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Bill’s ‘Class War’? ; Credlin must be Joking

“Bill’s low-rent class war” is scrawled across the pages of the “Herald-Sun” (6/7/17). Liberal operator and Opinion columnist Peta Credlin in full flight: defending the rights of the very rich against unconscionable calls to contribute to the common good.

Defending the wealthy and corporations against the ungrateful masses – who in the face of a cost of living crisis are feeling inequality more acutely than before ; and who scandalously expect tax evasion loop-holes to be closed ; for affordable housing ; for an end to punitive welfare ; for a modern living wage ; high quality public Health and Education, and so on.

Credlin asserts that “the top one per cent pay nearly 20 per cent of all tax.” And: “there are nearly four million households that pay no net tax after transfer payments.”

Further, Credlin draws on Roger Wilkins to argue “Australia is more equal today than forty years ago.”

And so Credlin infers that any kind of redistribution: whether through welfare or the social wage will drive “businesses and people offshore”; and hence Shorten is “[pushing] a hard left agenda.”

How to respond to this?

To begin, ‘the top 1%’ comprise people on incomes of over $227,000 a year ; and these would still end up with post-income-tax incomes of over $150,000. (calculated according to the income tax scales) They are not ‘battlers’.

Joe Hockey made similar claims in 2015 when he argued that “50% of all income tax in Australia paid [was] by 10% of the working population”.

We will deal with Hockey’s claims as a way of responding obliquely to Credlin’s arguments.

‘The Conversation’ concluded that Hockey’s claims were accurate , but put it down to Australia’s progressive taxation system. Without progressive taxation distributive outcomes would be skewed even further towards the rich, and against everyone else, especially the poor.

Therefore these figures must be considered in the context of rising income and wealth inequality. That is – the rich (including the top one per cent) are paying more tax because they are bringing in much more money. (at other peoples’ expense ; it does not ‘trickle down’ ; exploitation is a reality)

As I have observed elsewhere: Professor Robert Wilkins conceded that the portion of national income going to the top 1 per cent has approximately doubled since the 1970s to over 8 per cent, and that inequality is “high by modern standards” (‘the Australian’ (22/7, pp 1, 8).

And if we include the GST in our calculations we might acknowledge the fact that the wealthy also pay more GST because they can indulge in so much more conspicuous consumption.

The Conservatives in this country have also been concerned at the possibility that Australia may develop a European-style welfare state. But when put in context we see (admittedly according to 2009 and 2013 figures) that in 2009 Australia devoted just over 7 per cent of GDP to cash payments (welfare) ; compared with roughly 17 per cent in France. And in 2013 France devoted roughly 34 per cent of GDP to “social expenditure” compared with roughly 19 per cent in Australia. Even with very significant reforms such as I project in this article – we are nowhere near a “European style welfare state”.

The Conservatives also say nothing with regard the fact the Aged Pension takes the lion’s share of the social security Budget. They take the ‘aged demographic’ for granted ; but ultimately want a retirement age of 70. And when a greater proportion of Australians start retiring on their superannuation savings we might expect a more “frontal assault” on pensioners.

At only about 26 per cent of GDP overall levels of tax in Australia are in fact very low. Australia’s $154 billion social security and welfare bill (2016 figures) is also low by international standards, despite an obvious tactic by the Liberals of cultivating ‘downwards envy’ – intended to create resentment against the vulnerable ; often involving the distortion and misrepresentation of statistics. In fact the cost of social security and welfare in 2016 (approximately $154 billion) was somewhat less than 10% of a total $1.6 trillion dollar economy ; but is larger proportionate to the total tax take only exactly because overall Australian tax levels are comparatively so-very-low.

So again ; when you factor in a dramatically rising cost of living – as well as levels of personal indebtedness for those on lower and average incomes, or with lower to average wealth – the problem of inequality is becoming far more urgent.

This personal indebtedness includes mortgage stress. Indeed while some banks have behaved in an irresponsible and predatory way, there is the danger that the unsustainable personal debt which fuelled the housing boom (and perhaps consumption levels more generally) may finally give way to bust ; flowing into overall consumer confidence as well.

Factoring the housing affordability crisis in, that makes a strong difference to those on average or lower incomes attempting to pay off a mortgage, or even to afford the rent in an established suburb with decent amenities and infrastructure. Indeed home ownership is down to 31% from 41% in 1991, reflecting the concentration of housing in the hands of investors – to the detriment of first home buyers. The plight of those forced to the urban margins ; or to forsake the ‘Australian Dream’ of their own home also cannot be grasped by mere considerations of income inequality. Again, because of a broader cost-of-living crisis inequality is more urgent than any time in decades.

