Tax cuts for the wealthy, wage cuts for the poor: Happy New (Financial) Year!

By | | comments |
(Meme via @CFMEUJohnSetka)

This financial year's inequality is epitomised by tax cuts and pay increases for the few alongside penalty rate cuts and more austerity for the many, writes John Passant.

JULY 1 MARKS new beginnings for most Australian taxpayers.

It is also often when government and corporate goodies (fewer and fewer of them for you and me) and baddies (more and more of them for you and me) start. 

In other words, there is usually nothing very happy about the new financial year, unless you are rich. Speaking of which, those on $180,000 a year got a tax cut from, you guessed it, 1 July. This is because the Turnbull Government allowed the "temporary" 2% budget repair levy on high-income earners to lapse. The "debt and deficit" and "budget emergency" must be over, eh?

Shane Wright, the economics editor for the West Australian, calculated back in February that this would mean a tax cut of $6,740 a year, or $129 a week, for Prime Minister Malcolm Turnbull. It gets worse. That calculation was done on Turnbull’s then base salary of $517,504.

You guessed it. The prime minister’s base salary went up, on 1 July, by 2%, to $527, 852. That is a $10,348 pay increase. Turnbull and all the other Federal politicians have reason to be happy — they’ve "won" a pay increase and a tax cut.

To put this in perspective, the PM’s take-home pay, if we add together the wage increase of $10,348 and the tax cut of $6957, went up $17,305. I can think of many more people deserving of an extra $17,305 a year than multimillionaires like Malcolm Turnbull. Such as pensioners, the unemployed, the sick, the poor, teachers, nurses, older people ripped off by avaricious retirement’ homes — the list is almost endless.

Let’s not forget that between March 2012 and July 2013, backbenchers received "a salary boost" of $54,220 or more than $1,000 a week — a 40% increase. Ministers and opposition heavyweights got corresponding percentage increases. Australia’s Federal politicians were then – and my reasonable guess is they are still now – among the highest paid in the world.

What about your wages and the taxes you pay if you have a job? Taxes first. Only workers on more than $80,000 a year have received a tax cut in the recent past.

In 2016, according to ABC Fact Check,

‘ … while average male full-time earnings are about $82,000 a year, the most recent ABS data shows that the median annual cash earnings for all earners, male and female, full-time and part-time, was $52,052.’  

Using 2014-15 tax data, Greg Jericho in The Guardian estimates that the median taxable income was $54,543. There is a gender divide in relation to this figure too. 

Shadow Minister for Employment and Workplace Relations Brendan O'Connor discusses penalty rates, tax cuts and politician pay increases (Source @BOConnorMP)

As Jericho points out:

‘… the median for all women was just $47,125, while it was $61,711 for men.’

Given that Turnbull’s tax cuts last year only kicked in for workers on more than $80,000, these figures show there has been no tax cut for most workers. But there were for companies, from, you guessed it, 1 July. For companies earning up to $10 million, the rate has dropped from 30% to 27.5%. That rate will extend to companies earning up to $50 million in two years and then the rate will begin dropping to 25%. The cost over ten years is $24 billion. The Government’s real target is a 25% rate for all companies — that is, for the really big ones. 

What about pay increases then? 

Most readers will know the story here. Pay increases have been at historic lows for some time and now, in real terms, wages are going backwards. They are not keeping pace with inflation and have fallen 0.3% in the last year, according to Gareth Hutchens in The Guardian.

But wait, there’s more. Cuts to Sunday penalty rates began on 2 July. The cuts apply to the retail, pharmacy, fast food and hospitality sectors, and will affect about 700,00 workers. The first instalment is a 5% reduction in their penalty rates after 1 July. 

Happy new financial year to all those workers who depend on working on Sundays and the penalty rates that go with it to survive — to feed their kids, to pay the rent, to buy clothes, to get to work, to pay the doctor, to cover the soaring costs of electricity and gas.

One of the contradictions of capitalism is summed up in an aphorism. That is the problem for the wealthy. Cutting wages may increase profit rates temporarily but it may also cut consumer demand.  

One of the counterbalances to that in Australia over the decades of wage restraint has been increasing household debt, but that may have hit its limits in terms of the level of debt workers can carry and as real wages and hence repayment capacity, begin to fall. According to Governor of the Reserve Bank (RBA) Philip Lowe, the ratio of household debt (including mortgages) to income is now 189.6%. If, as appears possible (at least according to ex-RBA member John Edwards) interest rates rise up to two percentage points in the next few years, then this personal debt counterbalance will become a millstone around our necks.

Almost all the growth in the economy is going to capital, at the expense of labour and has been for some time. The share of national income going to Australian households is now at its lowest in 50 years.

As Gareth Hutchens points out:

‘Bureau of Statistics data show labour’s share of gross domestic product has fallen to 51.5%, down from 54.2% in the third quarter of last year. At the same time, the profit share of GDP has risen from 24.5% to a five-year high of 27.5%.’

If we compare those trends over the last few decades, labour’s share has fallen ten percentage points or so (62% to around 52%) while that of capital has risen ten percentage points (17% to 27%).

This "falling wages, low GDP share" is of real concern to capitalist technocrats like Philip Lowe from the RBA. He went so far as to argue that workers should demand higher wages.

Of course, they should demand higher wages to improve the immediacy of their lives but capital won’t give pay increases without a real fight. The side of workers is ill prepared for that. With one or two isolated exceptions, there has been no concerted industrial action by workers for many years. Strikes and other industrial action are at historic lows.

That is one of the reasons for the shift in wealth from labour to capital and now for falling wages. I have discussed the consequences of the Accord in detail before, but there are other factors, too – such as casualisation, robotics, globalisation and the like – though these have been constant themes in global capitalism and have not, in the past, blocked strikes. Indeed, automation objectively increases the power of those few workers who remain on the job.

The legacy of the Accord lives on today in a trade union leadership frightened of its own shadow and a workforce unfamiliar with the actuality of class struggle. Sally McManus may be shaking things up but, so far, she has delivered only words of resistance rather than resistance itself.

While real wages are falling for most workers, the Construction, Forestry, Mining and Energy Union (CFMEU) won pay increases of 5% a year for 30,000 of its members in Victoria

Instead of waiting for McManus to become a Jeremy Corbyn and relying on her to win wage increases for workers, the task now is for workers to organise and use their own strength to win real wage increases, restore penalty rates and defend jobs.

We need not a hero figure but millions of heroes on strike for big wage increases. That would be the most effective way to usher in a happy new financial year.

Read more by John Passant on his website En Passant or follow him on Twitter @JohnPassant.

Signed copies of John Passant’s first book of poetry, Songs for the Band Unformed (Ginninderra Press 2016) are available for purchase from the IA store HERE.

Creative Commons Licence
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License

Monthly Donation


Single Donation


It adds up. Subscribe to IA today.

Recent articles by John Passant
POEM: Together we must

Together we must   HE was three years old You killed him And 50 others ...  
Morrison Government takes fearmongering to another level

It was just another week of lies from the Morrison Government.  
Coalition ministers abandon the sinking ship

With news of yet more ministers retiring at the forthcoming election, it’s ...  
Join the conversation
comments powered by Disqus

Support Fearless Journalism

If you got something from this article, please consider making a one-off donation to support fearless journalism.

Single Donation


Support IAIndependent Australia

Subscribe to IA and investigate Australia today.

Close Subscribe Donate