Jenny McAllister (NSW, Australian Labor Party) Share this | Hansard source

In question time today we called on Minister Cormann to provide evidence that tax cuts would lead to wage growth, and he referred us to the effect of Trump's tax cuts in the United States. Let's actually look at the effect that those cuts have had. There's an article from the Financial Times. Now, you know that this is a radical socialist publication. Nonetheless, let's take an interest in what the Financial Times has to say. The article's heading is 'Trump's tax cuts herald $1tn bonanza for US investors', and then the subtitle is 'Growth in stock buybacks outstrips investment in capex, R&D and employees'. The first paragraph says:

US companies are on track this year to return a record $1tn to shareholders, as Donald Trump's tax cuts prompt boards to boost buybacks and dividends at a faster rate than their capital expenditure, research and development budgets or wage bills.

It doesn't look good, does it? If we really want to look at the Trump tax cuts, let's see what they delivering. Well, according to the Financial Times, not a great deal for wages. The article continues:

Goldman Sachs estimated in February that buybacks would jump by 23 per cent to $650bn this year, while JPMorgan predicted … that they would rocket by as much as 50 per cent to $800bn …

…   …   …

US companies have announced a record $187bn in new buyback plans so far this year—

That's what has been announced, according to Birinyi Associates, and—

Cisco and Wells Fargo lead the list, with plans to repurchase $25bn and $20bn respectively.

Goldman Sachs also sees dividends expanding by 12 per cent to $515 billion. They're some big numbers, aren't they? And how much will actually end up with workers, according to this analysis? CNN Money has estimated that, at the end of February, workers stood, at that stage, to end up with just $6 billion extra. Hundreds of billions of dollars is the range from all the analysts for share buybacks, but so far there is $6 billion for workers.

Like in the US, a sugar hit of tax cuts might do wonders for share prices and it might do wonders for executive salaries, but it's not going to do very much at all for wages and investment. The thing that is holding companies back from investing and hiring is not a lack of funds; it is a lack of demand. If you go back to that Financial Times article, it spoke of Howard Silverblatt, senior index analyst at S&P Dow Jones—another socialist organisation:

Reinvesting had not been a priority for most large companies for some time, he said. "Companies had enough money before the tax act to hire workers, to do more capex, to invest more. The bottom line is sales hadn't picked up."

How do you get sales to pick up? It's a big question, isn't it? Here's one idea: you could increase the wages of the people who are doing the buying. It sounds a little bit like economics 101, to quote the patronising thing that we hear so often from people on the other side of the chamber. I was astounded to read the submission from the National Retail Association to the Fair Work Commission's minimum wage review. It said that wages should remain stationary—not even meet the rate of inflation—because sales had not picked up. Who do they think will be doing the spending?

If the government were serious about increasing wages, if this was actually one of their policy objectives, there is a much more efficient and much more direct way to achieve that than handing $65 billion of taxpayer money to large corporates. They could just make the request in their submission to the Fair Work Commission. But they didn't do that; they ducked that question. If the government were serious about increasing capex and investment, they could have a policy like the Labor Party's Australian investment guarantee, which provides tax benefits for future investment but doesn't reward the investments of the past. They haven't done that. When all else fails, the government argues that, irrespective of the lack of benefits, we just need to reduce our tax rates to stay competitive with the US. But, as all the economists emphasise, companies don't make investment decisions based solely on the headline tax rate. They look at things like roads, rail, labour market capacity and infrastructure, and they look to the skills of our workforce. If this government were serious they would invest in these, but they haven't. Wages, investment and international competitiveness are not policy priorities for this government; they are just political arguments.