AUSTRALIA needs company tax cuts to keep our tax system internationally competitive, according to Reserve Bank governor Philip Lowe.
Dr Lowe’s speech to an economic forum overnight comes while Prime Minister Malcolm Turnbull and Opposition leader Bill Shorten are at loggerheads over corporate tax cuts.
Labor has accused the Turnbull Government of pushing for tax cuts for big business while increasing the burden for families, young Australians and pensioners.
But Australia needs to retain its relatively low government net debt as a form of insurance against future global economic difficulties, Dr Lowe has told the A50 Economic Forum dinner in Sydney.
“Looking forward, we need to make sure that we continue to have this insurance,” Dr Lowe said.
“We can do this by rebuilding our fiscal buffers.”
Rebuilding those buffers was “a challenging thing to do” given the additional demands on government spending and the competing need to make the tax system internationally competitive, Dr Lowe said.
“One example of this complication is in the area of corporate tax, where there is a form of international tax competition going on in an effort to attract foreign investment,” he said.
“Like other countries, we face the challenge of responding to this, while achieving a balance between recurrent spending and fiscal revenue.”
The Turnbull Coalition government continues to press its plan for a reduction in the corporate tax rate from 30 per cent to 25 per cent — a policy that will cost some $50 billion in revenue over 10 years.
Labor and the Greens remain firmly opposed to the policy.
In 2016 the UK announced it would reduce its corporate tax rate from 20 per cent to 17 per cent by 2020.
Dr Lowe’s speech covered Australia’s economic strengths, noting “a country with strong public institutions and whose economy is resilient and flexible”.
The RBA boss also mentioned trade and investment, saying the nation has “benefited greatly from the open international trading system”.