So Wilkins talks at length about income, but not so much about wealth ; this in a context where home ownership (or the lack thereof) is becoming a crucial socio-economic fault line.

And yet the Sydney Morning Herald’s Paul Maloney observes research from ‘Credit Swisse’ to the effect “the top 1 per cent of Australians own more wealth than the bottom 70 per cent combined.” And that according to ACOSS research “someone in the highest wealth group had 70 times as much wealth as someone in the lowest.” Maloney further observes the selective nature of the statistics Wilkins draws upon. Had Wilkins began by observing inequality from 2004 onwards that would have revealed a radical increase in inequality during the 2003 to 2008 period. This applies to income as well. According to the OECD, for instance, “Real incomes for the top quintile of households [in Australia] grew by more than 40 per cent between 2004 and 2014 while those for the lowest quintile only grew by about 25 per cent.”

Also since the 1970s profit-share has risen from 16.5 per cent to 26.5 per cent ; but the wage share of the economy has fallen from 62.7% to 52.3 per cent. (2016 figures) It had been assumed that increasing the profit share was necessary to spur investment ; while a falling wage share (and a largely neutralised trade union movement) would prevent a ‘wage-price spiral’. But in fact workers have less capacity to consume ; have turned to private debt to maintain lifestyles ; and the whole arrangement is beginning to look very precarious.

Neither pre-tax or after-tax income is enough to grasp the growth of inequality. While taxes have grown ‘flatter’ (less progressive) but nonetheless lower, the ‘user pays principle’ has been applied less and less discriminately , to the point where it applies now to everything from education and energy to communications, transport infrastructure and water. This intensifies the impact of inequality. Appallingly, ‘user pays’ for residential Aged Care especially has become akin to a ’death tax’ . But unlike progressive inheritance taxes or ‘death duties’, this impacts disproportionately upon families with lower to middle incomes, including those for whom the family home is the only significant asset they have.

As opposed to the earlier post-war mixed economy, the user-pays element has been increasing proportionately, and privatised entities are no longer providing cross-subsidies for ‘battlers’. Also: arguably privatised entities are abusing their market power to reinforce their bottom line. Hence the cost of “essential items such as food, electricity and insurance” is rising at almost double the rate at which wages are rising. And the position of the poor and welfare-dependant is even more precarious. A look at Medibank Private’s increasing premiums is enough to hammer these points home ; along with soaring profits.

Meanwhile policies such as capital gains tax discounts, superannuation tax concessions, and negative gearing – overwhelmingly benefit the well off – to the detriment of social programs which may otherwise further social solidarity and the common good. According to Treasury in 2015 $10 billion out of $30 billion in superannuation tax concessions alone are lining the pockets of the wealthy. (the top 10%) With time the problem could worsen markedly.

Bill Shorten’s agenda is not ‘hard left’by any reckoning. Michael Pascoe of the Sydney Morning Herald has observed that Shorten’s reforms to family trusts only scratch the surface (saving less than a third of what may have been possible). And that Shorten is even using 10 year projections to make his reforms look more substantial.  Pascoe concludes that if this is ‘class war’ Shorten is “firing blanks”!

We need much stronger policies from Labor: reforms of the tax mix, and new progressive taxes to provide for significant new social policies. End inequitable superannuation tax concessions. Wind back user pays in Aged Care and Education for equity and fairness ; and improve the quality of service. Reform welfare to further ameliorate poverty (raise all full pensions by $1000/year). A big investment over time in public housing to increase supply, deflate the bubble, provide for the vulnerable. Consolidate and extend Medicare. Provide the necessary resources and apply the political will to maintain transport, communications and other infrastructure as natural public monopolies. Consider strategic re-socialisations ; maybe re-establish a public-owned savings bank. Properly fund mental health.

The lower end of the labour market needs re-regulation as well ; though this is not necessarily linked with tax.

Arguably decades of privatisation and austerity have resulted in inferior cost structures for areas of the economy properly the domain of natural public monopolies. Meanwhile in Australia a limited welfare state has restricted ‘collective consumption via tax’. That also has impacted upon cost structures ; and has given consumers worse value for money in the end analysis.

The consequence has been less consumer demand for the remainder of the economy. Capitalism is desperately striving to expand existing and new markets to stave off its contradictions. But ironically perhaps the best way it can do this is to transition to a ‘hybrid economy’ which cedes ground to socialisation (public and other democratic ownership). Efficiencies via socialisation (natural public monopolies, collective consumption, enforcement of competition in specific sectors, eg: banking, insurance – by government business enterprises with competitive charters) would mean more income left over for consumers to spend elsewhere (ie: in non-socialised sectors). Many capitalists would resist such a transition for political and Ideological reasons ; but many others still could stand to gain from such a compromise. As could the public at large.

