The Turnbull Government’s plan to lock in more than $200 billion of tax cuts over the medium term has been upended today by one of the most respected global institutions, the Bank of International Settlements (BIS).
In its Annual Report, the BIS has warned against the “continuous build-up of debt” and that governments should “rebuild policy buffers” now to be well placed to tackle the next downturn.
The BIS also gave Australia a specific mention, pointing out that while some countries like the United Kingdom and the United States “have seen some private sector deleveraging” leaving them less vulnerable, “household credit as a ratio to GDP remains at historical highs in Australia” [page 13].
This follows recent advice from the International Monetary Fund (IMF) that also recommends governments rebuild fiscal buffers in to create room to provide fiscal support in an eventual downturn.
At a time when some of the most globally respected organisations like the BIS and the IMF are arguing forcefully about the need to re-build fiscal buffers during the global upswing, the Government is doing the exact opposite.
Instead of taking advantage of the better international economic conditions, and putting in place a better plan to pay down debt, the Government is hijacking the budget with more than $200 billion in new tax cuts that leave Australia less able to respond to a global downturn if one eventuates.
The calls from the BIS follow comments from the Grattan Institute which in relation to the tax cuts has said “we do not think it is prudent to be providing tax cuts of this magnitude that far in the future” and that as a result the budget “will inherently have less flexibility in a significant downturn”.
This is exactly why Labor does not support the hugely expensive tax cuts on the never never which together with the government’s fiscally reckless company tax cut will blow a $25 billion annual hole in the budget, something that will put jobs and future services at risk.
Labor is the only party heeding the advice and making the tough decisions on the budget.