“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

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.

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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 “$15,300 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.

The first (and possibly last) Scott Morrison Federal Budget is being widely misinterpreted as modest and non-controversial – playing to the theme of ‘living within our means’. Effectively token personal income tax cuts for those on high incomes are suggestive of Liberal Party priorities in the context where other income tax-payers experience no relief.

Further, increases in tax on tobacco may seem like a ‘safe bet’; but neither side of politics appears concerned at the distributive ramifications.

In the ‘big picture’ though, there are still big cutbacks implicit in this Budget that may escape voters’ eyes at a casual glance. Cuts in Medicare and Higher Education will undeniably lead to an intensification of user pays and privatisation over the course of a re-elected Turnbull LNP Government. The LNP is hoping to evade scrutiny by adopting some distributively-fair policies. But a thorough analysis reveals a Budget which retains too much from the disastrous 2015-16 Hockey austerity Budget.

And yet there are some aspects which are mildly encouraging.

Under the reforms foreshadowed by Treasurer, Scott Morrison, wealthy superannuants would no longer be able to “draw tax-free earnings from balances over $1.6 million.” The Government is also “planning to introduce a $500,000 lifetime cap on the amount of after-tax contributions a person can make, backdated to 2007.” Labor has criticised the “retrospective” nature of the policy, but the measure will still only bring in $2.9 billion over four years. Meanwhile, high income workers will also be hit with a lowering of the threshold at which the concessional rate of 30 per cent applies for payments into superannuation accounts. That is: lowered from a $300,000/year threshold currently to a threshold of $250,000. Other superannuation measures will subsidise low-income workers, and support the ‘topping up’ of low-income spouse’s accounts by a partner. Those measures are a move in the right direction.

But Sally Rose of ‘The Age’ also observes that without a crack-down on negative gearing these policies could simply drive more investors into property – contributing to an intensification of a housing bubble which already locks so many young families out of the market.

‘The Age’ also proclaims that Scott Morrison is ‘taking aim at the multinationals’, hiring 700 tax professionals to lead a crack-down on corporate tax-avoidance. Tax avoiders will face significant penalties. But the projected savings of $3.9 billion are highly optimistic at best, despite the projection that corporate tax evasion is costing over $30 billion a year.

What is more, while the Coalition’s ‘Youth Jobs’ initiative is a significant improvement on existing Work for the Dole programs, nonetheless it amounts to another form of labour conscription and exploitation. The good news is that the program links into the skills which may actually lead to work later down the track. The unacceptable side of the equation is that young workers will be paid a pitiful $100/week extra for working a 25 hour week. ‘The Age’ fears the policy may create “a conveniently revolving door for cheap labour.” The question is whether or not the opportunity for skills development will ‘break the cycle of unemployment’, or whether competition will simply increase for a limited pool of jobs (where there is only one job for every five job-seekers). This raises the question of whether government needs to intervene more directly with an industry policy that links skills with additional new jobs over the long-term.

There will be some additional money for schools and hospitals – but significant pain as well.

Medicare rebates will be frozen at $37 for six years, driving the erosion of the public health system, and heralding the introduction of steadily increasing co-payments. Prescription medicines will also increase in cost by $5 , and a user-charge will be added to Pathology services (eg: blood tests) adding up very substantially for those with chronic conditions for which medication and blood tests are non-negotiable.

The ‘Herald-Sun’ projects “$1.2 billon” in aged care cuts. ‘Pain management’ for residents in Aged Care will be cut-back on account of what is described as an “unsustainable” growth in expenses. (What price the amelioration of an elderly person’s suffering?). A crack-down on ‘false claims’ by Aged Care facilities is anticipated to bring in almost $500 million; but there is no recognition of the fact little can be done about quality of life and oppressively unfair user-pays without a very significant injection of new funds. By ‘quality of life’ I refer to a host of problems – from underpayment and under-staffing which impact on basic questions such as when residents are turned in their beds to avoid bedsores, or whether aged care workers can be certain residents are actually eating, or whether or not there is poor morale and a revolving door for skilled staff.. It also refers to the lack of things for residents to do ; of the terrible boredom, the lack of meaning, the lack of pleasant surrounds, and the lack of privacy. Finally it includes the need for a registered nurse on the premises 24/7 in the case of an emergency.

