Don’t be fooled: a strong businesses environment will underpin our future success as a nation
Throughout this Federal Election, we have witnessed a relentless misinformation campaign about the role business plays in Australia’s economic success story.
Business has been consistently pitched as out of touch with the nation’s immediate challenges or searching for hand-outs through tax breaks.
The Chamber of Commerce and Industry Queensland (CCIQ) steadfastly rejects this assumption and wishes to make the case to the Queensland people that a strong and prosperous business environment benefits us all and our national discussion should be framed as such.
We face enormous challenges as a state and a nation as we transition from reliance on the resources boom and it is business that underpins our success.
Nearly $1 million Queenslanders are employed by small business, with 97 per cent of Queensland businesses being small. Furthermore, small business contributes over $100 billion to Queensland’s Gross State Product and business to business (B2B) economic activity generates around $88 billion per year in the Sunshine State.
Small businesses are also central to our local communities. They give Queenslanders a job, they provide the goods and services we need and deliver the income people depend upon to live out their lives.
Business underscores our standard of living and sustains our services
We must not let our high standard of living slide.
We must create more and better paid jobs, ensure our health and education systems remain some of the best in the world and continue to deliver social services to the less privileged and marginalised in our society.
And it is a strong business operating environment that is critical to maintaining and improving on our enviable position as a nation and a state.
The global economy is changing, and so too is Queensland’s.
Global supply chains are forcing traditional businesses to revisit their product and service delivery, the downturn in the resources sector has impacted labour markets and our sources of revenue and there are new and continual adjustments to the notion of the “traditional workplace”.
Geopolitical shifts are also taking place, with Queensland located on the edge of some of the most densely populated nations on earth and the ‘Pivot to Asia’ signalling enormous opportunities for integration into Asia’s economic landscape.
Queensland’s businesses can be strong participants in sourcing and creating new opportunities in Asia, but our policy settings must best position business to do this.
There are also the challenges of demography, with a growing aging population impacting workforce participation, technological changes and the nation’s deteriorating structural budgetary position.
With such shifts in mind, how we capitalise on our opportunities and respond to our challenges is critical?
We must focus on creating and promoting the necessary policy framework to best position small and medium enterprises at the forefront of this transition.
This means embarking on the kinds of reforms that incentivize entrepreneurs to start their businesses in Queensland, enable flexibility in our workplaces, make our tax system more competitive, boost job creation and productivity through investment in infrastructure and curb regulation that scares off business decision-making and activity.
The case for improving competitiveness through tax reform
The proposed company tax cuts over 10 years has attracted strong rebuke from some sectors of our community.
The criticism notes that the cost of implementation outweighs the benefits.
This point fails on two fronts. First, the assumption compares a cumulative 10-year cost with one year’s worth of benefit. It also seeks to compare net benefits with gross revenue costs, which also fails to add up.
The Treasury’s own modelling of 1 per cent estimated benefit to GDP includes the full cost of the fully-funded cut, thereby adding $16.1 billion to the national economy in perpetuity. As the economy grows, so too does the benefit.
Further, data demonstrates that when taxes on business are lowered, corporate tax revenue as a proportion of GDP expands over time, thereby increasing the overall tax take.
On the above indicators, it is clear to see that a strong case can be made for lowering company taxes to boost economic growth.
It forms part of a multi-pronged diversification strategy and it is needed to keep our economy ticking.
Encouraging business investment using tax incentives
Over the year to the March quarter, domestic economic activity in Queensland contracted by 1.5 per cent due to a collapse of business investment.
Why does this matter?
Business investment is closely linked to GDP growth. Any downturn in business investment signals poor conditions. If businesses aren’t spending, then the economy fails to grow.
It is worthy to note that this contraction is not only confined to the mining sector. The non-mining sector has also underperformed for successive quarters.
If the economy is to wean itself off the mining, which it must do, it requires growth from elsewhere.
Reductions in the company tax rate is one way to stimulate business investment at a time when it is most needed.
Measures such as progressively implemented company tax cuts send a strong signal to existing business owners that their tax conditions will improve in the short, medium and long term and indeed, the long-term nature of the 10-year plan signals to the investors of the future that Australia will increasingly become a lower taxing nation.
It is simplistic to suggest business ‘just wants a hand out’
CCIQ has an obligation to make the case for a stronger and more prosperous economy based on private sector investment and growth.
The critics of a strong business environment for Queensland and Australia have so far provided zero contribution on how to get the federal budget back on track, boost non-mining business investment and sustain our enviable standard of living into the future.
A strong, competitive, and prosperous business environment benefits the entire nation now and into the future and the business community calls on politicians and commentators to acknowledge this fact in the lead up to Federal Election day on July 2.