share cafe logo  

Turnbull Chases Trump's Shadow

Malcolm Turnbull is taking a leaf out of Donald Trump’s playbook: Betting the house — and his re-election hopes — on businesses to save our economy. And it seems as though this is where the battlelines will be drawn for the next election.

Bill Shorten blamed business for the weak jobs sector and wages earlier this week. He argued that new laws forcing higher wages are the key to economic success.

Just ask South Koreans how well that turned out for them. Workers there are complaining that a recent minimum wage increase has made things worse rather than better. With employers dodging the increase or even firing workers because of the new cost.

Clearly not a winning strategy.

Perhaps propping up business growth to create jobs and wider wealth is the only real alternative. As Turnbull notes:

The most important engine for economic growth, investment and employment is business and, in particular, small and medium businesses, overwhelmingly owned and operated by Australian families.

So how do you kick-start this engine? Why, tax cuts of course.

We’ve heard it for a while now, and it seems Turnbull is committed to pinning his election hopes on sweeping tax reform. Cutting the costs for businesses and income tax.

A real crowd pleasing policy if we’ve ever seen one. At least it should be…

Botch the cuts, botch the election

Turnbull will need to take a good hard look at America right now.

When it comes to tax cuts you probably don’t want to follow Santa Trump’s master plan. Otherwise you may end up on everyone’s naughty list.

Americans apparently hate Trump’s tax plan. It received one of the lowest approval ratings ever at 32%. Which is a lower rating than Clinton’s 1993 tax increase.

Turnbull can’t afford those sort of numbers with an election looming.

Which is why he’ll need to appease voters as well as businesses. Whether he’s smart enough to strike the right balance though is another question. I’m not doubting the man’s intelligence, but politics does seem to do strange things to the brain.

And when they start promising tax cuts AND a budget surplus by 2021, I start worrying for their sanity.

I’m happy to be proven wrong. But I’m certainly going to keep my glass-half-empty outlook until I see a tangible result.

Obviously if they can make it happen and spur the economic machine to life it would be fantastic. The only question though is, where is the money going to come from?

And with wage growth looking like it’s heading nowhere, I don’t think the answer is going to be to many people’s liking.

Buckle-up, the economy’s not out of the woods just yet. You should still be prepared for what could be an unavoidable recession.

View More Articles By The Daily Reckoning

The Daily Reckoning's mission is to look at the investment world and the financial world in a sceptical and contrarian way. To do that day in and day out and tell you honestly what we see, even if it isn't always popular. If you'd like to subscribe to an alternative look at the mainstream interpretation of events, join for free here.



 › Marcus Today End Of Day Report
 › Friday At The Close
 › Beats and Misses
 › Bitcoin No Replacement For Gold
 › Is The Bear Out Of Hibernation?
 › Warren Buffett's Latest Portfolio Reshuffle
 › Australian's Love Affair With Debt - How Big Is The Risk?
 › Market At Midday On Friday
 › Not One, Not Two, But Three For Dacian As First Gold Production Looms
 › Next Week At A Glance
 › Overnight: The Big 'V'
 › Amazon Disruption Continues
 › What Lies Ahead For The Big Bank Stocks?
 › Is Solomon Lew Gaslighting The Aussie Market?
More ShareCafe   


Delivered free to your inbox before the market opens each trading day. Sign up below +


View More Videos