Public investments in services and infrastructure can also comprise a ‘pull factor’ for investment (for instance an educated workforce). This gets forgotten in the constant push for more austerity and lower taxes. And it is one reason why the Nordics are so successful with their welfare states, mixed economies, industry policies and active labour market programs. The opposite of the catastrophe scenario suggested by Credlin in response to Labor’s modest policy agenda.

As things stand a Shorten government could ameliorate social injustices including economic inequality. But Labor’s existing policies are very mild. Shorten has time to develop a stronger policy profile ; though the modesty of past ALP policy is such that Labor’s recent announcements appear ‘radical’ to some.

Token reforms are not enough to deliver, even though they may convince those without a sense of proportion and history. Rather than reforms bringing in $1 billion Labor needs to think bigger ; perhaps in the vicinity of 2 per cent of GDP in a first term. (approximately $32 billion in a $1.6 trillion economy)  And gradually more in subsequent terms. Not because that is just some ‘silly’ arbitrary figure ; but because Labor needs to think of what is necessary for its policy ambitions ; but also what is politically ‘do-able’ – and over what timeframe.

Meanwhile those claiming a $1 billion tax reform (that is, one sixteenth of one per cent of GDP) is ‘class warfare’ are frankly kidding themselves.

References:

http://www.smh.com.au/business/the-economy/labors-war-on-the-rich-is-firing-blanks-20170730-gxlz6r.html

http://www.abc.net.au/news/factcheck/2015-10-14/do-eight-of-ten-taxpayers-fund-welfare-bill/6822840

http://theconversation.com/what-income-inequality-looks-like-across-australia-80069

http://www.smh.com.au/federal-politics/political-opinion/roger-wilkins-claims-about-inequality-at-economic-conference-should-be-tested-20170727-gxk9m6.html

http://www.abc.net.au/news/2015-07-07/denniss-abbotts-promise-not-to-solve-our-super-tax-problem/6601112

http://www.smh.com.au/federal-politics/political-news/private-health-insurance-premiums-to-rise-by-nearly-5-per-cent-20170209-gu9p8t.html

http://evatt.org.au/papers/northern-lights.html

Dr Tristan Ewins is a Social Sciences PhD, qualified teacher and social commentator based in Melbourne.  He also blogs at ‘ALP Socialist Left Forum’, ‘Left Focus’ and ‘The Movement for a Democratic Mixed Economy’.  He has been a member of the Socialist Left of the Labor Party for over 20 years.  The opinions he expresses here are his own only.

 

 

Labor Turning Left on Inequality; Let’s Make Sure the Policies Match the Rhetoric

Apparently Federal Labor under Bill Shorten is considering significant reform of Australia’s tax system to bring in potentially billions in new annual revenue, and to address the scourges of disadvantage, inequality and poverty.

Labor had already long since committed to reform on capital gains tax concessions and negative gearing; with some modest changes on superannuation tax concessions as well.

But according to ‘Age’ journalist, Peter Martin (‘The Age’ 22/7, p 17), additional possible options now being canvassed include:

  • cracking down on the abuse of family trusts by the rich, bringing in maybe over $3.5 billion a year, and
  • “ending the diesel fuel rebate” for miners and farmers; again bringing in perhaps over $4 billion.

These would be very welcome announcements should they eventuate. Though to aspire to an extended social wage and welfare state, Labor really needs to be considering ‘in the ballpark’ of 5% of GDP in progressive new annual spending – arrived at over several terms.

And a figure of increasing Federal Government expenditure by 2% of GDP may be appropriate and realistic under a first term Labor government (ie: increase progressive tax and associated expenditure by around $32 billion in a $1.6 trillion economy).

We will consider other possibilities to reach that vicinity later in this article.

The Herald-Sun has responded to this recent positioning on distributive justice by Shorten, proclaiming that: “Bill Shorten has ratched up his class warfare rhetoric”. For the Herald-Sun instead Labor must cut “wasteful spending”  and not target “so-called” “rich and big business”. Here inequality is to be considered not a reality. Rather according to the Herald-Sun it is Shorten who is “dividing us” into a “Have and Have-Not nation” (Herald-Sun, 22/7, p 12, 38). There is talk of rewarding and not punishing “aspiration”; and a rising cost of living is blamed on renewable energy.  (as opposed, for instance, to abuse of market power and inferior cost structures in the wake of privatisation)

But ‘The Australian’ (22/7, pp 1, 8)  talks itself into a corner while unwittingly providing ammunition to refute the Herald-Sun’s suggestion that ‘inequality is a mirage’ conjured up by Shorten, and is not real.

