The Business Council of Australia (BCA) — the oligopolists responsible for high inflation, low investment, low productivity and low wages growth — has a vision for Australia: a nation in which business pays even less tax than currently, you pay more tax, workers have lower wages and worse conditions, and businesses get to do what they like regardless of the damage they inflict on the community.
This vision runs for 220 pages and the media, be it The Sydney Morning Herald, News Corp or the business shills at The Australian Financial Review, not only won’t tell you what garbage it is, they’re lauding it as a significant contribution to economic policy that will make us all richer.
For years, Crikey has been pointing out that the agenda of “economic reform” from the BCA consists of demanding company tax cuts and industrial relations deregulation (sometimes “streamlining”, sometimes “flexibility”) so that businesses can impose even bigger real wage cuts on workers than they’ve managed in the last decade.
We’ve had plenty of opportunities to say this because, despite the attention lavished on the latest report, the BCA constantly churns out this drivel. If today’s Seize the Moment doesn’t float your boat, how about Living on Borrowed Time from 2021? Or A Plan for a Stronger Australia in 2019? Realising our full potential, anyone? How about an Action Plan for Enduring Prosperity?
Despite journalists covering each one as if it’s some revelation of divine wisdom, they all literally say the same thing, often word for word: cut company taxes, lift the GST, strip away industrial relations protections.
The only thing that changes is that over time the evidence mounts for why these ideas are so bad.
Take cutting company taxes. In today’s iteration, the justification is that a cut is needed to stimulate investment. Except we’ve seen what happens when a developed economy cuts company taxes. Former US president Donald Trump did it in 2017 in the US. What happened? There was no detectable impact on investment. In fact, it fell. Even the arch-neoliberals of the International Monetary Fund found no impact on investment. And what about productivity, which the BCA says will also be improved by lower company taxes? No joy there, either.
Now, funnily enough, what has changed in today’s iteration of the “cut company tax” spiel is there’s something missing. Back when the Turnbull government was considering tax reforms and wanted to give tens of billions in company tax cuts to big corporations, the BCA insisted company tax cuts would increase wages. Curiously, the BCA now says nothing about how wages will increase as a result of company tax cuts. Why might that be? Perhaps because since then the clear evidence from the US has been that the Trump company tax cuts did nothing to affect wages growth.
As always, the BCA wants to pay for a company tax cut by increasing the GST, shifting the tax burden from shareholders — including foreign shareholders — to the poorest Australians, who devote the largest proportion of their incomes to goods and services subject to the GST. And, as always, the BCA wants to strip the industrial relations system of worker protections, imposing individual agreements and reducing the role of the Fair Work Commission to maintaining a “safety net”.
Except, over the past decade while the BCA has been making the same demand over and over like a malfunctioning automaton, the existing industrial relations system has been delivering big real wage cuts to workers and big increases in profits for business, sending the wage share of national income to historic lows. The existing system isn’t standing in the way of surging business profits — it’s standing in the way of workers maintaining their purchasing power, let alone increasing it.
Wages growth must come from productivity growth, the BCA repeats endlessly — except that, over the decade that the BCA has been chanting it, we’ve seen wages growth significantly lag productivity growth, meaning business has taken the bulk of the productivity gains and kept the benefits. That’s the problem with repeating the same garbage over and over — eventually the evidence accumulates that it’s just that, garbage.
Another strange absence from today’s drivel is any mention of inflation. In fact, the Biden administration’s Inflation Reduction Act gets mentioned more often than inflation, currently the most pressing issue in the Australian economy. Why? Might it be because it’s the BCA’s members who are primarily responsible for inflation to increase their profits? Like Shell? Origin Energy? BP? Shell? Qantas? Coles? Woolworths?
Why so coy on the economic topic du jour?
That’s related to another issue on which the BCA’s lecture is curiously silent: competition. Let’s go back to that IMF paper on why the Trump tax cuts didn’t lead to more investment: it concludes that an important reason is the market power that large firms hold in concentrated markets. There’s a well-established connection between market dominance and under-investment, including in the US.
Arguably the biggest contributor to inflation in Australia is overly concentrated markets and dominant firms exploiting their pricing power under the cover of supply-side inflation shocks. It’s certainly the case in the energy and airline industries, and probably in the grocery sector as well. It also increases the power of employers vis-à-vis workers and, as we know, reduces investment and thus productivity.
If one were going to seize the moment in the Australian economy, or realise our full potential, or we really were living on borrowed time, if you really wanted to lift investment, and productivity, and wages, and reduce inflation to boot, you wouldn’t cut company taxes, or deregulate industrial relations, or increase the GST, or any of the other demands listed by the BCA.
No, you’d get serious about breaking up oligopolies and reducing market concentration. You’d force the breakup, or ferociously regulate the pricing power of, Origin and AGL and Energy Australia and Qantas and the big four banks who are also BCA members, and the big four audit firms, who are also members, and Optus and Telstra, who are also members.
It’s not surprising that the BCA is utterly silent on the real reform needed in the Australian economy. But it’s disappointing that the journalists providing such slavish coverage of the drivel emanating from big business are equally silent.
