Turnbull touts tax cuts for middle-income earners and big business in 2018

Australia Prime Minister Malcolm Turnbull. Photo: Manan Vatsyayana/ AFP/ Getty Images.

Malcolm Turnbull will anoint business as Australia’s economic saviour in a pre-election speech in which he warns a return to Labor will jeopardise economic recovery, hard-won employment growth and, further down the road, tax cuts.

Drawing a stark contrast with Labor leader Bill Shorten, who on Tuesday attacked business for not paying workers more and called for changes to workplace relations laws to force higher wages, Mr Turnbull will argue that a flourishing business sector is the key to job growth and prosperity.

“The most important engine for economic growth, investment and employment is business and, in particular, small and medium businesses, overwhelmingly owned and operated by Australian families,” he will say in his year-opening speech in Toowoomba on Thursday.

In this vein, Mr Turnbull will argue for the retention of the company tax cuts that have so far been legislated – a lower rate for companies with turnovers of up to $50 million – as well as the remainder of the package, which would drop the rate from 30 per cent to 25 per cent for all businesses by the middle of next decade.

He said the government would again try to secure the passage of the legislation when Parliament resumes next week.

Shorten backlash

Mr Shorten’s promise of higher wages, union-driven industrial relations changes and giving notice to private health insurers over price hikes invited a backlash Wednesday, especially after shadow employment minster Brendan O’Connor said Labor could replace the minimum wage with a living wage set at a fixed percentage of the median wage.

Small Business Ombudsman Kate Carnell said the minimum wage proposal was “a war on small business, not big business” and would deal “a devastating blow” to employers. The Australia Industry Group said any increase must be done by the Fair Work Commission with all impacts taken into account, while private health analysts disputed claims the for-profit sector was awash with excess capital and was over-earning.

With a federal election possible later this year, both major parties are targeting the hip pocket of voters but from opposing ends of the spectrum. Mr Turnbull will say that 2016 and 2017 were the years of reforms and “this is the year we really start to see the rewards of that hard work”.

These “rewards” include the lower company tax rate for businesses with turnovers capped at $50 million, increased funding fo schools, increased and better targeted childcare rebates and possible lower energy prices. Along with strong jobs growth and signs of an economic recovery, Mr Turnbull says now is not the time to put that at risk.

“We know that our plan is delivering for Australians,” he will say. “The challenge now is to stay the course and follow through to 2018 and beyond.”

Income tax cuts

He will recommit to returning the budget to surplus by 2020-21 while, at the same time, seek to deliver income tax cuts for low and middle-income earners.

“The stronger the budget outcomes, the more we will be able to give back to hard-working Australians.”

Mr Shorten said profitable businesses kept worker’s wages low “because they can”. As well as vowing changes to enterprise bargaining laws to tilt them in favour of workers, he said the minimum wage was failing to keep pace with the cost of living.

The ACTU wants a living wage of 60 per cent of the median wage, which would increase the minimum wage from $695 to $852 per week.

Shadow Finance Minister Jim Chalmers was more circumspect.

“I think it is possible to responsibly lift the minimum wage. The total amount of that, and the total extent of that, is of course subject to a whole process via the Fair Work Commission with input from all sectors of the economy, which is a good way to go about it,” he said.

Minimum wage

Ms Carnell said “the greatest impact would be on businesses that use awards, and that is small to medium businesses, which make up more than 97 per cent of businesses in Australia.”

“Nearly half of our small business owners already earn less than the minimum wage and for these people, an increase in awards will mean job losses, limited employment opportunities and businesses closing.”

Mr Turnbull will contend today that Labor’s strategy defies economic logic. He will note last week’s decision by the International Monetary Fund to increase the global growth forecast on the back of the US Congress cutting America’s corporate tax rate to 21 per cent.

“The laws of supply and demand have not been suspended, wages growth will come because a stronger economy results in more investment, more jobs and more intense competition for workers.”

AIGroup chief executive Innes Willox said any minimum wage hike must be done through the Fair Work Commission.

“Legislating to take away the role of the Fair Work Commission in deciding what is a fair and sustainable minimum wage increase in each Annual Wage Review, and dictating that it must be at least 60 per cent of median wages, makes a mockery of the idea of having an independent umpire. The idea is a recipe for inflicting harm on businesses, damage to the economy and reduced employment prospects for low-paid workers,” he said.

This article was originally published by the Australian Financial Review. Read the original here, or follow the AFR on Facebook.

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.