Corporate tax cuts are politically difficult, says Scott Morrison, but good for the economy
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Corporate tax cuts are politically difficult, says Scott Morrison, but good for the economy

Treasurer Scott Morrison has warned one byelection result should not be enough to undo the Turnbull government’s signature economic policy, hours after Peter Dutton became the first cabinet minister to reportedly question whether the company tax cuts should be taken to the next election.

Mr Dutton’s electorate of Dickson borders Longman where the government suffered a 9.4 per cent swing against it on first preferences on Saturday.

Griffith University election analysts have warned the Home Affairs Minister “has a real problem on his hands” trying to hold onto the outer-suburban seat.

Treasurer Scott Morrison

Treasurer Scott Morrison Credit:Alex Ellinghausen

He holds it by a margin of only 1.6 per cent.

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Mr Dutton said Labor was able to marry and exploit the tax cuts “into the narrative of their lie about hospital cuts” throughout the Longman campaign.

“And my judgment is that we need to negotiate in good faith and to see whether or not we can get support in the Senate,” Mr Dutton told the Seven Network, in comments interpreted as urging the government to reconsider its position if the legislation goes down again.

Luke Howarth, Mr Dutton's neighbour in the Queensland electorate of Petrie, has been leading calls within the Coalition to reconsider the tax cuts before the next election.

"The fact is there’s no point taking a policy if it’s going to be defeated in the Senate and not looked after," he told 2GB Radio on Wednesday.

Coalition frontbencher Alan Tudge said the government "was taking a look at" the company tax plan, but "was taking it back to the Parliament as it is".

Mr Morrison, who has had differing opinions with Mr Dutton on policies in the past, acknowledged that the company tax cuts were politically difficult but were the right thing for the country.

“We’re not in this business of political expediency to jettison policies that we think are good for the Australian economy,” he said.

The Treasurer said “people were getting way ahead of themselves” in discussing what might happen if the Senate rejects the tax cuts from 30 to 25 per cent for all businesses turning over more than $50 million a year.

Home Affairs Minister Peter Dutton.

Home Affairs Minister Peter Dutton.Credit:Justin McManus

“I’m not engaging in those hypotheticals because the government is interested in implementing our policy,” he told ABC Radio on Wednesday morning.

“There are two issues here: It’s the right economic policy, the politics is a separate issue.”

Mr Morrison suggested that published polls on the tax cuts showed they had increased in popularity since the Turnbull government first announced them in 2016. 

He also said the Coalition's loss in Longman, where the two party preferred swing against it was 3.6 per cent made it completely different from Braddon, Tasmania, where the swing to Labor was a much smaller 0.2 per cent. "Frankly there was a very different result in Braddon, so I don’t know how people can draw, like there’s some sort of consistent theme here," he said.

A Fairfax/Ipsos poll in April found 49 per cent of respondents backed the Turnbull government's signature economic plan - an increase from 44 per cent in March last year.

Shadow treasurer Chris Bowen said Mr Morrison and Prime Minister Malcolm Turnbull would lose their economic integrity if they banked the $35.6 billion saved by dumping the policy before the election, which must be held before May next year.

“This is no minor matter. Mr Turnbull and Mr Morrison have been arguing for the entire package since the 2016 budget, this has been the Liberal Party’s one point economic plan,” he said

“The Liberal Party has spent two years telling the Australian people we needed to put all of the eggs in the ‘big business tax cut’ basket, so to pull up stumps now on this plan would be the end of any pretence Mr Turnbull has to policy credibility.”

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Mr Morrison fired back at Labor’s campaign that painted the tax cuts as a bonus for the big banks by pointing out the bank levy would essentially eliminate any benefit from the tax cuts and raise $2 billion a year for schools and hospitals.

He said Tuesday's Household Labour Income Dynamics in Australia survey showed that the proportion of people in relative poverty in Australia has fallen to less than 10 per cent.

“We’ve got more people getting jobs, less people in poverty, we’ve got the economy growing at over 3 per cent, we’ve got policies to ensure that keeps happening, the US has just pursued [the tax cut] policy and their growth rate has soared to 4 per cent per year," Mr Morrison said.

Despite strong economic and employment growth in the US, wage growth has been slower than expected following US President Donald Trump's corporate tax cuts from 35 per cent to 21 per cent.

They did see their biggest annual gain since 2008 last month, up 2.8 per cent in the 12 months to June.

Eryk Bagshaw is an economics reporter for the Sydney Morning Herald and The Age, based in Parliament House