I rise to make a statement on the report of the Joint Standing Committee on Trade and Investment Growth just tabled by the member for Dawson. Labor have long recognised the importance of trade and investment as essential components for growing Australia's economy, and we broadly support the final report from the Joint Standing Committee on Trade and Investment Growth on supporting Australia's exports and attracting investment. I thank the chair, the member for Dawson, and the committee members for their hard work during this inquiry and for their collegiality in finalising the report.
However, the Labor members have tabled a dissenting report. We do not support recommendation 2, which calls for a reduction in the company tax rate to be a priority. The recommendation is based more on ideology than on any sound economic basis, and the committee did not find any compelling evidence that reducing the corporate tax rate would result in an investment boom or higher wages. The Labor members would also like to note that, while this inquiry was coming to a close when the COVID-19 pandemic hit, it has highlighted the need for the Australian government to examine the possibility of diversifying Australian export markets and supply chains, as well as diversifying our own products for use domestically and for export.
As I said, Labor members did not endorse recommendation 2, which calls for a reduction in the company tax rate to be a priority. The hearings undertaken and submissions received by the inquiry did not make a case for an urgent reduction. No compelling evidence was provided to the committee that a reduction in the corporate tax rate would result in increased investment in Australia or any benefits for working Australians through higher wages or conditions. Australia already has low levels of average and effective corporate taxation. While statutory corporate tax rates are the most obvious measure of corporate taxation, they are often misleading. In many countries, seemingly low statutory rates are offset by a broader definition of taxable income that results in an effective corporate tax rate far higher than the statutory level would imply. Conversely, Australia's statutory corporate tax rate, currently 30 per cent, is offset by a range of concessions, allowances and rebates that translate into significantly lower effective and average rates of taxation for companies operating in Australia.
A recent assessment of corporate tax rates across the G20, undertaken by the US Congressional Budget Office, found that Australia's top statutory corporate tax rate is close to the median rather than being an outlier that disincentivises investment in our economy. The authoritative analysis also found that Australia's average corporate tax rate is far lower than the statutory rate, as is the effective corporate tax rate paid by Australian companies. For any company considering foreign expansion and investment, comparing effective tax rates is the best way to assess real levels of corporate tax in destination markets and their impact on investment returns. Therefore, Australia's low average and effective corporate tax rate are important dimensions in our attractiveness as a market for overseas investment and in total flows of foreign investment.
While tax is an important factor in corporations' investment decisions, the OECD has found that it is not the main determinant. Capital flows are attracted to countries which offer equitable and efficient access to markets, stable conditions and profit opportunities, low levels of sovereign risk and a predictable non-discriminatory legal and regulatory framework. Not only does Australia already have highly competitive rates of average and effective corporate tax compared to our G20 peers but these are matched by our rule of law, well-developed infrastructure, strong institutions and public services, advanced levels of human capital and a raft of other fundamental attributes that are highly attractive to businesses, including those based in jurisdictions with lower corporate tax rates than Australia's. Given that the decision-making of foreign investors is most strongly swayed by these macroeconomic fundamentals, it's not clear that slashing statutory corporate tax rates is required to attract foreign capital.
The committee did not find compelling evidence that reducing the corporate tax rate would result in an investment boom or higher wages. The economics underpinning proposals to reduce the tax rate applied to the largest businesses operating in Australia are not compelling. Reducing Australia's corporate tax rate for large businesses will not unleash higher levels of investment or a job creation boom. Instead, it's more likely to accentuate the share of economic output flowing towards shareholders and capital at the expense of labour.
Since the 1970s, Australia's corporate tax rate has fallen from nearly 50 per cent to 30 per cent. This contributed to corporate profits reaching all-time highs at the end of 2019, with the windfall being directed towards shareholders rather than being reinvested back into productive assets and deepening the capital base of the Australian economy, which is ultimately the key driver of improved living standards. Across a similar period, labour compensation as a share of GDP fell from 58 per cent in the mid-seventies to just 47 per cent by 2017, the lowest level since 1960. Rather than enabling capital deepening, as promised by advocates of corporate tax cuts, falling tax rates and rising company profits have been accompanied by capital shallowing. That is a reduction in the capital-labour ratio that has contributed to Australia's declining labour productivity.
Workers' declining share of Australian GDP has equated to the redirection of over $200 billion in income per year from Australian workers to other groups in society, mainly corporations. Prioritising further corporate tax cuts in the name of obtaining higher levels of foreign investment would accelerate this trend and give precedence to the bottom line of large corporations over Australian workers' living standards. The idea that lower-taxed firms create more jobs is not supported by the evidence. An examination of the relationship between Australian companies' job creation rates and tax rates demonstrates that output and employment growth in the Australian economy has not been driven by those with lower effective tax rates. In fact, firms which use existing deductions and rebates to obtain an effective corporate tax rate lower than 25 per cent shed more jobs than they create. By contrast, Australian firms with an effective tax rate above 20 per cent grew employment at an annual rate of two per cent.
Finally, Australian government debt more than doubled during the period 2013 to 2019. Even before the COVID-19 response, net debt stood at over $403 billion, an all-time high. The government's response to COVID-19 will result in an unprecedented and rapid additional increase in public debt, so this is not the time to slash company tax rates, with the large corporations being given a free kick at the expense of working Australians. We would be better placed to ensure multinational corporations actually paid their fair share of tax, because, as we know, so many manage to avoid paying tax at all.
I would like to finish by thanking my fellow ALP members of this committee, Senators Marielle Smith and Ayres and the member for Fraser, for their contribution to the final report and this dissenting report. Thank you.