Overview of poll results by John Hewson

*Pic: Image from here

Proposition:

The recent US corporate tax cuts will have no impact on investments in and capital flows into Australia.

This month’s poll puts a hard line proposition that “the recent US corporate tax cuts will have no impact on investments in and capital flows into Australia”. It’s an “absolute” – NO impact. Economists, in particular, have significant difficulty in being that precise – you know the old adage about “on the one hand, and on the other” – “if you laid all economists in the world end to end you would still never reach a conclusion”.

Yet, even weighting for their declared confidence in response, 27.3% either agreed or strongly agreed with the proposition. But some 55.5%, roughly twice those who agreed, either disagreed or strongly disagreed, with only 17.2% undecided. Interestingly, most of those who disagreed didn’t seem to feel the effects would be significant – they wouldn’t agree to “no impact”, but none argued in their comments for “significant impact”. Indeed, many respondents thought the effects, either way, would be minimal (the main ones being Eslake, Frijters, Toth, Foster, Sheen, Bloch, Quiggin, Nowak, Abelson, Dixon).

Of course, more detail of the US tax measures might have engendered a more fulsome response. For example, Saul Eslake, recorded as uncertain (neither agreeing or disagreeing), made the observation that “according to the IMF (at least) the component of the tax package which is expected to have the biggest impact on economic activity in the US is their ‘immediate expensing of investment’, which is not part of the corporate tax cut proposed by the Australian Government”.

Similarly, a complete answer would have to consider how the US tax cuts will be financed, and particularly whether any short-term benefits are sustainable. It appears that “financing” has been based on the assumption that these cuts will have a significant effect on overall economic growth, which will ultimately cover the early significant impacts on the budget deficit. This is, of course, a highly contentious assumption. In its recent forecasts for US economic growth over the next few years, the IMF has acknowledged an initial boost from the tax cuts, but growth is to taper off after a couple of years.

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*John Hewson AM is Professor, Crawford School of Public Policy, Australian National University