Malcolm Turnbull says the laws of economic common sense appear to have been suspended among his political opponents when it comes to his government's proposed tax cuts.
The prime minister used a business conference on Wednesday to reiterate the benefits of reducing the corporate tax rate to 25 per cent for all businesses, a cut that looks set to be blocked in the Senate.
"The laws of supply and demand have not been suspended ... but the laws of economic common sense have been suspended among our political opponents," Mr Turnbull told the Australian Financial Review Business Summit in Sydney.
He said reducing the tax rate from 30 per cent will return more investment, more employment, better-paid jobs and productivity.
Treasurer Scott Morrison said what is disappointing is Opposition Leader Bill Shorten and shadow treasurer Chris Bowen "know better".
"Yet they are still going down this path of populist economics and it is going to cost Australians if they get the opportunity to run this country," Mr Morrison told reporters in Canberra.
"If we think we can be complacent about our tax settings ... then we are kidding ourselves."
He pointed to new economic modelling by consultants KPMG which showed that not keeping up with the global trend of lower tax rates would come at a $5 billion cost to the economy and the loss of 25,000 jobs.
Reserve Bank governor Philip Lowe told the AFR conference a form of international tax competition is going on.
"If we do respond, and I can understand why we would, it needs to be in the constraints of running a sustained period of fiscal discipline," Dr Lowe said.
He found it "quite troubling" that with the US economy already at full employment, it is implementing a big fiscal stimulus and going to have budget deficits of five per cent of GDP for the indefinite future.
"I think it would be a problem if we were to go down that route," he said.
Dr Lowe added investment is not just driven by tax.
"People invest in Australia because of our fantastic natural resources, our workers and our ability to innovate and tap markets," he said.
Australian Associated Press