Investment Tanking - The Centre for Independent Studies
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Investment Tanking

MP money boat sinkingBusiness investment is plummeting in Australia. And it can’t be excused away by the end of the mining boom. Yes, mining investment is falling quickly; but non-mining investment isn’t recovering and remains at levels only previously seen before in the middle of the 1990s recession.

The weakness in investment could also be excused as a global phenomenon. Investment is falling everywhere, you might say. But this isn’t true. In fact, total business investment across OECD countries is growing faster than the total OECD economy. So investment is recovering in most of the rest of the developed world, just as it is tanking in Australia.

In fact, the small and exclusive club of developed countries with falling investment since 2009 includes Italy, Spain, Portugal and Greece. We are a member of this club, according to OECD data, whether or not you include mining investment. Doesn’t it make you proud?

If on the other hand this troubles you, then perhaps it might be a good idea to do something about the tax on investment — namely, company tax. While our investment levels are falling, company tax as a share of profits is

growing, and our tax rate is becoming less and less competitive over time, as detailed in the CIS research report Fix it or fail: Why we must cut company tax now.

It doesn’t take a genius to realise that falling investment levels and increasing investment taxes might be connected. But in case this isn’t obvious, the research report also details plenty of real-world evidence of this.

Fixing declining investment levels should be a priority. If business doesn’t invest in more capital, Australia risks failure: the economy won’t grow and there won’t be the funds to pay for our mounting economic challenges. Therefore, the proposal currently before parliament — to cut the company tax rate from 30% to 25% — deserves the support of all.