It quotes labour market economist Professor Robert Wilkins to the effect that inequality has not been “ever rising” since the Global Financial Crisis. (2008)  But then has to concede that the portion of national income going to the top 1 per cent has approximately doubled since the 1970s to over 8 per cent.  Wilkins also interestingly concedes that inequality is “high by modern standards”.

Wilkins further concedes that we do have wage stagnation. And when you add a rising cost of living, the reason inequality is becoming a far more urgent and resonant issue is clear.

Further, ‘The Australian’ observes that Shorten and Bowen are drawing on pre-tax figures on inequality. But if anything taxes have long been becoming lower, more broad-based, and less progressive; at the same time as we have observed a growth in the application of the ‘user pays principle’ for everything from education to water.

Briefly, arguments about ‘the size of government’ also flounder in the face of statistics. Whereas Australia enjoyed a general tax rate of 26 per cent of GDP and expenditure levels of 35 per cent of GDP in 2014, the figures for Finland were at 43 per cent of GDP and 55 per cent of GDP respectively. Meanwhile Germany enjoyed a total tax take of 37 per cent of GDP, and expenditure levels of 45 per cent of GDP.

So Australia is lagging behind some of the most successful economies in the world in respect its levels of tax and expenditure. Despite Ideological claims to the contrary from the Business Council of Australia (‘The Australian’, 22/7/17) and elsewhere, the reality is that ‘bigger government’ can be good for the economy, and even ‘good for business’.

While Labor has recently only been courageous enough to target the very rich with admittedly very-modest reforms, ACOSS observed in a 2015 report that inequality was marked in our supposedly-egalitarian nation.

Drawing on ABS (Australian Bureau of Statistics) research, ACOSS depicted the average income and wealth according to five “quintiles”; “a statistical value representing 20% of the population, of which the first quintile represents the lowest fifth of the population, 1-20%; the second quintile represents the second fifth, 21-40% and so on”.

Here the bottom 20% of Australian households enjoyed a total averaged income of under $34,000/year; while the quintile immediately above enjoyed a total averaged income of only $67,113. The middle or third quintile amounted to $97,570 ; the fourth to $134,127; and the final and wealthiest layer $232,175.

Household wealth was similarly measured, and here the bottom 20% enjoyed average total household wealth of $31,100, but the top 20% enjoyed average wealth of $2,212,200.

This gives us some idea of the extent of income and wealth inequality. Though these statistics may also admittedly be influenced in the context of ‘asset rich, income poor’ households; those who may own a family home for instance, but who may fall into one of the bottom two quintiles for income.

Also the top 20% wealth and income quintiles may be affected by the weighting of the extremely wealthy. Again: after all, research quoted by Robert Wilkins in ‘The Australian’ (22/7/17) has it that the top 1 per cent alone account for over 8 per cent of total wealth in Australia.

Labor needs a nuanced approach: assisting the income poor and the asset poor, while redistributing from those who are income and asset rich. Deflating the housing bubble and making home ownership a real prospect for families again is crucial. Labor’s Negative Gearing reforms are essential here. Expanding public housing is necessary to assist low income families and vulnerable individuals as well, while also boosting supply with a ‘flow on effect’ to affordability for everyone.

But that’s not the end of the story. In short, Labor needs to redistribute from a broad enough economic base to fund redistribution via the tax mix, tax-transfer system, social wage and welfare state. That must mean redistribution from the upper middle class as well as the outrageously wealthy.

Yet tax may need to rise for the ‘middle income’ layers as well.

The rationale for this is as follows:

Tax comprises not merely a burden as if taxpayers received nothing in return. It is also the means of funding collective consumption and social insurance. Despite complaints from the banks, the recently-implemented Federal tax upon them was a way of paying for an effective ‘government guarantee’ – a form of ‘economic insurance’ which originated with the Rudd Labor Government during the Global Financial Crisis of 2008 (GFC).

Morally-speaking, the ‘middle income layers’ should also show some solidarity with those who are struggling. That’s part of the picture. But by ‘collectively consuming’ infrastructure, services and social insurance they can ensure they also get a much better deal for their tax dollar than they would as atomised private consumers. Consider communications, transport, water, energy infrastructure, health and education infrastructure – and the costs of the associated services. And taxes also must be levied so citizens are ‘covered’ in the case of accident, illness, disability, job loss and so on.

