Turnbull's policies generate inequality and threaten Australia's Fair Go!

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Whilst Australia prides itself on its belief in a 'fair go', PM Turnbull's policies are increasing inequality which threatens our national ethos and prosperity, says Leon Moulden.

AUSTRALIANS ARE proud of their egalitarian traditions. The idea of egalitarianism has embedded itself in our nation identity and with it, so has the belief in a “fair go”. It is part of our national ethos. It is who we are, and what we stand for. But is this truly the case? Do we as a nation actively pursue policies that promote equality? Unfortunately the evidence suggests otherwise.

Since the 1980s, Australia’s “fair go” has been under attack. It has been undermined and overlooked in the name of free markets, productivity and rampant individualism. As a consequence, inequality is rising. The Chifley Research Centre’s latest report 'Inequality: Facts and Future' is one of a plethora of reports that highlight the rise of inequality in Australia.

It argues that wealth inequality has been increasing for several decades, and that inequality will threaten Australia’s economic prosperity. The report highlights that the top 20% of households now own 60.8% of Australia’s wealth, while the bottom 20% own only 0.9% of the nation’s wealth.

In addition, The Australia Institute’s report 'Income & Wealth Inequality in Australia' reveals that the top 20% of Australians earn five times the income of the bottom 20% of Australians. And that remuneration for senior executives is now 150 times more than the average weekly income.

But these are not the only recent reports on inequality in Australia. The Reserve Bank of Australia, Treasury, and ACOSS have all reported on this trend in recent years. Yet this is during a 25-year period of uninterrupted economic growth.

However, there is more to this ever-increasing catalogue of disturbing trends. Over 105,000 Australians are homeless. That’s more than one in every 200 Australians. Some 2.5 million Australians now live below the poverty line. Over 725,000 Australians are unemployed, with another 1.2 million Australians underemployed. And for the first time, over 3.8 million Australians are employed part-time because full-time jobs are in decline.

Unemployment and underemployment are fuelling our inequality, but it is exacerbated by the steady decline in the value of unemployment benefits. Many social security recipients have seen their allowances decline because not all payments are indexed to wage increases. At the same time, multiple income tax cuts have reduced the progressivity of the income tax system so that most households now pay less tax, including high-income earners.

Now to add to this, the Turnbull Government is insisting on new tax cuts for middle and high-income earners. But not for those who earn below $80,000 per year.

The proposed tax cuts will move the $80,000 income tax bracket to $87,000. Meaning more Australians will stay on the 32.5% tax bracket instead of moving onto the 37% bracket. According to the Federal Treasurer, Scott Morrison this will provide tax relief of up to $315 per year for average full-time wage earners, and “ensure hard-working average full-time wage earners can keep more of what they earn.”

At first glance this could be viewed as fair, but don’t low-income earners work hard too? And what about Australia’s 3.8 million part-time workers? Don’t they work hard as well? It’s doubtful that many of them will benefit from this policy.

But the big problem with this policy is that the $315 tax cut also goes to those on high incomes. And if the Federal Government also removes the 2% deficit levy on high-income earners – as they are proposing – then high-income earners will receive an even larger tax cut. Yet the millions of Australians struggling to live on low incomes will not see a single dollar from the Federal Government’s largess.

And while an extra $315 per year will barely be noticed by middle-income earners and probably not be noticed at all by high-income earners, for those struggling to live on the minimum wage, a part-time income, or social security, an extra $315 would be very welcome.

Therefore, as a nation we should be asking: How is this good public policy as it neither reduces the budget deficit, nor improves the progressivity of our income tax system. Indeed, it makes the tax system more regressive.

While it could be argued that middle-income earners would benefit from the proposed tax cuts and “perhaps” deserve a cut, there is no rational argument that can justify giving a tax cut to high-income earners when clearly income and wealth inequality is already too high in Australia.

This policy not only leaves low-income Australians carrying more of the load regarding budget repair but also adds to inequality, therefore, seriously jeopardising Australia’s economic prosperity. ACOSS in its report 'Inequality in Australia: A Nation Divided' has clearly argued this point, stating:

'The risks of rising inequality are becoming increasingly recognised around the globe. In a report published in May 2015, the OECD found that rising income inequality reduced economic growth by an average of around 5% across OECD countries over the two decades to 2010. The main reason for this is that, by widening the rungs in the income ladder, it closes off opportunities for people at the bottom of the distribution. By holding people back from realising their potential, especially through employment, it stunts their contribution to the economy.'

Even the Managing Director of the International Monetary Fund, Christine Lagarde has warned of the serious problems that countries will likely face if they allow inequality to rise, stating:

“inequality holds back growth because it discourages investment in skills and human capital which leads to lower productivity in a large part of the economy.”

If the IMF identifies inequality as a major threat to national prosperity, then inequality is demonstrably much more than a peripheral social concern. It is a concern of the highest order, because inequality amongst a nation’s citizens is detrimental to a nation’s prosperity.

Therefore, this poses the question: Why is the Turnbull Government pursing policies that will only increase inequality in Australia? Are they beholden to the top end of town, or do they slavishly believe in the ideology of free market economics? Or both? Either way, this is lazy public policy.

Joseph Stiglitz - Free Markets don't work and is intellectually bankrupt.

It’s now hard to deny that Australia is showing symptoms of public policy neglect. The symptoms are manifest. It’s obvious that our political elite have placed the needs of a few above the needs of the many. There are large disparities between the haves and the have-nots, with wealth and income inequality increasing with no sign of abating.

While disadvantage, poverty, and marginalisation follow close behind. As a consequence, there’s no doubt that Australia’s fair go is in steep decline. Therefore, a government that places it citizens in the binary classification of “taxed” and “taxed not” is a government not worthy of the office it holds.

Leon Moulden is a freelance social researcher.

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