Forget about tax cuts and additional spending, the Turnbull government must focus on balancing the budget as its number one priority.
That’s the view of a national think tank analysis that believes a surplus is achievable in 2018/19, two years earlier than predicted by the government.
It comes amid further calls for a company tax rate cut in the May budget and reports suggesting the government is working on a $5 billion state funding deal for hospitals.
The Committee for Economic Development of Australia says successive governments have promised to return the budget to surplus, but instead there have been eight years of continuous deficits at a time of sustained economic expansion.
“We believe no economic problem … is graver or more urgent in Australia than the persistence of large budget deficits,” the committee’s chairman Paul McClintock told the National Press Club in Canberra on Tuesday.
Prolonged deficits penalise future generations, who will end up paying for current spending despite Australians being wealthier than they have ever been.
The CEDA report offers various combinations to achieve a balanced budget by raising an extra $15 billion in revenue and a cut in spending of $2 billion by 2018/19.
Among its options are calls for halving the capital gains tax discount, raising taxes on luxury cars, alcohol and tobacco, keeping the deficit levy and changes to superannuation tax concessions.
On the expenditure side, it suggests a reduction in assistance to industry and a lowering of the private health insurance rebate.
The Minerals Council of Australia wants the company tax rate cut from 30 per cent to 25 per cent, and then eventually to 20 per cent to match that of the UK.
“A reduction in Australia’s uncompetitive company tax rate would primarily benefit wage-earners and consumers, promote innovation and stimulate new foreign investment and economic growth,” the council’s chief executive Brendan Pearson said in a statement.
Bur Mr McClintock says while there might be an argument for this in the longer term, he questioned its feasibility when trying to deliver a balanced budget in a reasonable time.
Separately, the Australia Institute says there is no historical evidence that a company tax rate cut in Australia or across the OECD will produce economic or wages growth, or lead to higher levels of employment.
The institute’s executive director Ben Oquist says even a modest cut to 28.5 per cent for all businesses would cost the budget $9 billion over the four-year estimates.
“In a budget-constrained environment it seems ridiculous to be proposing a $9 billion hit to revenue for a growth dividend that doesn’t seem to be there,” Mr Oquist told Sky News.