Today the RBA Governor Dr Phillip Lowe has warned of the danger of funding company tax cuts through higher budget deficits and government debt.
Speaking at the House of Representatives Economics Committee, Dr Lowe said in response to questions about the Trump tax cuts, higher debt and the Australian context:
“I think that is very problematic and if we were to go down the direction of having the lower corporate tax rates I think it would be a big mistake to do that on the back of higher budget deficits."
This week Scott Morrison tried to jump on this comment from me on Radio National Breakfast about Australia not being able to afford the Government’s $65 billion company tax cuts:
“…our main focus is returning the Budget to balance, when the Budget has returned to surplus then you can look at further tax reform for both personal and company tax. But you’ve got to be able to afford it. You’ve got to pay for it.”
It was as if the Treasurer had for the first time discovered that major tax reforms could and should be funded.
Today’s very clear and fresh observations from the Reserve Bank Governor should give Mr Morrison cause to reflect.
To be frank, we’ve seen this all before, where Scott Morrison and Turnbull Government Ministers push election slogans and exaggerated rhetoric devoid of and often contrary to official advice.
We saw this most spectacularly with the revelation that Treasury advised the Government in early 2016 that Labor’s reforms to negative gearing and the capital gains tax discount.
And today we’ve seen it again – it’s another reminder that Scott Morrison is hopelessly out of his depth as Treasurer.