The government is ignoring the supply side at its own peril and that of the nation's

On a day that the federal government announced yet more spending of taxpayers dollars to pump prime the economy and (supposedly) stimulate demand through cash payments to low and middle income earners, Agitate! once again asks the question, ‘Where are the supply side policies?’

The essential thesis of Say’s Law remains true:  Supply creates demand.  Economic progress is always dependent on the creativity of suppliers, not the largesse of big deficit spending governments.

Dealing with the global financial crisis is no excuse for the government to take its eye off the need for other important supply side reforms.  Removing regulations and seriously cutting taxes which stifle business activity and investment ought to be a priority for the government. 

There should also be a serious re think of the Fair Work Bill and those provisions which will not only act as a disincentive for business to hire workers, but will also result in existing jobs being lost.

Even reforms that do not attract the media headlines, such as the creation of a genuine national OHS and workers compensation system would help business enormously in achieving productivity and efficiency gains.  It may even help to protect jobs.

The Shadow Treasurer, Julie Bishop was right the other day when she called for tax cuts to stimulate economic activity and (more importantly) entrepreneurship.  Ms Bishop was also unfairly ridiculed for (correctly) suggesting that tax cuts can result in a corresponding increase in government revenues.  In the words of George Gilder, author of the seminal work ‘Wealth and Poverty’ -

“High taxes choke off enterprise – and thus can reduce government revenues…forcing potential investors to eschew investment, thus impoverishing the economy.” 

The government and Ms Bishop’s opposition colleagues would do well to heed such a lucid and accurate observation.