3%), Finland (54.4%) and Norway (54.9%)3must be in diabolical economic trouble, and in desperate need of the wisdom of someone like Scott Morrison. Currently, Australia has a growth rate of 2.9% whereas that of New Zealand is 3.1%, Canada is 1.5%, Netherlands 2.2%, Germany 1.9%, Sweden 3.2%, Austria 1.5%, Belgium 1.5%, France 1.2%, Denmark 2.0%, Finland 1.9%, Norway, 1.1%4. So, given that Sweden has a tax take almost 1.5 times that of Australia, its growth is higher. Clearly, tax is not the only factor at play here.
The unemployment rate in Australia (in late 2017) is 5.5%, in New Zealand it is 4.5%, Canada 5.8%, Netherlands 4.5%, Germany 3.6%, Sweden 6.6%, Austria 5.4%, Belgium 6.3%, France 8.9%, Denmark 5.4%, Finland 8.3% and Norway 4.0%. This also shows that the relationship between growth and employment is not a simple one as Morrison and the Coalition would seem to indicate.
What Morrison is really on about, is delivering growth in profits to big business and higher remuneration for CEOs and senior managers in those big businesses, presumably in the hope that they will keep the donations to his party flowing. Despite all their bluster about jobs and growth and the fact that the Australian economy is growing slightly higher than the world average (~2.7%)4and the OECD average (~2.5%), our unemployment rate is not dropping significantly, having mostly been between 5.8% and 5.5% for the last three years6.
Perhaps the most telling statistic is the GDP per capita. In Australia, this rose more or less steadily until the GFC, when it declined from about $US49,700 to about $US42,700. It then skyrocketed to about $US67,800. Since 2013, when the current Coalition government was elected, GDP per capita has been in freefall, and in 2016 was at $US49,900, much the same as it was before the GFC, a decade ago, and $US18,000 less than when this government was elected. While most countries have suffered a fall in per capita GDP between 2013 and 2016, in few western democracies has it been as precipitous as that experienced by Australia. That is the price of having a government wedded to the outmoded neoliberal economic theory.
Morrison seems unable to grasp the fact that, despite all the available evidence, the economic model to which he adheres is outmoded. On top of this, he is now blaming the Opposition Leader for not holding a Banking Royal Commission7, seemingly unaware that all his previous utterances in which he pilloried the concept are still online and available to one and all. As a consequence, I am leaning towards the assessment that Scott Morrison is indeed a simpleton.