Australian opposition leader Tony Abbott, whose coalition has a slight lead in opinion polls ahead of the Sept. 7 election, vowed to trim company taxes by 1.5 percentage points in his first major campaign promise.
“Reduced company tax will result in more economic activity,” Abbott told reporters in Adelaide today, announcing the rate would be lowered to 28.5 percent on July 1, 2015, should his Liberal-National coalition win government. “It will be good for jobs, it will be good for prosperity, and ultimately will be good for government revenue.”
The announcement comes as Abbott, 55, who trails as preferred prime minister even as the coalition holds an advantage in polls, seeks to transform his image into that of a leader with a policy platform for the nation. The ability of the opposition and the Labor government of incumbent Prime Minister Kevin Rudd, 55, to lure votes with spending promises is hampered by a slowdown in economic growth and government revenue.
“It’s the sort of policy you’d expect from the coalition, which is traditionally seen as representing big business,” said Paul Strangio, a senior lecturer in politics at Monash University in Melbourne, who expects a coalition victory. “One of the intriguing dynamics of this campaign is that the government coffers are so tight, so funding promises is tricky.”
Lowering the rate would partly offset the cost to companies of the coalition’s plan for paid parental leave, Abbott said, adding it would shave A$5 billion ($4.5 billion) off the forward budget estimates. The opposition would announce budget savings before the election, Shadow Treasurer Joe Hockey said at today’s announcement.
Abbott’s proposed parental leave program, which would let new mothers take up to half a year in paid leave, would be funded by a 1.5 percent levy on companies with taxable income of A$5 million a year or more.
“It’s kind of funny they’re putting up company tax and putting it down as well to pay for the rolled-gold paid parental leave scheme,” Finance Minister Penny Wong said in a Channel 7 interview today.
Rudd received a boost yesterday when Australia’s central bank cut its benchmark rate to a record low 2.5 percent in a nation where about 90 percent of mortgagees have variable-rate loans. The central bank is seeking to boost non-mining sectors that struggled with an elevated currency, underscored by Ford Motor Co. (F)’s plan to close its local plants, resulting in 1,200 job losses.
Rudd has announced plans to scrap the world’s highest carbon price and changed Labor’s rules for selecting its leader since defeating former prime minister Julia Gillard in a June 26 leadership ballot. He needs to boost Labor’s reputation as economic managers after the government backed away from a pledge in December to return the budget to surplus in the last financial year.
Treasurer Chris Bowen last week lowered the government’s growth forecast and predicted the jobless rate will rise to an 11-year high by July. The nation’s mining investment expansion is predicted to wane as demand from nations including China slows.
A 2016-17 surplus projection was cut to A$4 billion from the A$6.6 billion seen in May, documents released by Bowen on Aug. 1 showed. The 2014-15 deficit is now expected at A$24 billion while the 2015-16 shortfall is forecast at A$4.7 billion, from a balance flagged in the May 14 budget handed down by Bowen’s predecessor Wayne Swan.
To raise receipts, the government will increase tobacco taxes by A$5.3 billion; save A$1.8 billion by tightening tax breaks for business car use; target A$827 million of unpaid tax and pension savings; and charge banks a fee for deposit insurance.
Abbott’s pledge to cut the company tax rate comes after previous promises to scrap Labor’s emissions trading program and a 30 percent tax on coal and iron-ore company profits.
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