Tax cut won't increase jobs, pay: senator

One of the key supporters of the Turnbull government's business tax cut doesn't believe it will lead to more jobs or higher wages, but he's sticking by the need for it anyway.

Liberal Democrat senator David Leyonhjelm says Australia is uncompetitive at the moment and reducing the corporate tax rate from 30 per cent to 25 per cent will only protect existing jobs and investment.

"If a company is profitable, growing, expanding, (and) needs skilled people, they're going to pay more for those people, but it is an oversimplification to say 'today tax cuts, tomorrow wage rises'," the crossbencher told ABC TV on Sunday.

"It is not going to increase the number of jobs and investment in Australia, it's just going to protect what we've got."

The government has persistently argued its $65 billion tax cut package will lead to more business investment in Australia, lifting stagnant wage growth and boosting the number of jobs on offer.

Finance Minister Mathias Cormann - who is leading negotiations to pass the cuts - warned last week if the tax rate wasn't dropped and Australia stayed uncompetitive, "the unemployment queues will increase and ... wages will reduce".

Opposition employment spokesman Brendan O'Connor rubbished that notion.

"We don't ascribe to the trickle-down economics theory, we think it's discredited," he told ABC TV.

"We don't believe there will be some ... commensurate wage increase come out of this largesse

"The overwhelming bulk of the $65 billion ... will go to multinational companies; the majority of the largesse will go to foreign shareholders, it will go to banks."

Senator Leyonhjelm says the point of the tax cuts is for companies to hand over less of their money to government and keep more of it for themselves or give it to shareholders as dividends.

The government has to persuade two more crossbench senators - Derryn Hinch and Tim Storer - to support the cuts in order to get them through parliament.

Senator Hinch last week flagged he could support it if the big four banks were exempted but the prime minister rejected that idea.

On Sunday, News Corp reported Senator Hinch might now be won over if the government dumps its plan to scrap a payment intended to help welfare recipients with power bills.

Senator Leyonhjlem said he was pretty sure the government would win Senator Hinch over.

Senator Storer - who only joined the upper house last Monday - is still working through the detail before committing to a position on the tax.

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