Also there is a growing crisis of what some would call ‘corporate welfare’. Ostensibly in order to be ‘competitive’ in attracting capital we have seen an increasing phenomena of tax payers, workers, citizens – effectively subsidising business. Governments ‘look the other way’ on tax evasion, tax havens, abuse of trusts and so on. Or ‘talk the talk’ while taking only token action (Labor could do with some introspection here as well).

Corporate Taxation falls lower and lower to ‘remain competitive’. A ‘race to the bottom’. The ultimate consequence of this is that business is no longer paying its fair share for the services and infrastructure it benefits from. That means workers and other taxpayers have to ‘pick up the tab’.

But as well as being unfair, ironically this ‘comes back around’ to harm certain businesses as well. Workers and taxpayers therefore have less disposable income, which means less scope for discretionary consumption. This is why some businesses are beginning to worry about falling wages. Though others remain narrowly self-interested – looking only at their own sectional interests, and for instance supporting attacks on penalty rates.

The other possibility is that crucial services and infrastructure will just be neglected. But much of that infrastructure and services is a ‘drawcard’ for investment as well.  For instance an educated workforce. ‘Social disintegration’ can also mean added costs in the form of crime, ill health and so on. This is without even considering the question from the viewpoint of striving for ‘The Good Society’ and not just ‘economic goals in the abstract’.

There are other possibilities for tax reform, also, not examined by Martin’s article. Those could be crucial in lifting Australia closer to the examples set by successful economies such as Germany and Finland. We will consider a number of those:

  • Further (and genuinely substantial) cuts to superannuation concessions for the unambiguously well-off (the upper middle class and higher); with the potential to save tens of billions a year with that one measure alone
  • Fix the Company Tax rate at 30 per cent and take serious action on corporate tax evasion, use of tax havens etc
  • Gradually wind back Dividend Imputation (tax credits ostensibly to stop ‘double taxation’ – the rationale of which has weakened with falling Company Tax rates) that would have the potential to save $5 billion a year from reducing Dividend Imputation to a 75% rate alone in a first term Labor Government; and much more over time depending on the reaction
  • Seriously restructure the PAYE income tax mix for progressivity, including indexation of the bottom two or three brackets thereafter – to prevent future unfair bracket creep
  • Raise and restructure the Medicare Levy into a more-progressive multi-tier tax; and index to prevent unfair bracket creep. Also cover Aged Care costs within the Medicare Levy – and raise enough revenue to eliminate unfair user pays costs for lower income, middle income and working class families while improving services, and hence improving quality of life and happiness for residents and those remaining at home.
  • Introduce a progressively-scaled ‘infrastructure levy’ to provide for all manner of infrastructure (transport, communications, energy, water etc) and to stem the trend towards privatisation – which is worsening cost structures and arguably fuelling nepotism
  • Introduce a modest inheritance tax on inheritances valued over $2 million; perhaps excluding the family home, and again indexed for progressivity
  • Introduce a ‘Buffett rule’ – or ‘minimum income tax’ affecting the wealthy.

Importantly though, Labor’s consideration of increasing the top income tax rate by 2 per cent is not substantial enough to make serious inroads into the deficit, provide for social wage and welfare expansion, or to render indexation of the income tax mix sustainable thereafter. Compared with other taxes, income tax has great progressive and redistributive potential and its significant reform must be prioritised to achieve the best outcomes.

It’s encouraging that Labor is considering serious reform of the tax system for fairness. We need such reform to promote distributive justice, and provide the means for social wage and social security expansion. But Labor activists need to hold their politicians to a high standard as well.  There is a history of rhetoric on these issues, combined with a failure to match that rhetoric with the necessary action in the ‘end analysis’. Not every measure considered here will be implemented by a first term Shorten government. But extension of progressive tax and associated social expenditure by 2 per cent of GDP, or $32 billion in a $1.6 trillion economy, is a very good place to start.

This article was originally published on ALP Socialist Left Forum.

Doctor Who?

The news that the next ‘Dr Who’ will be played by a woman (specifically by British Actress Jodie Whittaker) has been met with a generally positive reception. But as a fan since I was about seven years old I have to reluctantly confess to feeling somewhat more ambivalent. It’s not that I have any problem with strong female leads. Female Sci Fi leads in the Star Wars movies ‘Rogue One’ and ‘The Force Awakens’ provided new stories and new backgrounds and were in keeping with modern expectations of strong female characters. This was entirely appropriate exactly because we were dealing with new characters and new stories.  (It was not as if Anakin Skywalker – aka Darth Vader – suddenly switched gender; and even though today’s society is more ‘open’ to themes of ‘gender fluidity’, such a change would still be seen as ‘over-reaching’ by most fans).

