Weak economic data a wake-up call

The poor economic growth figures released today should be a wake-up call on economic reform, according to the Centre for Independent Studies (CIS).

“The economy shrank by 0.5% in the September quarter, and the largest contributor to the decline was private sector investment,” CIS economist Michael Pottersaid.

“The ABS data show the fall in private sector investment cut growth by 0.6 percentage points. We are only facing recession because businesses aren’t investing,” he said.

“Investment is plummeting, and the tax on investment is high: yet Federal parliamentarians are squabbling over a modest cut in the tax on investment through company tax. Today’s figures show the real costs of this bickering.

“Falling investment isn’t just hitting today’s growth figures. It is also harming the prospects for a rebound in wages, profits and income: in fact every economic indicator will be worse off if investment continues to fall.

“Australia’s investment problem can’t just be blamed on the mining sector — investment in non-mining industries is weak as well.

“Poor growth can’t be propped up by more wasteful government spending. Government investment is higher than it was in March 2016: it is private sector investment that has fallen off a cliff.

“The figures released today should force federal parliamentarians to wake up from their policy coma and commit to reducing the tax on investment.

“Otherwise we must get used to more dismal figures for economic growth,” Mr Potter said.

Michael Potter is a Research Fellow in the Economics Program at the Centre for Independent Studies and author of the CIS research reports Fix it or fail: Why we must cut company tax now and The case against tax increases in Australia: the growing burden