Alison Pennington: Budget billions wasted as real wages go backwards
The Coalition is pretending the cost-of-living pinch is caused by higher energy prices, writes Alison Pennington. Photo: TND
The federal government’s budget would have us believe that the cost of living is a sudden problem because of higher oil prices.
But the real reason people are feeling the pinch is because their real wages are going backwards.
The budget forecasts wage growth of 2.75 per cent in 2021-22, below inflation which is forecast to grow by 4.25 per cent. That’s a real wage cut of 1.5 per cent.
The budget will increase the low-and-middle-income tax offset, but then scrap it at the end of this financial year. The fuel excise will be reduced for six months.
Complex tax-bracket-shifting schemes are a good way to distract from powerful wage suppression policies. While we’re calculating “how much do I get”, these policies entrench insecure work, cap public sector pay, and stop collective bargaining. These measures hit workers every pay packet, not just at tax time.
The amount workers get from the tax cuts is nothing compared to normal wage increases. For the 15 years to 2012, private-sector wages grew about 3.5 per cent per year. For someone on $70,000, that’s about $2500 more in one year.
Distracting the income-strapped
This budget is about trying to distract the income-strapped with temporary solutions that do nothing to help in the long-run. Alongside time-bound tax cuts are $250 one-off payments to income support recipients – thousands of people who permanently languish below the poverty line.
The government is also hoping people believe in magical free-market fairies – that lower unemployment will finally unlock wages growth. As though holding a job automatically equips workers with bargaining power.
The “record funding” fairies were out in full force, too. The Treasurer says “record funding” has been allocated in schools, hospitals, mental health, aged care, women’s safety and disability health. But if you reduce spending to rock-bottom, every marginal increase in spending with population growth can be called “record funding”.
If it’s not enough funding to meet demand, then it can still be “record funding” for some. Shockingly, public school funding will be cut by $560 million over the next three years. Meanwhile, JobKeeper-subsidy-dripping private schools will get $2.6 billion more over the forward estimates. It’s not a budget without blows.
Cuts to workers’ pay
Worse, this budget signals more cuts to workers’ pay. The budget has earmarked reducing legislated minimum redundancy payments for part-time workers. This will disproportionately affect women.
Women’s chronically low wages and poor job quality receive no attention. Hundreds of thousands of women in underfunded healthcare and social services need government to front up and fund their pay increases. This budget is proof the biggest barrier to Australian women’s progress isn’t glass ceilings, but their own government.
This government will balls up any opportunity to address structural gender inequality. A new paid parental leave (PPL) scheme will combine the paltry two-week Dad and Partner Pay with the existing 18-week program for a combined 20 weeks. Packaged as empowering “family choice”, it will remove any incentive for fathers to take leave.
PPL payment at minimum wage will continue to push women into primary caring roles. This is because men earn almost one-third more than women on average. That’s not women’s “choice”.
Governments have wage-booting tools to deal with the higher cost of living. Across the ditch, New Zealand just increased the minimum wage by 6 per cent, recognising its frontline lowest-paid workers have offered the most in the pandemic, and been hit the hardest.
Genuine cost-of-living help overlooked
Along with boosting minimum wages, there are other options for helping workers deal with high inflation. The government could lower the cost of living by ending fee-for-service practices in all the areas they fund – child care, aged care, and disability care. Under the current government, out-of-pocket healthcare costs have increased almost three times more than CPI.
And there’s not much hope for youth in this budget. Presented with a future of declining living standards, political dysfunction and ecological catastrophe, young people are given just $206 million in mental health funding. They can talk to someone on the phone while the world burns.
The bottom rungs on the economic-opportunity ladder have been eliminated and youth can’t get up. Tens of thousands of educated capable youth languish in dead-end jobs. Sacrificed by a government that would rather turn unemployment into a misery industry than to create secure, career-building jobs.
Billions of waste
The government is wasting billions of dollars paying off their friends in business without conditions to invest in higher wages. Before this Budget, $291 billion in public spending was ploughed into a “business-led recovery” from COVID. On businesses responsibility to reinvest post-war record-high profits, there’s an eery silence.
And in this budget, we have zero assurances new business subsidies will be invested in the real economy – people, capital, research – rather than more profit-padding.
On budget eve, Morrison attempted to hat-tip a bygone conservative era. He said “families” will be key to winning the upcoming election. But he never invested in them, instead putting them in a pressure cooker of record-low wage growth and high living costs.
The government was struck by enormous luck this budget. Extra revenue to play with and they’ve thrown it all away. Hundreds of billions in government spending and no era-defining economic reforms.
Cost-of-living pressures wouldn’t be as acute if people had almost a decade of normal wages growth. But the truth is, the government has pursued wage suppression over the entire nine years it has been in power.
Alison Pennington is senior economist at the Australia Institute’s Centre for Future Work and associate editor of the Journal for Industrial Relations. @ak_pennington