University fee-deregulation has been dumped for the time being; but big cuts remain in place – still begging the question of how the sector will cope. Likely options include further reductions in HECS (Higher Education Contribution Scheme) repayment thresholds to well below Average Weekly Earnings (AWE). Liberal arguments, here, that government and students need to spread the cost of degrees ’50/50’ deserve to be treated with healthy scepticism. Not only does business benefit from the skills acquired by students; but also the most equitable way of spreading the burden is through a progressively structured tax system. If repayments are to be geared to the actual financial benefit gained, then there is no better way to go. On the other hand, higher repayment rates for those on over $100,000/year could have a ‘progressive aspect’, and should not be considered in the same light as reductions in repayment thresholds and increases in repayment rates elsewhere.

Arguably students will be hit hard with debt in order to pay for big Corporate Tax Cuts. True to its mantra of ‘small government’, essentially the government is arguing it will ‘do more with less’. In reality, though, this adds up to ‘no new programs without cuts elsewhere’. Linking the National Disability Insurance Scheme to welfare-cuts, there will be cutbacks in pensions for new recipients amounting to $15/fortnight, and a push to reassess the pension eligibility of some 90,000 Disability Pensioners. For those already living in poverty this can impact with malnutrition, or exposure to the elements as the costs of heating and cooling become unsustainable.

The Government anticipates an economic transformation ‘beyond the mining boom’, yet while it is subsidising Defence jobs in the construction of subs and other hardware (inefficiently creating 3,600 jobs at a cost of about $50 billion), the death of Australia’s auto industry undeniably occurred under the Liberal Party’s watch, with perhaps 50,000 jobs lost directly and indirectly.

The goal of raising Defence expenditure to 2 per cent of GDP by 2020-21 remains: but if the Liberals want bipartisanship with Labor, here, they must ensure this is not at the expense of other important programs. If bi-partisanship is ‘in the nation’s interest’ the Liberals must disregard Ideological qualms and accept a small increase in ‘the size of government’ to lock in Defence commitments. And Australia’s military assets should always be reserved for the actual defence of Australia and its allies, and not in adventures and wars of aggression overseas (as with the Gulf War of Bush, Blair and Howard).

More generally the Budget is light on infrastructure construction. Hence the need to make tough decisions to ‘increase the size of government’ or make further painful and damaging cuts is ‘postponed’. Given infrastructure demands in transport, communications, energy and so on, it is a situation which cannot be sustained over the longer term.

‘The Age’ reports that Shorten Labor has responded with “$71 billion Budget Savings” of its own. This includes opposition to Turnbull’s tax cuts for corporations which will see the Company Tax rate reduced from 30% to 25% over ten years. Some analysts are anticipating an utterly unsustainable cost to the Budget of over $50 billion over ten years should this Turnbull policy be adopted. This should not be surprising given the Liberals’ track record of tax cuts for the wealthy and upper middle class (unsustainable because in the context of the mining boom) – and ultimately funded by austerity elsewhere, impacting upon those on middle and lower incomes, as well as those mired in poverty.

Here, the Turnbull mantra of ‘Jobs and Growth’ has no substance. While low Company Tax rates may attract some investors, the other side of this decision could be neglect of services and infrastructure necessary to sustain economic activity. That might mean less ‘jobs and growth’ and not more. And while a small proportion of the cuts will flow through to workers, most of the tax cuts will simply be pocketed by business. Under this scenario, If essential infrastructure and services are not to be neglected the only alternatives include privatisation and user pays, or for taxpayers to ‘pick up the tab’ elsewhere.

None of those options are desirable or fair. But this scenario also raises other problems such as reduced workers’ consumption power, and the inferior cost structures involved in the private finance and operation of profit-geared services and infrastructure. The Liberal obsession with ‘small – government’ with ‘no exceptions’ betrays an impractical posture where good sense is sacrificed for Ideology.

In light of what it once called a ‘debt and deficit disaster’ the Liberals’ projected Company Tax cuts are being dismissed as fiscally irresponsible by Shadow Treasurer Chris Bowen.

Somewhat disappointingly, though, Shorten has argued Labor will oppose the Liberals’ $1.6 million cap’ on superannuation savings which attract the concessionary tax rate. Again: The argument is that the policy would have ‘retrospective’ elements, and hence is opposed ‘on principle’. Some corners of the media are speculating that the idea may be to ‘wedge’ the Liberals on their own core constituencies (ie: the wealthy and upper middle class). Nonetheless Labor’s own policy seeks to remove superannuation concessions from retirees already living on superannuation-streamed incomes of $75,000/year and over. Labor expects this will impact upon 60,000 superannuation account holders with accounts valued at over $1.5 million. But Labor is also reducing the threshold for the ‘high income super charge’ (HISC) from $300,000 to $250,000, affecting 110,000 people, and diluting their concessional tax rate on their contributions by a flat 15% (ie: a 15% concession down from 30%).