But ‘Doctor Who’ is different from Star Wars – ‘The Force Awakens’ and ‘Rogue One’. While both franchises have a lineages going back decades, ‘Doctor Who’ stretches back more than fifty years and involves ongoing themes of both continuity and change. And since the 1960s a ‘male doctor’ has been a constant.

In an enlightened society popular culture should feature strong female and strong male characters in equal measure almost spontaneously. As well as ‘sympathetic’ female and male characters of significant depth. Though in reality: yes at first the barriers to strong women leads have had to be broken down consciously and deliberately. And this has met with sometimes unwarranted cultural resistance.

Even relatively recently we lived with the legacy of women’s treatment by some as what Simone de Beauvoir famously called ‘the second sex’. But we also have to ask ourselves: is every instance of male prominence also an instance of male privilege that must be uprooted and overturned? Can we now ‘leave any stone unturned’ when it comes to strong and traditional male leads in popular culture?; (for instance in science fiction generally and Doctor Who specifically).  Is this a sign of ‘progress’? Or perhaps are we sometimes overcompensating for centuries of past male cultural dominance?

Again ‘the Doctor’ has always been played by a male actor since the 1960s. And while the writers of Doctor Who have tried to prepare the way for a female Doctor: for instance with the change of gender by traditional adversary ‘The Master’ (or ‘Missy’ in her most recent incarnation) – it still feels like ‘a bridge too far’. People like a mix of continuity and change. But a woman Doctor is perhaps too great a change. Perhaps it goes against peoples’ expectations to the point where they feel they are no longer dealing with the same character.  Which could turn out to be something of a weakness for the new series.

Not everything that is ‘male’ is at the same time representative of ‘male privilege’ and hence must ‘be torn down’. Though yes, ‘Doctor Who’ originated in an era where the strong female leads of today were unthinkable by most. So indeed even Doctor Who has not escaped the history and influence of gendered power relations. But the cultural milieu which produced ‘The Force Awakens’ and ‘Rogue One’ does not need to tear down every strong and traditional male lead character in order to promote women’s cultural liberation. The battle over strong women leads in Science Fiction and Fantasy popular culture has been fought and it has been won. If anything it is the strong male leads who are becoming more the exception and less the rule.

So ideally we need to arrive at that point where strong female and male leads are produced in roughly equal measure in popular culture ‘spontaneously’ – or even ‘organically’. Where one is not seen as being a threat to the other. And where we can enjoy ‘traditionally male’ lead characters at the same time as enjoying the path-breaking, strong female leads in productions such as the more-recent Star Wars movies, and in ‘Game of Thrones’.

‘Doctor Who’ is a production where the masculinity of the lead character has been a key element for over fifty years. I enjoy and support modern productions with strong female leads. But after enjoying ‘Doctor Who’ for several decades of my life I like to feel I am still dealing with the same lead character. That has me a little uncertain about the recent announcement.

Scott Morrison’s 2017-18 Federal Budget: Some Good Measures Amidst the Typical Austerity

Many media commentators are responding to the 2107-18 Morrison Federal Budget by branding it as ‘Labor Lite’ or ‘worse’.  But how much of that actually stands up to scrutiny?

Yes the Government is attempting to appear ‘fair’.  And many media figures are throwing around terms like “cash splash” which are commonly reserved to use against Labor governments.  There are pressures in the right-wing monopoly mass media for a ‘right-turn’ in response to any moderation of economic policy under Turnbull.  Bernardi’s ‘Australian Conservatives’ and the libertarian ‘Liberal Democrats’ stand to gain most from this.  But despite years of conditioning from the monopoly mass media Australians may resist these trends given the remnants of our ‘egalitarian spirit’.   The point of all this appears to be stigmatisation of social investments and expenditure ; ultimately leading to a US-style political culture.  Which in turn would support a US style class system based on the absolute destitution of many , and the blatant exploitation of a class of working poor. To the extent Turnbull and Morrison resist pressures for an ‘economic hard right turn’ then that is welcome.

Some Budget changes do appear at the least superficially ‘Labor-esque’.  Many of the billions in cuts and savings originally proposed in the nightmare 2014 Hockey Federal Budget are laid to rest permanently here. The increase to the Medicare Levy will be welcomed by many, and will help provide for the NDIS. (National Disability Insurance Scheme)  The Government claims a ‘$56 billion shortfall’ for the NDIS ; though most of that could have been made up for immediately by jettisoning the Government’s $50 billion in planned corporate tax cuts over 10 years.  (much more over time) $8.2 billion will be taken via the Medicare Levy increase over the first four years.

A so-called ‘Google tax’ targeting corporate tax evasion is also expected to net more than $3 billion over four years  (though it is quite insignificant compared with corporate tax cuts elsewhere).

