5 August 2020
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Big businesses want government gifts. So give them what they want!

Peter Switzer
28 July 2020

The big end of town businesses in the Business Council of Australia (BCA) want ScoMo and his Government to bankroll their investments with a 20% allowance, and it’s an early Christmas ‘gift’ we have to give. And we better find a few more presents, if we know what’s good for us.

Optimism and belief in the wonderful potential of Australians and our economy is my unique selling proposition as a supplier of money-important information. But that doesn’t mean I refuse realism to enter into my calculations and forecasts. That’s why it has to be said. We’re a chance to get out of this Coronavirus crash of the economy and stock market but growing infection rates here and overseas remind us that we’re not out of the woods yet.

If Victoria wasn’t going through what’s happening now, I wouldn’t be a little worried about New South Wales and I wouldn’t have any concerns about Queensland. But it is what it is.

When I was a teacher and then lecturer at the University of New South Wales, I taught ex-students like one Scott Morrison and Afterpay-founder, Anthony Eisen, about what I called ‘Sussan Economics’.

In those days there was a popular ad on TV for the women’s fashion store Sussan. As women mixed and matched different apparel, the song went: “This goes with this, goes with this…at Sussan.”

In trying to explain many economic concepts and relationships, I’d say “rising interest rates goes with falling demand goes with a slowing economy goes with falling stock prices, etc.” That was Sussan economics!

Of course, I also explained when the relationship could be offset by other factors but it was a good way to get students to see core relationships in economics. And right now, because of the Coronavirus, the key economic “goes with this, goes with this” relationship is that if the Government gives incentives to business and consumers, this goes with more economic growth and that goes with more jobs and this goes with more taxes paid and goes with eventually less government spending and all of this goes with a falling budget deficit and this goes with slower debt growth.

The boss of the Business Council of Australia, Jennifer Westacott, says the non-mining investment is “diabolical.”

Why? Businesses are scared and uncertain about the future.

Why would Qantas invest in new planes? Why would landlords of office blocks invest in renovations? This damn virus has put a huge question mark over our economic future.

And before the Government makes decisions around the October Budget (which is just over two months away), the BCA is putting in its Christmas wishes.

This is what they want:

  • A 20% investment allowance rather than company tax cuts. It means if a business spends a million dollars they can claim $200,000 as a tax deduction immediately and then use the usual depreciation rules for the rest of the vital outlays that not only boost business productivity but create jobs.
  • Bring forward the income tax cuts for households to boost spending.
  • Increase the unemployment benefit or JobSeeker.

Despite efforts in some quarters to portray business as purely self-interested, people who own/run these operations know they need consumers in jobs and with money if their business is to succeed. In reality, we’re altogether in making an economy work but the Coronavirus has actually made us think about how we all need each other.

Recall during the Hayne Royal Commission, the number of people who hate banks grew exponentially as report after report showed how past governments had ignored bad practices in the sector. However, before the Commission, the actual customer satisfaction numbers said most of us thought the banks were OK! Check this out from 2017 before the Commission kicked off late that year.

“New research from Roy Morgan shows that the big four banks improved customer satisfaction over the last year from 79.5% in the six months to June 2016, up by 0.3% points (to 79.8%) in the six months to June 2017. Over this same period, the combined satisfaction of all other banks declined by 0.9% points to 84.8% in June 2017, from 85.7% in June 2016.”

This was a huge survey of 50,000 customers and shows how the media can change the way we think. And that’s why I like to find the legitimate positives out there that should be factored into your development of opinions.

These sensible demands from the BCA come as the PM has expanded and repurposed the advisory panel used to make sure business gave input into how we beat the Coronavirus.

It was called the National COVID-19 Coordination Commission chaired by Nev Power. And I reckon it should be called the “Power Panel” as it is to be renamed the National COVID-19 Commission Advisory Board and used to power the economy out of this Coronavirus crash.

And ScoMo has been smart enough to add former union boss Greg Howles (who’s now a partner at KPMG) to the Board.

This is no time for silly politics. We have to contain the infections and stimulate the economy.

The Economics Editor at the SMH, Ross Gittins, wrote yesterday that if the Government doesn’t spend sensibly, the economy will slow, taxes will fall and we’ll end up with a big deficit anyway and no extra production, income or jobs!

We’re all in this together so all levels of government have to beat the second-wave infections and the Federal Budget in October has to be crafted to get us all feeling confident and spending. Petty politics and grandstanding obstructionism has to be called out and nationally exposed. This isn’t the time to be anti-anyone or any business that creates jobs.

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