After a decade of peril, let’s not risk all we’ve achieved
A burst of fine weather is no reason to change economic settings that got Australia through the storms. Photo: AAP
What made Tuesday night’s federal budget so disappointing was the government’s apparent amnesia about what our economy has just been through.
It reads a bit like the update we’d have had in 2008 if John Howard hadn’t lost the 2007 election, and the global financial crisis that began unfolding in August of that year had never happened.
Thus we have an unprecedented attack on the progressive income tax scale, a ridiculous 23.9 per cent cap on tax revenues (a target Mr Howard wouldn’t have hit, by the way), punitive cuts to the ABC budget, and the continued commitment to give a tax windfall to overseas investors rather than shore up the nation’s creaking ‘social wage’ and welfare system.
In the fantasy 2008 described above, a bold dismantling of the ‘fair go’ might have been acceptable. From a position of strength, voters might have enjoyed a risky foray into the realms of neoliberal utopia.
But things didn’t turn out that way, did they? The GFC did happen, and we only just reached economic terra firma in late 2017.
Australia has navigated the post-GFC era better than just about any other nation.
While we still have a private credit bubble to deal with, fragile new export industries to nurture, and a backlog of infrastructure to build, our GDP-per-capita has nonetheless grown 37 per cent in the past 10 years, compared with 24 per cent in the US and 9 per cent globally.
That feat that should not be simplified as just the dumb luck of a high iron ore price, the rushed but effective bank rescues, the ‘wasteful’ but successful stimulus programs of the Rudd-Gillard governments, or the current deluge of publicly funded infrastructure jobs.
All of those were important, but as described the morning after the budget, a holistic view of those factors, and many others, must be the starting point for future reforms.
But instead we get a Prime Minister and Treasurer, looking a bit like Captain Bligh and his first mate reaching their first beach after being abandoned at sea, and crying ‘let’s smash up the lifeboat to make a fire!’
The most obvious example is the third stage of the government’s income tax cuts, which ANU researchers greeted with a report on Thursday that noted: “The targeting of the tax cuts more strongly favours higher income households over lower income households where the cuts are much more modest (both in dollar and percentage terms).”
You betcha. As the chart below shows, the top two quintiles of Australian income earners will get a huge benefit from the proposed abolition of the 37 cent tax bracket in 2024-25 – if it ever happens.
I think voters will see through the ‘need’ to ‘simplify’ taxes in that way.
The hit to revenues caused by those cuts would have to be balanced with severe cuts to services that everyday Australians rely on.
It amounts to a ripping up of the social compact Australian parliaments have refined over three decades, with no justification other than the fact that the top two quintiles are heavily populated with Coalition voters.
So please, let’s not chop up the boat that got us here, Australia. We have a lot further to sail.
On a personal note
As the nation sails on, so will your erstwhile columnist.
After 23 years of journalism, eight years of writing politics and economics from inside and outside the Canberra Press Gallery, and seven years juggling all that with the demands of solo parenthood, it’s time to disappear for a few months of sabbatical.
As for The New Daily, I firmly believe the booming publication we’ve built over the past five years is advancing the interests of everyday Australians. I hope, in my own small way, that I’ve done the same with my contributions over those turbulent years.