Further, the ‘big banks’ (including CBA, ANZ, Westpac, NAB) will be hit for $6 billion over 4 years ; apparently including an effective payment in return for the ‘government guarantee’ for the sector (which began with Rudd’s response to the Global Financial Crisis).  In response there is the question : will the banks hit customers or will they hit shareholders?  If somehow larger shareholders could be targeted that would ensure the most equitable outcomes.  A payment by the big banks in return for an effective government insurance policy makes sense.  Without it ultimately there could be impositions on workers, citizens, tax-payers.  So on this front at least the Government is doing the right thing.  And if the Banks respond by upping fees and charges arguably the co-operative and mutualist sector could ‘step into the breach’.  Were the Commonwealth Bank still in public hands then assuming a ‘competitive charter’ it could have held the rest of the sector accountable , countering tendencies to pass costs onto consumers.  That’s also a good reason for Labor to consider restoring a public-sector bank – perhaps taking advantage of existing Australia-Post infrastructure.

Meanwhile, foreign home owners who leave properties vacant six months or more will be taxed – a measure apparently borrowed from the Andrews Labor State Government in Victoria.  As well as raising some revenue, this measure should also influence investor behaviour ; and effectively increase available housing supply ; with downwards pressure on housing and rental affordability.

The ‘Gonski 2.0’ measures, meanwhile, are a significant improvement on past Liberal policy, and include needs-based funding.  David Gonski is due to present another report by the end of the year.  The Catholic sector appears to be in the firing line.   More broadly, Shorten points out that despite the gains, here, (including some cuts to some of the richest private schools) the proposals nonetheless still involve an overall $22 billion cut to the sector over ten years compared with the deals previously negotiated by Labor.

Other constructive policies include significant tax breaks for ‘empty nesters’ to ‘downshift’ to smaller, lower-maintenance accommodation.  That could also increase effective housing supply.  The housing bubble will eventually deflate (or ‘burst’ disastrously). But government could step into the economic breach with public housing.  There is still the need to expand supply to meet underlying human need.  Planned Negative Gearing and Capital Gains Tax reforms from the Government are welcome, but do not go anywhere near far enough, saving just $1.6 billion over 4 years . Stronger action on Negative Gearing is necessary to lessen competition between first home buyers and investors , correcting the Housing Bubble over time.

Also there’s $10 billion for rail as part of a suite of infrastructure commitments (though these are not as significant as some think when compared relative to infrastructure investment under a ‘traditional’ Labor Government).

A once-off payment of $75 for singles, $125 for couples – to assist with energy costs – is very insignificant when you consider the rising cost of living. The Liberals point to renewable energy as the alleged ‘culprit’ here ; but what of privatisation?

Finally ;  Annual TV Licenses are scrapped in favour of a much lower ‘spectrum fee’ – which makes sense given the changing media landscape – which is hurting traditional media. Arguably the licenses aren’t worth as much anymore.  But diluting media ownership laws will still enable the likes of Murdoch to dominate traditional media.

The Down-Side
But there’s a very significant ‘down-side’ to this Budget as well ; including ‘traditionally Liberal’ attacks on vulnerable groups ; and treating tertiary students like ‘cash-cows’.

Higher Education stands to lose almost $3 billion a year – with students hit hardest.  The Turnbull Federal Liberal Government claims that its fee increases – and its reduction in the minimum repayment threshold to $42,000 a year (down from $55,000) “better reflects the lifetime benefits reaped by higher education graduates”.  But these measures will start ‘kicking in’ affecting people on approximately half the average wage.  Hence in places the measures really bear no relation to any alleged private financial benefits for students. The logic behind these measures also neglects entirely the gains by business and society at large from a more highly educated populace.   There is some progressivity as those with much higher incomes will repay at a significantly higher rate.  But this does not excuse or make up for a 7.5% average increase in tuition fees.  In response Labor needs to raise the threshold somewhere much closer to the average wage ; and higher over time ; while entrenching a progressive scale in the rate of repayments.  Exceptional groups such as the disabled should probably be forgiven their debts, here : or at least have them frozen. The inevitable effect of this will be to deter many poorer students from study, reducing the nation’s pool of ‘human capital’ over time, and impacting on ‘equal educational opportunity’.  It is dubious at best to consider educational investments a ‘bad debt’.

