Treasurer Scott Morrison has left open the idea of less ambitious company tax cuts so the government can afford to pay for personal income tax cuts before the election.
Speaking after release of the government’s six-monthly budget update, Morrison said the Coalition was still hoping to pursue its 10-year enterprise tax plan, complete with $65bn in company tax cuts, despite the Senate’s opposition.
He said Australian businesses needed the multibillion-dollar tax relief, and the country needed to keep its headline corporate tax rate internationally competitive in the face of Donald Trump’s looming tax cuts in the US.
He said the Coalition also wanted to pursue personal income tax cuts before the next election, as Treasury forecasts a larger surplus of $10.2bn in 2020-21, revised up from $7.4bn.
But he did not dismiss the idea that the government may need to reduce the level of its planned company tax cuts to create the fiscal room to pay for personal income tax cuts and to get the Senate’s support.
“We’ll just keep working the issue,” Morrison said on Monday. “Our policies and commitments remain the same. We’re working to meet all of those objectives.”
On the ABC’s 7.30 program, Morrison said he believed Australians “always” deserved a wage rise but there were “good signs” at the moment due to the high levels of business investment and profits.
He said as the labour market continued to get tighter “we can expect to see that flow through to wages more broadly in the economy”.
Asked why wages had not yet risen, Morrison argued they had got out of sync with productivity in the mining boom and profits had only just turned a corner.
“We had 12 consecutive quarters where profits were going backwards ... for the first time over the last four quarters we’ve actually had positive profit growth,” he said.
Morrison said the prime minister had made it “pretty clear” his task was to deliver income tax cuts for middle-income earners “into next year and the years beyond that”.
The treasurer said he intended to deliver income tax cuts while still returning to surplus in 2020-21 and would not be pushing ahead with the plan if tax cuts would put the AAA credit rating at risk.
Last month the progressive thinktank the Australia Institute warned the Turnbull government should not try to cut Australia’s headline company tax rate to compete with Trump because it could harm the local economy.
It dismissed concerns that a US cut of its corporate tax rate to 20% would lead to capital being withdrawn from Australia.
Malcolm Turnbull foreshadowed personal income tax cuts for middle-income Australians in a speech last month to business leaders as he attempted to shrug off the chaos of the past few months and make the case for his “measured” leadership.
Since then, he and Morrison have defended the idea on several occasions.
The Labor leader, Bill Shorten, dismissed Turnbull’s plan to cut personal income taxes last month, saying it amounted to a vague promise of “free beer tomorrow” to distract voters from his political woes.
The former Treasury official Chris Richardson also undermined the plan, saying there was no strong economic case for personal income tax cuts and they would come at the budget’s expense.
The finance minister, Mathias Cormann, on Monday said if parliament passed the government’s business tax cuts in full he would expect “the impetus [would] be there for future increases in wage growth”, but he did not say how that could happen.
He accepted that wages were currently growing at a record slow pace despite a near-record 383,000 jobs being created this year.