In April 2016 Shorten and Chris Bowen had argued that this, and measures on corporate tax evasion would save $20 billion over a decade. Again: that is in the context of superannuation tax concessions soon costing as much as $50 billion EVERY YEAR, and Corporate Tax evasion costing over $30 billion EVERY YEAR (according to Labor Senator, Sam Dastyari).

It is clear now that no-one is willing to truly ‘get serious’ on the reform of superannuation concessions and tax. On Superannuation Concessions alone Labor needs to target a ‘broader base’; hitting the upper middle class as well. While the upper middle class may not be as privileged as the ‘top 1 per cent’, nonetheless it is not fair for the remainder of society, including low and middle income workers, to subsidise their lifestyles. A better policy here could free tens of billions for investment elsewhere in services, infrastructure, and welfare.

But despite this there remain very-encouraging Labor policies as well; which will still see Labor outstripping the Liberals on distributive justice and the public interest.

The Gonski education reforms will be implemented, as will the National Disability Insurance Scheme (NDIS), and the construction of the National Broadband Network with superior Fibre-to-the-Home technology.

Exploitation of students (and taxpayers) by dodgy private vocational education outfits will be cracked-down upon with an $8000/cap per student, and a re-emphasis on TAFE. This is estimated as saving $6 billion over a decade.

Shorten’s Labor reforms limiting access to Negative Gearing to new investments, as well as restricting Capital Gains Tax concessions could save over $7 billion a year. And a Deficit Levy on high income earners will be made permanent, saving $16 billion over a decade. The Negative Gearing policy especially should lead to more-affordable housing and more new housing. So while there is ‘room to improve’, this is a step in the right direction.

By leading the debate Shorten has forced Turnbull and Morrison to adopt some ‘Labor-esque’ Budgetary policies. To the extent to which Labor is setting the tone for the election this has to be welcomed.

On the other hand while Labor is condemning the far-from equitable cuts that Morrison has projected elsewhere in the Budget, Shadow Treasurer Chris Bowen also points to the maintenance of “higher taxes” under the LNP than any time during which Labor was in Government.

This can partly be traced to priorities. For example the $50 billion Defence contract to build 12 new subs; and the decision to raise overall Defence expenditure to 2% of GDP. But at the same time: eventually Labor needs to confront the fact that it cannot afford its social agenda without raising tax significantly on those who can really afford it.

As considered earlier, Aged Care requires many billions new expenditure annually to wind back regressive user pays structures, and improve the quality of care and infrastructure.

And Mental Health spending needs to rise absolutely and proportionately with billions new funding as well. There is a truly shameful National Emergency whereby the mentally ill are on average dying 16 years earlier than the general population, and those with Schizophrenia (maybe 300,000 Australians) are dying 25 years earlier than the general population average. Catherine Armitage of ‘The Age’ (‘A kind of creeping euthanasia’, 11/4/16) has pointed out that 9000 Australians with a serious mental illness are dying prematurely as a consequence of this situation every year. This far outstrips the road toll and suicide rate combined several times over. Both Labor and the Liberals need to support fully-funded government programs to ‘Close the Gap’ on life expectancy for the mentally ill, much as there are programs to ‘Close the Gap’ for Indigenous Australia.

Again: The Liberal obsession with ‘small- government’ with ‘no exceptions’ betrays an impractical posture where good sense is sacrificed for Ideology. Labor needs to decisively reject this Ideology and embrace reforms which reject ‘small government’, and instead promote social solidarity, collective consumption, social insurance, truly progressive taxation and so on. The Nordics already demonstrate what is possible. But to be serious even a ‘gradualist’ posture by Labor – aiming to emulate the Nordics over the course of two or three decades – should see social expenditure and investment rise by tens of billions under Shorten Labor.

Labor is providing a clear choice in this election: on Gonski, tax reform, NBN and NDIS. But we need to do better. In Australia we should no longer ‘take small government for granted’. With the end of the mining boom, we need to reform tax just to ‘stand still’ on social services, infrastructure and welfare. Tax reform is ‘the price we pay for civilisation’. And a progressive policy trajectory necessarily entails ongoing, serious and cumulative reforms on this front.

This article was originally published on the ALP Socialist Left Forum.