The 0.5 per cent increase in the Medicare Levy is supposed to reassure voters that Labor’s warnings on health are only a ‘scare campaign’.  But while the Levy is re-indexed the forsaken increases to Medicare’s coverage in recent years are not made up for.  Medicare might still be eroded by stealth ; and that is ‘de-facto privatisation’ in the sense of intermittently eroding the coverage of ‘socialised’ public health proportionately.  This was always what Labor alluded to , but for some reasons ‘the waters were always muddied’ in the mass media, with throw away lines like ‘Mediscare’.

Also , while the Medicare Levy is rising, the 2 per cent Deficit Levy is gone – directly benefiting the wealthy in the final balance. There are ‘traditionally Liberal’ distributive  outcomes, here, despite claims of the Budget being ‘Labor Lite’ (that is, the Budget favours the wealthy).

Payroll tax on foreign workers will also be replaced with a levy of $1500 to $5000 per employee raising $1.2 billion over four years “to improve Australian workers’ skills”.  To an extent this will take some of the wind from Labor’s sails on related issues.

Other measures include punitive attacks on the rights of the  unemployed, with the threat of payment suspension for those who miss a job interview or refuse a job offer they don’t want.  And reversion to a ‘cashless welfare card’ for anyone found to have illegal drugs in their system.  5000 people will by thus tested – and effectively humiliated – in order to create a ‘Trojan Horse’ for the introduction of cashless welfare.   Already Australia has one of the most negligent and punitive unemployment benefit regimes in the advanced capitalist world.  But ‘cashless welfare’ will see Australia revert to Depression era ‘Susso’ style ‘payments’.  The ‘Susso’ basically provided threadbare material subsistence (rations and vouchers) for the long-term unemployed.

Conclusions

Claims to the effect this Budget is ‘Labor Lite’ do not really stand up in the longer view historically when you consider pre-1980s relativities on the Economy ; and more recently with the ‘relative economic centrism’ of former Liberal leaders like John Hewson. The reality is ‘convergence’ on right-wing, economically Liberal policies ; though Shorten has begun to ‘break away’ to something more recognisably ‘left of centre’. Ironically,  the “Abbott Purists” will likely claim the austerity has not gone far enough. Though they may be upset by the attacks on Catholic education.  But it is THEY who have abandoned ‘traditional Catholic Centrism’ on welfare, labour and the economy (a tradition which interestingly had parallels with other ‘Christian Democratic’ parties in Europe).

This government is restrained by its own inflexible “small government no matter what” Ideology (spending is set at no more than 26 per cent of GDP ; well below the OECD average).  This drives various ‘cuts to the bone’ (as Gillard would have put it) , because it leaves no other option than harsh austerity.  Ultimately, Scott Morrison will have to make a choice: real people or Economically Liberal ‘small government’ Ideology.

Terry McCrann of the Herald-Sun calls the Budget ‘a disgrace’ for not sufficiently addressing government debt.  And Jeff Whalley (also of the Herald-Sun) argues that government debt amounts to “$375 billion” or “$15300 for each man, woman and child” .   But while government spending can have a positive ‘multiplier effect’ on economic activity,  austerity also has a negative multiplier effect ; dragging the broader economy down in sympathy.

Also we must remember  that private household debt is the much bigger problem, and is connected with falling real wages.  (Why the cuts in Penalty Rates, therefore, we might ask! ; which will lead to lower tax revenue also).  And reducing investment in PUBLIC owned infrastructure presents its own associated problems of passing inferior cost-structures on the broader economy. Indeed, investments in some services (eg: Education) and infrastructure add to productivity – and the public sector (natural public monopolies) can often do the job more efficiently.  So Morrison’s ‘good debt’ and ‘bad debt’ has some substance. (A pity in the past they did not apply those principles to Labor governments!)

In conclusion;  The Herald-Sun reports with an air of alarm that taxes will be up $23 billion over four years ; and spending up $15.7 billion over four years.   Indeed, Commentators are complaining that income tax is becoming more significant proportionately.  Though really, this need not be a problem if total income tax is progressively restructured, and also the rest of the taxation mix.  Also keep in mind the economy is worth approximately $1.6 trillion.  So in reality spending is up by less than a quarter of one per cent of GDP.  The revenue gap has at least been appreciably narrowed.

In some ways this Budget is better than we might have expected from the Liberals after the horror Hockey ‘Lifters and Leaners’ Budget from 2014. But a lot of that Ideology is still there.  And the cuts are still significant ; with the introduction of ‘cashless welfare’ setting a precedent for the further future humiliation of job-seekers.  And shutting many lower-income Australians out from Higher Education.  An Opposition with strong, traditional Labor policies on distributive justice can still ‘outflank’ a Liberal Government which cannot help but govern primarily in the interests of its core constituency: the unambiguously well-off.

This article was originally published on ALP Socialist Left Forum.

 

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