Politics

How can there be fairness in an unfair economy?

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A preoccupation with Triple-A ratings mean Labor's economic policies are only marginally more considerate of Australia's rising inequality than those of the Coalition, writes John Passant.

NOTHING highlights the contradiction at the heart of the Labor Party than its campaign in this election around fairness — especially improved health and education spending.

Yet at the same time it tells us it is putting people first, it has announced it would accept in some form, some of Tony Abbott’s and Joe Hockey’s savage 2014 Budget cuts — cuts that for the last two years, Labor has opposed and voted against in the Senate.  

One measure halves family tax benefits supplements for families with combined incomes of over $100,000 a year. Many families have both parents working to survive. A salary of $50,000 each is not much. This measure will "save" – that is, take from those families – $500 million over the next four years.

Labor will continue the Turnbull Government’s freeze on the indexation of the thresholds for the Private Health Insurance and Medicare Levy Surcharge. This will cost those caught by the measure an extra $2.3 billion over the next decade.

Labor has also attacked university students. Labor has proposed reducing the threshold for repayment of HECS-HELP fees from $54,126 to $50,638. This will bring in $129 million over 10 years. Students in early childhood education, maths, science and nursing will pay increased fees totalling $159 million.

Labor also proposes indexing funding to the cost of living index, not the education costs index. This will cut university funding over the decade by $3.7 billion.

Just two weeks ago, Labor agreed to cut the $4.5 billion Schoolkids Bonus.

On Sunday, Bill Shorten exposed that contradiction between fairness and managing capitalism when in power, even more sharply, when he announced an extra $2 billion above the Turnbull’s Government’s commitment of $2.9 billion more on health spending over the next four years. As Labor and then Australian Medical Association President Brian Owler have been telling us for two years, the Abbott/Turnbull Government is actually cutting $57 billion out of the health system from 2018 onwards. So the Coalition’s "extra" $2.9 billion and Labor’s "extra" $4.9 billion, basically accept more than $50 billion being cut from health.

Maybe Shorten should explain why it is that Labor now accepts $52 billion in health cuts while the Government accepts $54 billion in cuts. He avoided a question about the $57 billion shortfall and muttered something about tough choices being necessary. Shorten said Labor could not fund all the cuts the Abbott/Turnbull Government had unleashed. In other words, the conservatives’ cuts are doing Labor’s work for them.

And therein lies a hint as to what is going on. Labor, too, will cut spending on health but just slightly less than the Liberals. Labor’s "fiscal consolidations" are like having your throat cut with a scalpel rather than the Liberals' rusty old knife. You are still dead. The lesser evil is still evil.

I look forward to hearing the Opposition Leader’s weasel words on what Labor identified as the Government’s $23 billion shortfall in spending on schools and how we now can’t afford the full Gonski.

None of this should surprise us. Labor’s role is to manage capitalism. The capitalists have been telling Shorten and Co for some time they need to rein in "profligate spending". Labor are falling into line despite the fact that in terms of OECD countries, Australia is a low taxing and low spending country. 

When Labor released its 10-year economic plan, it showed it would have a slightly higher Budget deficit over the next four years than the Turnbull Government’s projections but like the Government, would have a surplus in the year after. This is, in part, because their negative gearing and capital gains tax changes would really begin to kick in. It is also, presumably, because Labor won’t be spending much to address the $52 billion health cuts and the $23 billion in education cuts the Coalition Government have set in train for the years after 2018.

Various economists went berserk when Labor announced it would have slightly higher deficits than the Liberals. They warned that our Triple-A credit rating would be at risk. This is odd because the Government, too, will have Budget deficits for the next four years, although reducing at a faster rate than Labor. It also strikes me as political interference not based on any deep scientific analysis by these economists, of what the unelected market controllers like Moody’s and Standard & Poor’s will do.  

If we look at gross government debt, ratings agency Fitch’s says 

‘gross general government debt/GDP remains below the "AAA" median (34.5 per cent of GDP in 2015, versus 42.8 per cent).’

Net government debt is just under 17 per cent of GDP. Most OECD countries would give their right arm for such figures.

If, however, they were to cut our credit rating, banks and governments would have to borrow at higher interest rates and lending bodies would pass that on to borrowers like you and me and to business. It would strengthen the Australian dollar and make our exports less competitive, exacerbating the falling price of most commodities. 

The one per cent frame their arguments about economics in this way to frighten us into accepting attacks on basic services and social welfare. We’ll all be rooned' if we don’t go along with their suggestions. The saved money will then be used to cut company tax rates in the hope that this will stimulate investment and increase growth, jobs and wages. There is no evidence this has happened or that it will happen. Even the Government’s own figures suggest the impact will, at best, be very small and very long term.

Let’s reverse the grounds of the debate. According to ACOSS there are 2.5 million Australians living in poverty, including 603,000 kids. More than 100,000 Australians are homeless and many of them sleep rough. None of the major parties have any plan for addressing these issues. Indeed, both the major parties are committed to increasing inequality in Australia.

There is a redistribution of wealth and income going on in Australia from labour to capital — a redistribution started by the Hawke and Keating Labor Governments and continued by Howard, Rudd, Gillard, Abbott and Turnbull.

Shorten Labor, if it wins government on 2 July, will fit in nicely.

John Passant is a former assistant commissioner of the Australian Tax Office. Read more by John on his website en PassantYou can also follow him on Twitter @JohnPassant.

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