The Albanese government is facing growing backlash to its “wealth redistribution agenda” after former RBA governor Philip Lowe said Labor’s tax changes would hamper investment.
Former RBA governor Philip Lowe said Labor altering capital gains tax on assets outside property would “damage the very investment Australia needed to lift lacklustre productivity”.
“We don’t have a growth agenda, we now have a redistribution agenda,” Mr Lowe told Future Generation chief investment officer Lee Hopperton in a presentation on Thursday.
“We’re arguing over how we redistribute rather than make a bigger pie, and I feel like we’re losing our way.
“Too much political discourse is focused on how we cut the pie rather than grow the pie, and we grow the pie by investing, innovating, building new businesses, and hiring people with good skills.”
Nationals leader Matt Canavan said the former RBA governor’s comments showed Labor’s economic agenda hurt the nation’s growth prospects.
“As Mr Lowe said, this is a redistribution agenda and the government’s been open about that,” Mr Canavan told Sky News.
“They’re really just trying to take from Peter and pay Paul. They reckon that this will help young people. I don’t think it will because higher taxes will hurt the economy and everyone will get hurt then.”
Labor will scrap the 50 per cent CGT discount and replace it with an inflation adjusted model with a minimum 30 per cent tax take.
This has sparked massive uproar amongst business leaders and entrepreneurs.
The boss of Wesfarmers, which runs Bunnings, Officeworks and Kmart, labelled the CGT change “anti-aspirational”, while SafetyCulture’s founder demanded carve outs apply to all businesses.
Labor’s changes will also restrict negative gearing to new builds and properties purchased before budget night.
This has rattled the housing market, sending auction clearance rates plummeting while property prices are expected to fall by as much as 10 per cent.
Mr Canavan said the calamity caused by the tax changes was a blow to Labor’s economic credentials.
“We see property markets in free fall, we see economic confidence in free fall and we’re left with a government that’s just not trying and has given up on trying to stimulate economic growth in our country,” he said.
“I think that’s at the heart of the frustration of people (and) at the heart of the frustration of very smart people like Mr Lowe.
“We need to focus on what matters right now and this budget has turned out to be one big distraction from that and even worse it is threatening to weaken our economy overall.”
Responding to Mr Lowe’s criticism, Treasurer Jim Chalmers said the former RBA governor was “entitled” to express his view, but that he did not share it.
“When it comes to the substance of his comments, we are fixing a very damaging distortion that has existed in our tax system for a quarter of a century,” Mr Chalmers told reporters.
Mr Lowe’s latest criticism follows him calling on the government to rein in spending in February.
The Treasurer acknowledged Mr Lowe’s criticism before noting the former RBA governor was dumped from his position despite wanting to stay on.
“I think it is a matter of public record (that) Phil Lowe would have liked to have been reappointed by the government,” Mr Chalmers told reporters in February.
“After he wasn’t reappointed, he’s become a fairly persistent critic of the Labor government in the pages of the Financial Review and elsewhere.”
Further backlash on top of Mr Lowe’s recent comments came from Liberal Senator Dean Smith.
He said the CGT changes throw Australians off riskier investments and are a detriment to entrepreneurialism.
“The key element of what the former RBA Governor was saying … (is) that the CGT changes will undermine (and) will dampen people’s appetite to take risk on investments that will earn them a capital gain,” Mr Smith told Sky News.
The tax changes passed the Senate on Thursday after Labor struck a deal with the Greens.
This deal also banned borrowing in self-managed super funds and extended an inquiry into the NDIS.